This chapter provides an assessment of the existing system of social benefits in Portugal. Social benefits are cash benefits which are provided by the social security system on either a means-tested or non-contributory basis and are generally separate from insurance‑based benefits. This chapter examines the rules and entitlement conditions of social benefits in Portugal and analyses how these rules and other features of the system affect its capacity to reduce poverty and provide work incentives. The analysis draws upon administrative and survey data, with international comparisons. As well as examining benefits individually, the chapter considers the interaction effects between benefits and looks at the system as whole.
Towards a Unified Social Benefit in Portugal
A Review of the Existing Social Benefits in Portugal and Reform Proposals for an Improved System
Abstract
Social benefits in Portugal: Assessing the impact of the rules and entitlements of the benefit system on incomes, poverty and work incentives
As with most benefit systems, Portugal has both contributory-based, insurance, benefits, and other, non-contributory and typically means-tested, benefits. The goal of these, non-contributory, cash benefits that can be characterised as the social benefit system is to provide support to vulnerable individuals and households, primarily on the basis of need: providing support for living essentials, housing, or the additional costs associated with children or having a disability. Such support must also be carefully balanced against work incentives and fiscal constraints. To do this, these benefits utilise an array of assessment criteria and means-testing approaches to determine who can access social support, and at what level. Benefit parameters are calibrated to balance the likely impact on household income and work incentives, as well as on fiscal balances and poverty. Social benefit systems are typically complicated.
Putting the Portuguese social benefit system in an international context, this chapter provides an assessment of the entitlement rules and generosity of the existing social benefit system and examines the ability of the current system to address poverty and maintain work incentives.
Portugal has 27 different social benefits with varied means-tested entitlement rules across the solidarity, family protection, and other benefit subsystems
Seventeen different solidarity benefits in Portugal provide support to low-income households in a variety of different situations of social need. These benefits are targeted towards low-income households through means-tests and provide support through a universal Minimum Income Benefit and through other benefits for more specific circumstances, including: at-risk pregnancy, adoption, hospital travel, orphanage, widowed, disability, and unemployment. Together they accounted for 800 million euros of spending in 2023 (22% of all social benefit spending) for over 250 000 households.
An additional eight family protection benefits in Portugal are targeted towards children and disabled persons. These benefits are available to low-, middle‑ and higher-income households but are still subject to income means-tests. Altogether they accounted for 2.5 billion euros of support in 2023 or 70% of spending on social benefits. Child Benefit alone provided 1.3 billion euros of support in 2023 (36% of all social benefit spending) to almost 1.1 million households.
Housing support and education benefits are other important means-tested cash benefits in Portugal. These benefits provided around 330 million euros of support to 280 000 households in 2023, but they do not form part of the main benefit system and are administered by a separate part of the Portuguese Government.
The large number of benefits and subsystems creates a confusing array of cash support with duplicated purposes for low-income households and those with additional support needs
Social benefits have a confusing mixture of different exclusivity rules to prevent individuals receiving duplicate support from multiple benefits. Exclusivity rules are designed to limit total benefit support, but it is possible to combine some social benefits and not others. These different rules make it harder to understand benefit entitlement, can encourage unnecessary benefit claims which waste administrative resources, and could be inhibiting take‑up of support.
Child Benefit and Minimum Income Benefit provide support with overlapping means-tests which confuses work incentives and undermines targeting of support for very-low-income households. Child Benefit is designed to assist with some of the costs associated with raising children across most, but not all, of the population. Meanwhile, Minimum Income Benefit provides additional support for raising children only in very-low-income households – who can also receive Child Benefit at the same time. Both benefits are means-tested at the same point in the income distribution however, making work incentives are unnecessarily complicated for households eligible to both benefits. This overlap also risks support being poorly targeted among very-low-income households.
Some pensioner benefits provide unnecessary, overlapping support. The Social Pension and the Minimum Pension (part of the contributory pension system) provides no additional support for single pensioners compared to Pensioner Social Assistance benefit, and only limited, poorly targeted extra support to pensioners with a high-income partner. An earlier OECD review on Pensions in 2019 highlighted the same issue.
Unclear Disability Benefit rules result in relatively very generous support. Benefit rules permit a household to claim both Minimum Income Benefit and Disability Benefit which in total provide three‑times as much support than a non-disabled household is entitled to under Minimum Income Benefit alone.
Eight solidarity benefits have fewer than 1 000 recipients each, highlighting both low take‑up and the unnecessary complexity of the benefit system. Social pregnancy, childbirth and adoption benefits among others have fewer than 1 000 recipients per benefit and in some cases fewer than 100 recipients. Such low receipt rates imply very low take‑up rates, and those benefits are likely to have very high per-recipient administration costs.
A fractured social benefit system, requiring manual applications and processes for many benefits, is poorly positioned to face future crises. Over 65% of Portuguese respondents of the OECD Risks that Matter survey (OECD, 2023[1]) believe they are unlikely to be able to access support from the benefit system in times of need. Respondents expressed concern that the benefit application process would not be simple and quick – the highest levels of concern across OECD countries measured.
The impact on poverty from the social benefit system in Portugal is very limited compared to other EU countries. This is the result of low working-age benefit levels and low coverage of support
Social benefits in Portugal have the lowest impact on poverty reduction in the EU despite a plethora of different social benefits. Social benefits reduce poverty by just 2 percentage points (not including the impact of contributory benefits). This is explained by Portugal having the lowest share of household income from social benefits in the EU – at just 2% of total income. This compares to a typical income share of 6% across EU countries.
Portugal has low benefit levels and limited coverage of support for low-income working-age adults. Levels of Minimum Income Benefit are the seventh lowest in the EU. Similarly, among 13 OECD countries, Portugal has the second lowest coverage of social benefit support for unemployed individuals and the lowest coverage for low-earning adults.
Pensioners living with working-age social benefit recipients have a much lower effective income than pensioner-only households. The benefit entitlement rules penalise pensioners living with non-working working-age family members as their pension income is deducted from working-age benefit entitlements. This results in a much lower income (after adjusting for household size) compared to a pensioner living alone.
Relatively generous contributory benefits undermine the efficiency of the whole benefit system in targeting low-income households
The overall benefit system provides twice as much support to the richest fifth of working-age households than the poorest. This poor targeting of support is because the limited social benefits in Portugal are dwarfed by a much larger, and untargeted, contributory benefit system.
Work incentives provided by social benefits are inconsistent and, in some cases, benefit interactions discourage working more hours
Dual benefit entitlement to Disability Benefit and Minimum Income Benefit undermines work incentives. There is almost no financial incentive for partners of disabled people to work. This is because their income is deducted against two separate benefits leaving them financially worse‑off as they work more hours.
Income threshold “cliff edges” incentivise part-time work over full-time work and penalise pay rises for several social benefits. In contrast to the smooth earnings deduction rate for Minimum Income Benefit, Social Unemployment Benefit and Child Benefit have income thresholds that can leave households worse‑off from working more hours or after receiving a pay rise of up to 10%.
Very strong work search conditionality and social integration obligations further enhance employment prospects, but not for all social benefit recipients. Portugal has one of the strictest applications of benefit sanctions across the OECD, where support can be withheld from the first refusal of a job offer. While recipients of Social Unemployment Benefit and the Minimum Income Benefit are subject to these strong work search conditions, partners of recipients of other social benefits may avoid these conditions despite being able to work.
Benefit systems are typically complex. Benefits provide support for a range of different individuals and households, with varying needs. They have multiple policy objectives that relate to supporting these households, as well as achieving overarching economic objectives such as lower poverty, higher employment and meeting fiscal constraints. Such objectives necessarily require detailed rules that set out the value of support to which households are entitled, and the circumstances under which they are entitled to claim each benefit. While the Portuguese benefit system is no exception in this regard, its complexity, and the extensive number of benefit streams in Portugal, stand in stark contrast in an international context.
1.1.1. Social benefits and the structure of the benefit system
Social benefits provide means-tested cash support under two separate sub-systems
Portugal has an overarching benefit framework with different systems and subsystems under which different benefits fall. These systems and subsystems, set out in Figure 1.1, have a broadly aligned set of objectives and, for the most part, group benefits with a similar purpose together.
Social benefits, which are almost entirely means-tested, fall under the remit of the “social protection” system, a distinct branch of the overall social security system.1 Contributory benefits are largely under a separate “insurance” system.2 In addition, the “complementary” system provides social support through collective private or public support for specific groups (for example civil servants or private pension schemes). Funding for the three systems is separate, with social benefits funded from general taxation, contributory benefits funded from social contributions, and the complementary system funded by both individuals and employers separate to the social insurance system. This social security framework is set out in Portuguese law (Diário da República, 2007[2]).
Within the social protection system, cash social benefits are provided as part of two subsystems: the “solidarity” subsystem and the “family protection” subsystem. Non-cash benefits, such as social services for low-income households, are provided through the “social action” subsystem. Benefits under the solidarity subsystem typically have more restrictive means-tests and therefore target individuals and households with very low or no other income. Family protection benefits typically have less restrictive means-tests and are available to households with moderate other income sources as well as low-income households and are targeted to provide support for households facing extra costs such as having children or a person with a disability.
Mapping of the different social security policy systems in Portugal
Beyond the social security system there are several other policy areas which interact with social benefits and affect household incomes and labour market outcomes. Specifically, the tax and social insurance contributions individuals pay (including various income tax allowances), the employment service support provided to recipients of unemployment benefits, social integration services provided to recipients of Minimum Income Benefit, and other grants and benefits provided to low-income households (such as reduced transport costs, a social tariff for energy bills, and lower cost medical prescriptions). Housing rent support programmes, including means-tested social housing and rent benefits, are provided through a separate policy area in Portugal.
Support through 27 different social benefits creates a confusing landscape of support that is perceived to be difficult to access
The large number of 27 different social benefits (listed in Table 1.1) makes it difficult for households to understand their benefit entitlements. This complexity impedes benefit take‑up and is more burdensome for the government to administrate. Households can also be entitled to multiple benefits and, in some cases, will have to choose between several benefits to which they are entitled to claim. This increases the risk of low take‑up of benefits as households are unlikely to fully comprehend the benefit system and understand their entitlements. Ultimately, this risks higher poverty as well as fewer persons receiving support from employment services.
While it is not unusual for countries to have several different social benefits to meet the large number of different circumstances faced by low-income households (Hernanz, Malherbet and Pellizzari, 2004[3]), 27 benefits in Portugal represents an unusually high number of benefits.3 This high number of social benefits may partly explain why Portugal has the second highest share of citizens, 65%, that disagree they could easily receive public benefits if they needed them (OECD, 2023[1]). Among respondents who don’t believe they could access benefits if needed, 86% do not think the application process for benefits would be simple or quick, the highest in the OECD.
To complicate the Portuguese system further, most social benefits have exclusion criteria that restrict individuals (but not households) from receiving different benefits concurrently. These rules are not consistent across social benefits however: solidarity subsystem benefits are more restrictive than other social benefits. With 27 social benefits in total, there is also a very large web of possible benefit interactions as households can receive multiple social benefits.
Solidarity subsystem benefits
The following social benefits are those within the solidarity subsystem. These benefits have more rigorous financial entitlement criteria and are targeted at the lowest income households. In general, they act as a substitute for not having sufficient income to pay for essentials. Unless specified, an individual can receive only one solidarity benefit; however different individuals in the household can claim different benefits at the same time.
The value of benefits listed are monthly amounts which are valid as of the start of 2024.4 As of 2025, the majority of benefits have been updated by the Social Support Index (Indexante dos Apoios Sociais), which increased by 2.6% (DGAEP, 2025[4]). Benefits are paid monthly, although it is possible to receive benefits relating to only part of the month if they only meet the conditions for part of the month.
Minimum Income Benefit (Rendimento social de inserção): Can be received by any household, and in addition to any other social benefit including any other solidarity benefits. The level of support depends both on the size of the household, and the level of the household’s other existing income. The maximum amount of support is equal to EUR 237 per month for one adult plus EUR 166 per additional adult plus EUR 119 per child in the household.
Social Unemployment Benefit (Subsídio social de desemprego): Can be received by an individual with sufficient social insurance contributions. The value of support is EUR 407 per month for a single adult alone, or EUR 509 when living in a household with two or more people. There is also an additional amount of EUR 82 per child living in the household.
Special Social Disability Benefit (Pensão social de invalidez especial): Can be received by individuals with specific serious illnesses as designated by the legal framework. It has a value of EUR 319 per month.
Caregiving Benefit (Subsídio de apoio ao cuidador informal principal): Can be received by an individual who is performing unpaid care duties for a person with a disability who is in need of support (this is defined as someone who is granted Assistance Benefit). The maximum level of the benefit is EUR 407 per month, although this is reduced euro for euro if the recipient has any earnings. Caregiving Benefit can also be received alongside Widow’s Social Pension.
Social Parental Benefit (Subsídio social parental): Can be received by new parents after the birth of the child. The mother can receive the benefit for up to 72 days, and the father can receive for up to 35 days, with up to an additional 150 days between both parents. The maximum value of the benefit is EUR 407 per month.5
Social Pregnancy Risk Benefit (Subsídio social por risco clínico durante a gravidez): Available to pregnant persons who have a clinical risk. The value of the benefit is EUR 407 per month.
Social Pregnancy Termination Benefit (Subsídio social por interrupção da gravidez): Can be received by someone during the period they are unable to work as a result of the termination of a pregnancy. The value of the benefit is EUR 407 per month.
Social Specific Risks Benefit (Subsídio social por riscos específicos): Can be received by mothers who have recently given birth and are unable to work their normal jobs as these pose a risk to their or their child’s health. The value of the benefit is EUR 407 per month.
Social Hospital Travel Benefit (Subsídio social por necessidade de deslocação a unidade hospitalar): Can be received by persons who live on an island and need to travel outside of this island to a hospital to give birth. The value of the benefit is EUR 407 per month.
Social Newborn Hospital Care Benefit (Subsídio social específico por internamento hospitalar do recém-nascido): Available to parents when their newborn child is admitted to hospital with special medical needs. The value of the benefit is EUR 407 per month.
Social Adoption Benefit (Subsídio social por adoção): Can be received by persons who are newly adopting a child for a period of up to 150 days. The maximum value of the benefit is EUR 407 per month.
Funeral Allowance (Subsídio de funeral): Can be received by anyone who pays the funeral expenses of a person, where no‑one else received any death benefit (including contributory benefits) for the deceased person. It is not means-tested and can be received in addition to any other benefits by the recipient of the payment and has a value of EUR 255 for a single payment.
Pensioner Social Assistance Benefit (Complemento solidário para idosos): Can be received by an individual pensioner or a pensioner couple. This benefit can be received in combination with the Social Pension or the Widow Pension. The level of Pensioner Social Assistance support depends on whether the recipient is an individual or part of a couple, as well as their other household income. The benefit, in effect, tops up the household income to a fixed level of EUR 551 per month for an individual or EUR 964 for a couple.
Social Pension (Pensão social de velhice): Can be received by an individual pensioner, and in combination with the Pensioner Social Assistance Benefit and Widow Benefit. It has a value of EUR 246 per month, with an addition of EUR 21 if younger than 70, or EUR 43 if aged 70 or older.
Widow’s Social Pension (Pensão de viuvez): Can be received by the widow of a pensioner that was receiving the Social Pension. Can be received alongside the Social Pension and the Pensioner Social Assistance Benefit. Alternatively, it can be received alongside Caregiving Benefit. The value of the benefit is EUR 148 per month.
Orphan’s Social Benefit (Pensão de orfandade): Can be received by child orphans under 18 (or their carer) and can be received alongside other solidarity benefits received by the carer. The maximum value of the benefit is EUR 196 per month for all orphaned children living in a family together, although this also depends on the number of children orphaned. The maximum amount is reduced to EUR 98 per month when there is a surviving spouse of the orphans’ deceased parent.
Pension Social Supplement (Complemento Social): Can be received by anyone receiving an insurance pension or insurance disability benefit (but not a social pension), with a calculated benefit level lower than the minimum guaranteed amounts (minimum pension). Value of EUR 5 to 20 per month.
Minimum Pension: Can be received by pensioners with contributory pension value below the minimum level if they have sufficient years of social contributions (15 years for the lowest minimum pension for new pensioners).6 This benefit is received independently of any social benefits, although it is relevant income for any means-testing. The minimum pension level ranges from EUR 319 (with at least 15 years of social contributions) to EUR 462 (with 31 or more years of contributions).
Family protection subsystem benefits
The following social benefits are part of the family protection subsystem. These benefits are targeted towards individuals and households in specific circumstances and tend to have less restrictive financial entitlement rules. They can be received alongside all other benefits and each other, with the occasional exception. The value of benefits listed are also monthly amounts which are valid as of the start of 2024 and are paid monthly in full or in part.
Disability Benefit individual element (Prestação Social para a Inclusão a Componente Base): Can be received by an individual with a disability, where the level of benefit depends on degree of disability and individual earnings income. This benefit can be received with all other benefits except for Pensioner Social Assistance Benefit, Social Pension or Special Social Disability Benefit. The maximum value is EUR 316 per month.
Disability Benefit household element (Prestação Social para a Inclusão o Complemento): Can be received by households with an individual in receipt of the individual Disability Benefit element, and it can be received alongside all other benefits except for Pensioner Social Assistance Benefit, Social Pension or Special Social Disability Benefit. The maximum amount of support is equal to EUR 551 per month for one adult plus EUR 385 per additional adult plus EUR 275 per child in the household.
Assistance Benefit (Complemento por dependência): Can be received by an individual that needs and receives care support in their own home. The individual must not be working and must be in receipt of an old-age pension or disability benefit. Value up to EUR 221 per month depending on degree of dependence.
Child Benefit (Abono de família para crianças e jovens): Can be received by the parent for each child up until the child finishes full-time education. The amount of support varies in steps depending on the income of the household and the age of the child. The child benefit is increased for single parent households (more 50%) and large families. There is also an additional Child Guarantee benefit (Garantia para a infância) that is payable on top of the Child Benefit to households with a very low income, in effect providing another step of support. The combined maximum value of the Child Benefit and the Guarantee is up to EUR 183 per month per child aged under 3, and up to EUR 122 for older children. Where the household is not entitled to the Guarantee, single parent households receive more Child Benefit. Although the support is paid monthly, it is paid twice in September, in effect providing 13 months’ worth of support each year.
Prenatal Child Benefit (Abono de família pré-natal): This benefit is paid on the similar basis as Child Benefit to pregnant individuals from the 13th week of pregnancy. It has a value of up to EUR 183 per month. The support is also increased by an additional 35% for single parent households.
Scholarship Benefit (Bolsa de estudo): Can be received by secondary school children aged 14 to 18 to encourage educational attendance for families with a low income. It has a value of EUR 72 per child per month, and EUR 108 when living in a single parent household.
Education Benefit for Disabled Children (Subsídio de educação especial): Additional support paid for children with extra care needs who are in full-time education at a specialised institution. The maximum value of support is equal to the educational fee incurred by the child, and this benefit cannot be received with Assistance Benefit for Disabled Children given the children are receiving support at school.
Assistance Benefit for Disabled Children (Bonificação do abono de família para crianças e jovens com deficiência): Additional support for children with extra care needs with a maximum value of EUR 139 per month which depends on the age of the child (up to age 24). The support is also increased by an additional 50% for single parent households. This benefit cannot be received with Education Benefit for Disabled Children.
Other benefits
Rent Support is not formally a part of either of the two social benefit subsystems, although it is most similar in scope to family protection benefits.
Rent Support Benefit (Apoio extraordinário à renda): Can be received by a household with rental costs higher than 35% of the combined household income. Support is equal to the rent costs over this threshold, subject to a maximum amount of support of EUR 200 per month and maximum household income of EUR 38 600 per year.
A high number of interacting benefit streams creates administration complexity and likely leads to higher costs
Despite having separate subsystems, different social benefits end up providing overlapping, if not duplicate, support streams to households. Benefit processing systems must necessarily be more complicated to manage multiple overlapping benefits which is likely to make administration of the benefits by social security workers more difficult and less efficient. The administration of benefits is generally centralised in Portugal and operated by the Institute of Social Security; however, one important exception is that the social integration support (which claimants are required to complete as a condition for receiving Minimum Income Benefit) is operated by municipalities.
Overlapping benefits risks badly targeted support, and poor work incentives
Overlapping social benefits with similar purposes can create confusion for recipients which may limit take‑up of support and can undermine effective targeting. Faced with 27 social benefits, potential claimants may not be fully aware of their entitlements to different benefits and may not claim support they are entitled to as a result. Unpredictable take‑up alongside more complex rules makes it difficult for policy makers to fully understand and assess how well social benefits are targeted – both by income and by other circumstances.
Contemporaneous means-testing across multiple benefits can contribute to poor work incentives as minor increases in income result in sharp withdrawal rates. Three examples of overlapping benefits with these risks are examined below: child-related support, pensioner benefits, and disability support for households.
Child-related support
First, income‑targeted extra support for households with children is provided both through Child Benefit (including the Child Guarantee) and through Minimum Income Benefit. These benefits are both means-tested, providing different amounts of support depending on the income of the household, and they also provide very similar maximum amounts of support: a maximum of EUR 119 per month per child is added to the total level for Minimum Income Benefit and a maximum of EUR 122 per month per child is available for Child Benefit (including the Child Guarantee) for children aged over 3 years.
The main difference between the benefits is that Child Benefit has a more generous means-test and is therefore not as targeted towards lower-income households. As Figure 1.2 shows, the different entitlement rules mean that only the lowest income households receive Minimum Income Benefit, whereas a single parent household with two children with a monthly income up to EUR 2 800 can receive some Child Benefit.7 For comparison, the average wage in Portugal in 2024 is just EUR 1 880. In general, households with more children can receive Child Benefit to higher income levels.
Levels of Minimum Income Benefit and Child Benefit support for a single parent with two children, by monthly earnings level, 2024
Note: Columns are stacked to show total benefit support. Child Benefit includes Child Guarantee. For illustration purposes the analysis separately shows the adult component of Minimum Income Benefit being withdrawn first as earnings increase. However in practice it could be withdrawn at the same time as the child component and would not affect overall benefit levels.
Source: OECD calculations.
In addition, Minimum Income Benefit also includes household obligations to look for work, or complete other social integration activities, whereas Child Benefit has no such obligations. This may partly explain why take‑up of Child Benefit is higher than Minimum Income Benefit (benefit take‑up is discussed in more detail in Section 1.2.3 below).
Having two different means-tested mechanisms for child-related benefits creates a more confusing array of support, more complex work incentives, and less well targeted support. The current system has the advantage of providing more support to low-income households, while still providing some support to middle‑income households with children. However, this comes at the expense of two different but overlapping means-testing rules being applied to households at similar points in the income distribution, and a less well targeted system of support overall.
Pensioner support
Second, there are four different pension benefits that, for most recipients, serve almost identical purposes and make pensions unnecessarily complicated. Figure 1.3 shows how the different pension benefits interact for a single pensioner depending on the number of years of social contributions they have. The first benefit that a pensioner may qualify for is a contributory pension. The second benefit is the Minimum Pension which tops up any contributory pension to a minimum level (which varies by years of social contributions). The third benefit is the Social Pension for those not entitled to a contributory pension (which includes a separate supplement amount which varies by age). The fourth, and last, benefit is the mean-tested Pensioner Social Assistance Benefit, which again tops-up income to a minimum level.
Pension benefit annual income in euros for a single pensioner by benefit and by number of social contribution years, 2024
Note: Columns are additive to show the total pension income. Contributory pension values assume the pensioner has retired this year; values will vary due to different uprating of pensions in payment compared to new pension amounts.
Source: OECD calculations using MTSSS information.
As Figure 1.3 shows, the Minimum Pension and the Social Pension are mostly redundant. Recipients of the minimum pension under the contributory system, or those receiving the Social Pension, are also usually entitled to Pensioner Social Assistance Benefit, which is a higher amount.8 Only pensioners with contributory pensions above the Minimum Pension levels are not entitled to any extra support at all. These findings of overlapping pension support systems reiterate work from a previous OECD pension review of Portugal (OECD, 2019[5]).
The figure illustrates the situation for a single pensioner, but the situation is similar for a pensioner couple as well. In practice the Minimum Pension would only be relevant for a couple when one pensioner has a very high contributory pension, and their partner has between 15 and 35 years of contributions and a low pension. This is because partner income is not included in the Minimum Pension calculation. Moreover, the Social Pension is only relevant for pensioner households that have additional savings and income that precludes access to Pensioner Social Assistance but is not included in the means-test for the Social Pension.
Not only does the current system of pensioner benefits make for a confusing array of support but, more worrisome still, different means-testing approaches undermine the targeting of social benefit support for pensioners. Because the Minimum Pension means-test relates to individuals, it means that individual pensioners can receive Minimum Pension support despite having a high household income.
Disability support for households
Third, the household element of the Disability Benefit has a very similar purpose to the Minimum Income Benefit: both benefits are targeted at low-income households, both benefits increase the level of support for larger households, and both benefits reduce support as household incomes increase.
Claiming both these benefits, as allowed by the benefit rules, provides a very generous amount of support to disabled households which results in very poor work incentives.9 A non-working household with one disabled adult and one other adult can receive EUR 551 per month under the household element of the Disability Benefit (in addition to EUR 316 for the individual element), and the maximum amount of EUR 403 Minimum Income Benefit. Combined, their income is EUR 1 270, three times higher than the support for an equivalent non-disabled household which can only receive the Minimum Income Benefit. As both benefits are reduced simultaneously as household earnings increase, the household (including any non-disabled adults) have very poor incentives to work (these work incentives are examined in more detail in Section 1.3 below).
Parallel contributory benefits create another element of complication
While the social benefit system can be confusing by itself, it is further complicated by the duality of the overall social protection system, which in many cases duplicates a number of social benefits in the contributory insurance system. All the solidarity social benefits (listed above in Table 1.1) also have corresponding insurance benefits in the contributory system with the exception of Minimum Income Benefit, Pensioner Social Assistance Benefit and Caregiving Benefit. Even if it is common for countries to have corresponding insurance‑based support and means-tested benefits, the number of different benefits in Portugal makes for considerable duplication. Although insurance benefits are beyond the scope of this project, it is important to consider the benefit system as a whole when considering complexity.
In contrast, the family protection subsystem benefits do not have insurance counterparts. As these benefits have less restrictive means-tests, households are typically able to receive them in addition to other income sources including insurance benefits.
Social benefit spending is concentrated among a few key benefits, with a third of spending on child benefits
Child Benefit is the social benefit with the highest total expenditure in Portugal, costing EUR 1.3 billion in 2023 (Table 1.2). This reflects that, though the average monthly benefit is relatively low compared to other social benefits,10 the number of households receiving the benefit is very high: nearly 1.1 million households in 2023 received Child Benefit in 2023, around 1‑in‑4 Portuguese households.
High spending on Child Benefit and other child-related benefits is not unusual in the OECD. On average, OECD countries spent 2.1% of GDP on all child-related benefits in 2019, compared to 1.2% in Portugal (EUR 2.6 billion).11
Excluding Child Benefit and other child-related spending, 87% of remaining social benefit expenditure is concentrated among 6 of the remaining 20 benefits: Disability Benefit (the individual and the household element), Minimum Income Benefit, Pensioner Social Assistance Benefit, Assistance Benefit, and Rent Support Benefit. Five social benefits in Portugal have a very low expenditure with fewer than 100 recipients, mostly related to specialised circumstances relating to childbirth.
Of the 15 social benefits with significant spending (more than EUR 10 million in 2023), Social Parental Benefit and Social Unemployment Benefit have the highest average monthly value per recipient of EUR 451 and EUR 379 per month. The variation between the average monthly benefit received and the monthly entitlement figures can be explained by recipients who receive the benefit for only part of a given month.
Benefit spending, average number of recipients per month, and average monthly value of benefits, for social benefits in Portugal in 2023
Note: Recipients reflect the number of individuals in receipt of each benefit and the average benefit received per individual. This is except for Child Benefit, Minimum Income Benefit, and Pensioner Social Assistance which reflect the number of households. Average recipients rounded to nearest 100. No data available for Social Newborn Hospital Care Benefit or Pension – Social Supplement.
Source: Ministério do Trabalho, Solidariedade e Segurança Social.
Over time, benefit levels (and therefore benefit spending) are determined by annual changes, which usually ensure that support will keep up with the cost of living. Most social benefit levels are linked to a Social Support Index (Indexante dos Apoios Sociais) which increases each year based on a complex formula that depends on economic growth and inflation. Based on the formula the increase is always more generous than inflation and may or may not be more generous than GDP growth. Exceptionally the index has been frozen in previous years, or the linking factors that individual benefits have to the index have been changed.
1.1.2. Financial entitlement and means-testing rules
Social benefits are set apart from other benefits by their entitlement rules: most social benefits are means-tested, which targets the support towards lower income households.12 Not all means-tested benefits are subject to the same rules, however. There is a complex array of different approaches across means-tested benefits which can vary in terms of what income is included, whose income is included, and how that income affects the level of benefit entitlement. In addition, financial assets are also considered.
Pensioner and some disability social benefits have more generous means-testing rules than working-age benefits because they don’t account for wider household income
Pensioner social benefits, already more generous than most working-age benefits, have, for most pensioners, a more favourable means-testing approach as well. As shown in Figure 1.4, pensioner social benefits only consider the income of the recipient and their partner when determining eligibility and the level of support, whereas almost all working-age social benefits consider the income of the whole household (including relatives of the claimant up to the second degree). In practice these rules provide even more pensioner support than working-age support in larger households. Specifically, a pensioner living with an adult child would not have their social benefit entitlement affected by any earnings from their child. In contrast, a working-age adult living with a working family member would have their social benefit entitlement reduced.
While the entitlement rules are more favourable to pensioners living with a working family member, they can still be indirectly negatively affected by the total amount of support their household receives where they are living with other non-working family members. This is because the amount of pensioner support is, in effect, deducted from entitlement to working-age social benefits for other members of the household. The combined effect is a much lower average amount of support in the household. Assuming the household shares at least some of the pensioner support to account for the lower working-age support, the pensioners are worse‑off in average‑household-income terms compared to pensioners living by themselves. This interaction effect between pensioners and working-age household members partly explains why pensioner poverty is relatively high in Portugal (21% compared to EU-average of 17%) in spite of the relatively high pensioner benefit levels. In comparison, all-age monetary poverty in Portugal (17%) is closer to the EU-average (16%).13
In addition to pensioner benefits, the Special Social Disability Benefit is also subject to an “individual and their partner” means-test, and the individual element of Disability Benefit is subject to an individual means-test where only their personal income is taken into account (and in cases of severe disability is not taken into account at all). In the case of Assistance Benefit, income is not taken into account at all, however the benefit cannot be received when the recipient is working. There is however no interaction effect between disability benefits and other social benefits, as the income from disability benefits is not included in the means-test for other benefits. This means that recipients of disability benefits are not worse‑off in average‑household-income terms as result of living with other benefit recipients.
Detail of whose income is considered for the different social benefit means-tests, and whether the means-tests are threshold-based or deduction-based
Note: Funeral Benefit not shown as there is no direct means-test for the recipient. Caregiving Benefit has a fixed income threshold means-test for household income and an income deduction means-test for individual earnings.
Static income thresholds for entitlement rules can disincentivise work
The majority of social benefits have a means-test based on a fixed income level threshold (Figure 1.4). This can financially penalise households for small earnings increases, and disincentivise work. While this threshold is effectively increased for larger households, it nonetheless leads to an abrupt end to benefit entitlement when household earnings cross a specific threshold. For instance, a person entitled to Social Unemployment Benefit in a two‑adult, two‑child household has a means-tested household income threshold of EUR 1 097 per month. If the recipient’s partner earns up to EUR 1 096, the recipient receives the full amount of benefit: EUR 509. If their partner’s earnings increase by one euro or more, then there is no entitlement. In this case the partner is better-off reducing their earnings or working hours.
The means test associated with Minimum Income Benefit, Disability Benefit and Pensioner Social Assistance Benefit, on the other hand, gradually reduces benefit support as earnings increase. This type of means-test ensures that households have smooth incentives to work, and do not face abrupt discontinuities where they lose out if household earnings increase. Minimum Income Benefit also provides stronger work incentives than the other income deduction benefits as earnings income is only deducted at a rate of 80% (or 50% for a new employment). In comparison, earnings income is deducted at a rate of 100% from the household element of Disability Benefit and from Pensioner Social Assistance. The maximum income entitlement threshold for all these benefits with income deduction also varies with the size of the household, in line with maximum level of benefit support. Figure 1.5 summarises the key differences between the two income means-testing approaches in Portugal while Section 1.3 examines these different work incentives in more detail.
Comparison of different approaches to income means-testing for social benefits
Rent Support Benefit has a slightly different means-testing approach compared to other benefits, although it is similar to the income deduction approach. Entitlement to Rent Support Benefit, and the amount of support depend on the ratio of household rent costs to income. Support is provided for all costs that exceed 35% of household income, therefore an increase in household income will reduce the level of benefit by 35% of the income increase.
Inconsistent income definitions for means-testing makes it difficult to understand benefit entitlement
Different social benefits apply different definitions of income when applying the means-test. While it is sensible to exclude some income sources from means-testing to have a coherent benefit system, too many different rules unnecessarily increase the complexity of the system as a whole and make it harder for households to understand what they are entitled to.
Income from earnings, assets (such as savings, investments and property), as well as contributory benefits are commonly included in the means-testing for all social benefits. This is straight-forward as these income sources are independent from social benefits.
Income from other social benefits is a more complicated issue. Not including any other social benefit income can lead to households being entitled to very large amounts of social benefits in total. However, including all other social benefit income in all social benefit means-tests can create a circular flow of calculations where households are entitled to two or more benefits. There is currently a mixed approach in Portugal which varies by benefit. This mixed approach makes it difficult to understand entitlements when a household is potentially eligible for several social benefits at the same time.
Full deduction of solidarity benefits from Minimum Income Benefit creates unnecessary benefit administration
Households can be unnecessarily claiming multiple benefits because of how some social benefit income is deducted from other social benefits. The income from other solidarity benefits (including from other household members) is taken into account when determining entitlement and benefit levels of other solidarity benefits, including Minimum Income Benefit. This creates an inefficient situation where households can unnecessarily be claiming some benefits. In the case of Minimum Income Benefit, the benefit level is reduced by 100% of the value of other solidarity benefits received. In cases where Minimum Income Benefit is more generous than the other solidarity benefits then it is effectively pointless to claim the other benefits. Conversely where the other solidarity benefits are more generous, then it is pointless to claim Minimum Income Benefit.
The approach to solidarity benefits not only creates a more confusing system, but it encourages unnecessary benefit claims, creating more administration work for the benefit claimants and for the government. If households had perfect knowledge of the benefit system, then they would know to claim only one benefit, but if they do not then their optimal approach is to claim all benefits they might be entitled to as that will always maximise their benefit income.
In contrast to solidarity benefits, family protection benefits have a more varied and different approach to how income from other social benefits is treated. While these rules do not lead to unnecessary benefit claims, the different approaches make the overall social benefit system more confusing. For instance, the Child Benefit income means-test includes income from solidarity benefits. In contrast, the Disability Benefit income means-test does not include any other social benefit income. While including the income from some social benefits in the means-testing of others is a legitimate way of targeting support, doing so in an inconsistent way across benefits makes it difficult for recipients to understand the interaction of support with earnings levels, and makes work incentives more complicated.
Income rules can lock households into support below their full entitlement
The treatment of social benefit income when establishing eligibility for solidarity benefits also creates a “first-mover” advantage which can leave households worse‑off. Receipt of one benefit first in a household may mean no entitlement to another benefit that could have otherwise been claimed first. This can effectively lock households into a lower level of support than they might otherwise be entitled to if they had claimed different benefits first. Households could rectify this situation by closing one benefit claim and opening another, but they would require specialist knowledge to be aware that it would be to their advantage to do so.
Rules on financial savings are much tougher for Minimum Income Benefit
As well as means-testing against income, social benefits also have financial asset entitlement rules, placing a limit on the total assets a household may have and receive social benefits. This is set at a high level of EUR 122 000 for almost all social benefits in Portugal, and includes savings, investments, and property (with an allowance for the main residential home). The only exception is Minimum Income Benefit, which has a lower limit of EUR 30 600.
The primary purpose of social benefits is to provide a safety-net of income support to households that would otherwise be unable to afford to live. In doing so, social benefits should aim to alleviate poverty in a targeted way, by providing support tailored to household circumstances and need. Support should also be accessible, as support that is not taken-up by eligible households is of little use.
In Portugal, relatively low spending on social benefits provides an important amount of support to a minority of low-income households. While spending on social benefits is generally well-targeted, they provide limited support compared to contributory benefits. Coverage of social benefit support is low compared to other countries, especially so for part-time workers. This reflects a combination of three factors: strict benefit entitlement rules, low benefit take‑up, and limited benefit levels. Tight household-income entitlement rules and a lack of a general in-work benefit mean that social benefits only provide entitlement to significant support for workless households. Even in this context, low take‑up of minimum income support means that many eligible households remain without support. In addition, those that do receive Minimum Income Support are faced with one of the lowest rates of basic support in the OECD.
1.2.1. Social benefits and poverty
Social benefits have a limited impact on poverty
Social benefit income (not including contributory benefit income) reduces the headline poverty rate in Portugal by a relatively small amount: just 2 percentage points (from 19% to 17% in 2023).14 As Figure 1.6 below shows, this is the lowest poverty impact of social benefits across all EU countries. The effect on the depth of poverty, the average difference between incomes and the poverty threshold, is only a little higher, where social benefits reduce the poverty depth by 6 percentage points (from 35% to 30% after rounding). This is less than half of the average poverty depth reduction across EU countries of 13 percentage points.
Change in poverty rate and depth as a result of social benefit spending by country, 2023
Note: Social benefits include all means-tested benefits and non-contributory, non-means-tested benefits.
Source: EU SILC.
Restricting the focus to recipients of social benefits only allows a comparison of the direct impact of social benefits that abstracts from compositional effects. Although the impact of social benefits on poverty among recipients is larger, Portugal still lags most other countries. The poverty rate for recipients reduces by 6 percentage points compared to an average of 11 percentage points, and the poverty gap reduces by 6 percentage points compared to an average of 8 percentage points. Even after social benefit transfers poverty depth for recipients remains high at 9%, the 3rd highest in the EU.
The impact of social benefits on poverty depends on three factors. First, the level of benefit support provided to households that receive them. Second, the degree of benefit entitlement coverage. Third, the degree to which those benefits are taken-up.
1.2.2. Benefit levels
While child support and pensions are in line with international norms, Minimum Income Benefit levels are low
Minimum Income Benefit for working-age households is substantially less generous than other social benefits in Portugal. A single adult receives support equivalent to just 25% of equivalised median household income, compared to 43% for a single adult receiving Social Unemployment benefit (Figure 1.7).
Pensioners and disabled persons receive even more support worth 68% (for a pensioner couple) and 83% of net median incomes (for a single disabled adult), while non-working households with children receive between 39% and 58%. However, as mentioned in Section 1.1.2, the entitlement criteria and interaction of working-age support in a mixed-age household may mean that pensioners in a mixed-aged workless household will have a lower equivalised household income than pension benefit levels alone would suggest. Indeed, a pensioner living with a single parent family member can expect an equivilised household income in line with what the single parent would receive by themselves, around one‑third less than what they would receive when living alone (as shown in Figure 1.7).
Equivalised value of selected social benefits for households as a proportion of median household income in Portugal, 2024
Note: Children aged over 5. Median income assumed to increase in line with projected GDP growth from 2022 to 2024.
Source: OECD calculations; EU-SILC, 2022.
Portugal is not unusual in providing less support to working-age adults who are able to work compared to those with a disability or other circumstance that limits work availability (for example, see Figure 6 in MacDonald, Prinz and Immervoll (2020[6])). The rationale for this is that lower support can strengthen incentives to work. Unlike those who are retired and those with severe disabilities, healthy working-age adults have the potential to move into work and thereby increase their income.
Compared to other countries, minimum-income support is relatively low in Portugal with levels set at just 13% of average wages (Figure 1.8). This level of support is just below the average support provided by minimum income support in OECD countries and ranks in the middle of all EU countries.
Minimum Income Benefit for a single adult as a percentage of the average wage by country, 2023
Note: Calculations assume full take up of family and in-work benefits where these benefits exist. Where benefit receipt is subject to activity tests and other behavioural requirements (such as active job-search or being “available” for work), these requirements are assumed to be met. Where benefit rules are not determined at the national level but vary by region or municipality, results refer to a “typical” case. Adult has good health and full work capacity.
Source: OECD tax-benefit model. Model version 2.6.0.
Support for households with children is more generous. This is due, in part to the supplement to the rate of Minimum Income Benefit for households with children, and in part due to Child Benefit. At 39% of average wages, the level of support for a workless family is in line with the average across OECD countries (Figure 1.9).
Minimum Income Benefit and Family Benefit for a non-working two‑adult two‑child household adult as a percentage of the average wage by country, 2023
Note: Family has two adults and two children. Family benefit includes only Child Benefit in Portugal. Calculations assume full take up of family and in-work benefits where these benefits exist. Where benefit receipt is subject to activity tests and other behavioural requirements (such as active job-search or being “available” for work), these requirements are assumed to be met. Where benefit rules are not determined at the national level but vary by region or municipality, results refer to a “typical” case. All family members have good health and adults have full work capacity. Children aged 4 and 6.
Source: OECD tax-benefit model. Model version 2.6.0.
The increased level of Minimum Income Benefit for larger households in Portugal goes above and beyond the equivalisation factors used to assess poverty rates, in effect meaning that social benefits reduce poverty more for larger households with children than for smaller households without. While the official Eurostat equivalisation rates (used in poverty calculations) weight additional adults in a household as needing 50% of the resources compared to the first adult, and 30% for each child, the level of Minimum Income Benefit increases are more generous than this at 70% for additional adults, and 50% for each child.
Support is also further bolstered for single parent households. In addition to relatively more generous support for households for children, single parent households receive more support for Child Benefit and other child-focused benefits. Purely from a poverty reducing perspective there is no reason to provide additional support to low-income single parents but not low-income households with two parents.
Social support for pensioners is comparable to the OECD average for targeted first-tier pension support. A single person in Portugal can receive a pension equal to 20% of average wages, slightly above the OECD average (OECD, 2023[7]).
Support for low-earning households is among the lowest in the OECD
Households in Portugal with limited earnings receive among the lowest levels of support in the OECD. Indeed, a household with one adult working part-time and two children receives social benefits equal to 17% of average wages – almost one‑third lower than the OECD-average level of support (24% of average wages, Figure 1.10).
Low levels of in-work support reflect both the absence of any in-work benefit in Portugal, as well as the steep rate at which Minimum Income Benefit is withdrawn as earnings increase. While a reasonably high minimum wage in Portugal partly offsets this, it leaves households with low earnings due to part-time work with lower incomes compared to most other OECD countries.15
Minimum Income Benefit, family benefits, and in-work benefits for a single adult working 20 hours per week at the minimum wage with two children as a percentage of the average wage by country, 2023
Note: Family has one adult and two children. Family benefit includes only Child Benefit in Portugal. Calculations assume full take up of family and in-work benefits where these benefits exist. Where benefit receipt is subject to activity tests and other behavioural requirements (such as active job-search or being “available” for work), these requirements are assumed to be met. Where benefit rules are not determined at the national level but vary by region or municipality, results refer to a “typical” case. When adults are in work, they are assumed to have full work capacity and to work in the private sector with a “standard” employment contract. All family members have good health and adults have full work capacity. Countries without a national-level minimum wage are excluded.
Source: OECD tax-benefit model. Model version 2.6.0.
1.2.3. Coverage: entitlement and take‑up
For benefits to be effective they must have high coverage rates for their target population. In the case of social benefits aiming to reduce poverty, this means high coverage among low-income households.
The accessibility of Minimum Income Benefit – the share of individuals and families in acute economic need who receive support – depends on a number of factors. In the first place it depends on the strictness of eligibility rules: the income and asset tests that define entitlement (as discussed in Section 1.1.2). Beyond eligibility requirements however, stigma, information gaps, or unwillingness to fulfil behavioural requirements, such as active job search, may make otherwise eligible households less likely to apply for support (Immervoll and Knotz, 2018[8]; Bargain, Immervoll and Viitamäki, 2010[9]; Eurofound, 2015[10]). Support needs, and other characteristics of low-resource households also vary over time and geographically and can affect observed patterns of benefit receipt.
Social benefits are characterised by low coverage of workless households
Accounting for household circumstances with a statistical analysis of benefit receipt (see Box 1.1), the proportion of low-income households in receipt of social benefits in Portugal is very low compared to other OECD countries: just 34% of single workless adults are likely to be in receipt of any social benefit (Figure 1.11 Panel A1). This is the second lowest rate of receipt among all countries with sufficient available data.16 Households with children fare somewhat better. Indeed, with a receipt probability of 74%, workless couples with children, have a probability of receiving benefits in Portugal that is in line with the average, even if it falls below the top performers, where receipt rates are above 90% (Figure 1.11 Panel B1). Low-paid adults living alone fare worst, however. In Portugal they have a 3% probability of receiving any social benefits, the lowest rate among the 13 comparison countries (Figure 1.11 Panel C1).
This statistical approach to analysing coverage of benefits, can also be applied to analyse benefit amount. Instead of comparing benefit entitlement amounts (as discussed earlier in this section), the statistical model allows a comparison of the expected amount of benefit received based on income survey data. A single workless low-income adult is expected to receive 20% of median income in social benefits (Figure 1.9 Panel A2), a workless couple with children can expect to receive 21% of median income (Panel B2), and a low-paid adult to receive 12% (Panel C2). The pattern of expected support across countries from the statistical model is similar to the pattern of entitlements across countries in the previous section in terms of the level of support for a workless and low earning single adult: in both cases the level of support is below average.
In contrast, the statistical model suggests the support for a workless couple with children in Portugal ranks significantly below other countries. This seemingly contradicts the analysis of benefit levels (Figure 1.9) where Portugal ranks close to the average of other countries. This difference can be explained by two possibilities: first, entitlement factors that limit benefit entitlement to very low-income households, and second, households may not take‑up all of the benefits they are entitled to. For instance, a low-income household may be receiving some contributory benefit income, but still have income in the bottom quintile of the income distribution. They may be entitled to Child Benefit, but not entitled to, or choose not to claim, Minimum Income Benefit.
It is important to account for variation in household circumstances when comparing benefit receipt across countries
Variation in benefit receipt across countries can reflect variation in the accessibility of benefits, however, it also reflects cross-country variation in household circumstances. Accounting for household circumstances, therefore, can enable a more accurate reflection of the relative accessibility of benefits. Figure 1.11 below accounts for this variation by applying a statistical model to benefit receipt data. This model quantifies the support that households receive in specific circumstances (income level, labour market situation, and household structure), looking first at the probability of receiving Minimum Income Benefit, and second, conditional on receipt, the expected level of benefit received.
The results of this model for each of 13 OECD countries are then applied to specific household circumstances: a single adult living alone, a workless couple with two children, and a low-wage worker living alone. In all cases, household members are healthy.
Estimates rely on data from the 2019 waves of the European Union Statistics of Income and Living Conditions (EU SILC) for eight EU countries and the United Kingdom, the German Socio-economic Panel (GSOEP, 2018 wave), the University of Melbourne Household Income and Labour Dynamics Australia survey (HILDA, 2019 wave), the Korean Labour and Income Panel Study of the Korean Labour Institute (KLIPS, 2020 wave), and the US Survey of Income and Program Participation (SIPP, 2020 wave). Incomes relate to before COVID‑19.
This modelling approach does not identify causality. The results showing probability of benefit receipt follow from analysis of several observable factors that typically affect benefit entitlement. Therefore, the results depend on the joint correlation of these independent variables with benefit receipt. Moreover, benefit receipt may also be driven by unobserved variables that may be correlated with other independent variables. The explanatory power of the statistical model is strong however, suggesting the most important drivers of benefit receipt are included.17
Note: Bars indicate 90% confidence intervals. Social benefits include all non-contributory benefits. Expected social benefit receipt for different “vignettes” of low-income individuals. See Table 1 in Hyee et al. (2020[11]) for the definition of non-contributory benefits. “Workless” means worked less than 10% of potential full-time hours during 2018/19* (i.e. less than one month of full-time work during the entire year). “Low income” corresponds to the bottom decile of the distribution of income from market sources and contributory benefits (workless situation) or in the second-lowest decile (low-pay situation). Panel A: Low-income working-age adults reporting to be in “good” or “fair” health and living in privately rented accommodation paying a “low” rent (bottom quintile of the national rent distribution). Panel B: Low-income workless couple with two children, all in good health. Panel C: worked 10‑30% of potential full-time hours (e.g. between 1.2 and 4 months full-time work, or between 4 and 12 hours a week part-time work during an entire year, or a combination of part-year and part-time work). Countries ranked by the probability of receiving non-contributory benefits for a workless low-income adult living alone enjoying good health (baseline). In Korea, benefits include refundable means-tested tax credits. Children are aged 4‑17 – results therefore do not reflect receipt of maternity benefits and one‑off birth grants. Since 2017, universal child allowance payments in Belgium are no longer reported separately from contributory payments; results on Belgium are therefore not reported. White diamonds indicate that the probability of receiving means-tested benefits only is significantly lower than the probability of receiving any non-contributory benefits (means-tested or universal).
Source: Estimates based on the EU-SILC (2019 wave), GSOEP (2018), HILDA (2019), KLIPS (2020), and SIPP (2020). 2020 survey data contains income information from 2019, therefore these estimates do not cover the COVID‑19 crisis.
Other social benefits that provide lower amounts of support for extra costs, such as having a disability or having children, have less stringent household income entitlement conditions. Under these benefits households can receive support while having higher income limits. For instance, the income limit for Child Benefit is up to EUR 122 000 per year. However, these extra cost benefits also provide lower levels of support than the main benefits: the average amount of Child Benefit is just EUR 99 per month, compared to EUR 285 for Minimum Income Benefit (see Table 1.2).
The combination of different income and characteristic entitlements mean that substantial amounts of social benefit support is limited to only very low-income households, pensioner households, or to households with a disabled person.
The proportion of low-income households that receive social benefits clearly reflects the income entitlement rules: only working-age households with existing income lower than 20% of median income – half the poverty line threshold – are in receipt of Minimum Income Benefit.18 Only the poorest working-age households with incomes below 10% of median incomes are more likely than not to receive and social exclusion benefits (the majority of which is Minimum Income Benefit): 72% of households without children (Figure 1.12 Panel A) and 91% of households with children are in receipt of support (Figure 1.12 Panel C). Less than a quarter of households with slightly higher incomes between 20% and 50% of the median income level receive any social benefit.
Given that targeting rules focus support on the very lowest income households, it is unsurprising that over 65% of adults in Portugal report that they would not be able to easily access public benefits if they needed them, the second highest rate in the OECD (OECD, 2023[1]).
In contrast to social exclusion benefits, child benefits (mostly Child Benefit but also some educational benefits) are received by over 60% of all low-income households with children (Figure 1.12 Panel C), reflecting a more relaxed income means-test. However, Child Benefit provides a lower average amount of support of EUR 1 600 compared to EUR 4 900 for social exclusion benefits (Figure 1.12 Panel D). This reflects the different benefit levels of Child Benefit and Minimum Income Benefit. The higher amount of support for households with children also reflects the higher generosity of Minimum Income Benefit for households with children (Figure 1.12 Panels B and D).
Percentage of non-working working-age households with and without children in receipt of selected social benefits and average amount of benefit received by equivalised household income in Portugal, 2023
Note: Equivalisation of income and benefit amounts using Eurostat scales. Separate data for Minimum Income Benefit is not available, however, Minimum Income Benefit is the main Social Exclusion Benefit for working-age households in Portugal. Child benefits include Child Benefit and all other child-specific benefits.
Source: OECD calculations using EU-SILC (2019).
Similar to other countries, non-take‑up of Minimum Income Benefit is high
Subject to entitlement, benefit coverage also depends on take‑up. High rates of non-take‑up of social benefits reduces the coverage of social benefit support and their effectiveness in reducing poverty. Decisions by households to not take‑up benefits may be a result of negative stigma associated with the benefits, the low value of the benefits relative to expected future income sources, or a lack of awareness about entitlement.
Precise estimates of non-take‑up are difficult to establish because of the limitations of survey data. However, extensive work in other European countries suggests that non-take‑up for Minimum Income Benefits are between 30% to 50% (Eurofound, 2015[10]). These estimates would be consistent with the above analysis which show a non-take‑up rate of up to 30% for Minimum Income Benefit in Portugal.
It is possible that this apparent non-take‑up may be partly explained by entitlement conditions other than household income. For instance, a Portuguese household can be disqualified for claiming Minimum Income Benefit for up to 12 months if they fail to complete job-search requirements or other social integration conditions such as attending appointments with social workers imposed by local administrators.19 Analysing the extent to which these additional conditions are directly responsible for lower take‑up is difficult using quantitative data alone. Would-be recipients may choose not to claim because they have no intention of complying with work-search conditions, or simply because they are apprehensive about them. Extensive additional survey and interview research would be needed to fully understand why households entitled to benefits did not claim them. A longitudinal study of individuals using administrative data could also track the outcomes of benefit recipients who have their claim disqualified to see the number of households that remain on a very low income over time as a result.
Given the difficulty in accurately determining take‑up, an alternate approach is to assess the effect of entitlement conditions and take‑up rates together (Almeida, De Poli and Hernandez, 2022[12]). This approach also avoids the complication of the interaction between entitlement rules and take‑up. That is, the fact that more complicated benefit rules and claim processes can dissuade households from making a benefit claim (Bhargava and Manoli, 2015[13]).
Although take‑up is generally low for social benefits, it is not universally true. For instance, the above analysis (Figure 1.12 Panel C) suggests very high take‑up of Child Benefit of over 70%. The lack of stigma to claiming this benefit, the lack of additional conditions, and the automation of benefit calculation which requires minimal claimant input data are all reasons that can explain why take‑up is higher than for Minimum Income Benefit.
1.2.4. Targeting
Portugal has one of the most targeted social benefit systems in the EU
In Portugal spending on social benefits is targeted towards low-income households. Some 45% of social benefit spending is received by the poorest quintile of households, 23% by the next poorest quintile, 16% by the middle quintile, 10% by the second richest quintile, and with the richest quintile receiving just 6% of spending (EU SILC, 2023). In terms of spending towards the poorest households, Portugal has the fourth most targeted social benefit support system in the EU (Figure 1.13).
Share of social benefits received by the poorest fifth of households by country, 2023
Note: Social benefits include all means-tested benefits and non-contributory, non-means-tested benefits. Net household income after all taxes and social transfers.
Source: EU SILC.
The well-targeted social benefit support does not feed through into a significant impact on poverty however, with Portugal having the lowest social benefit impact on poverty in the EU (see Figure 1.6 above). The limited effect on poverty is a result of the low overall spending on social benefits: in Portugal just 2% of total household income is from social benefits, the lowest in the EU and compared to an EU-average of 6% (Figure 1.14). The effect is common among working-age and pensioner household alike with the share of income from social benefits the same for both groups.
Share of total household income from social benefits by country, 2023
Note: Social benefits include all means-tested benefits and non-contributory, non-means-tested benefits.
Source: EU SILC.
Low social benefit income is a result of low benefit levels, tight entitlement rules and low take‑up. As discussed above, Portugal compares poorly to other countries especially in terms of Minimum Income Benefit levels, the level of support for low-earning households, and low coverage of support which is symptomatic of restrictive entitlement rules and low take‑up.
In contrast to social benefits, contributory benefits play an outsized and less targeted role in supporting incomes
Contributory benefits provide over four times more support in total to working-age households in Portugal compared to social benefits. While larger contributory benefit systems are the norm in European countries, the ratio of support in Portugal stands out as being especially high: the third highest in the EU where the total value of contributory benefit income is nearly five‑times higher than the support from social benefits (Figure 1.15).20
Ratio of total household income from contributory benefits to income from social benefits for working-age households by country, 2023
Note: Social benefits include all means-tested benefits and non-contributory, non-means-tested benefits. Contributory benefit income excludes income from benefits that are both contributory and means-tested.
Source: EU SILC.
The relatively high contributory benefit income in Portugal is also not well-targeted towards lower income households. Almost a third, 32%, of working-age contributory benefit income is received by households in the richest fifth of the income distribution while the poorest fifth of working-age households receive just 15% (compared to an equal share of 20%). While it is not unusual for contributory benefits to be less well-targeted than social benefits, Portugal stands out in this regard compared to typical European countries, with the richest fifth of households receiving the fourth highest share of contributory benefits in the EU. These differences are likely to be the result of more generous contributory benefits relative to average earnings, higher take‑up of contributory benefits by higher income households, or entitlement criteria that favour higher income households.
Share of contributory benefits received by working-age households in the richest quintile of incomes by country, 2023
Note: Contributory benefit income excludes income from benefits that are both contributory and means-tested.
Source: EU SILC.
Overall benefits are poorly targeted because of the small scale of social benefits
The small scale of social benefits, though well-targeted, is completely overwhelmed by contributory benefits. More costly and untargeted, contributory benefits mean that the majority of all benefit income is accrued by higher-income working-age households in Portugal. On average, a household in the richest fifth of the income distribution will receive more than double the amount of benefit income than the average household in the poorest fifth. The average working-age household in the top income quintile received EUR 3 808 from contributory benefits in 2023 and EUR 133 in social benefits. In comparison, the average working-age household in the bottom income quintile received EUR 1 209 from contributory benefits, and EUR 1 107 from social benefits (Figure 1.17).
Average annual household income from social and contributory benefits by equivalised income quintile for working-age households, Portugal 2023
Note: Social benefits include all means-tested benefits and non-contributory, non-means-tested benefits. Contributory benefit income excludes income from benefits that are both contributory and means-tested.
Source: EU SILC.
Benefit systems should support individuals to become more self-sufficient where they are able to do so in the longer term as well provide necessary support to guard against deprivation in the short-term. An effective strategy to achieve self-sufficiency requires clear work incentives and the provision of effective activation support to enable working-age individuals to enter work and increase their earnings.
Social benefits in Portugal have a mixed range of work incentives reflecting the complexity of the system overall. While the Minimum Income Benefit provides smooth and clear incentives to work, other benefits create thresholds that encourage working fewer hours instead or more, or the overall complexity can lead some households worse‑off in work than when not working. There are strong obligations to search for work for recipients of Social Unemployment Benefit and Minimum Income Benefit, but other benefits lack this support.
1.3.1. Work incentives
Fixed means-testing thresholds create work incentives traps
The majority of solidarity subsystem social benefits in Portugal have a strict household means-testing threshold (see Section 1.1 for a detailed description). Where household income is below this level, the household is entitled to the full value of the social benefit, where income is above this threshold the household is not entitled to the benefit at all. Such fixed thresholds can create strong incentive traps, such that, for households with earnings approaching the threshold, working more hours is irrational.
Figure 1.16 (Panel A) shows how this affects work incentives in practice. Where one person in a couple is entitled to Social Unemployment benefit and is not working, their partner faces strong work incentives to earn up to the equivalent of 32 hours a week at the minimum wage. Additional earnings beyond this disqualify their partner from entitlement to Social Unemployment Benefit, leading the household to be financially worse‑off. Although the household is better-off with one person working full-time compared to no‑one working, they are even better-off working part-time when paid the minimum hourly wage. To be better-off working full-time, they would need to be earning the equivalent of 65 hours at the minimum wage each week. This reflects the financial cliff-edge generated by the income means-tested entitlement rules for Social Unemployment Benefit.
Panel B in Figure 1.16 shows the financial work incentives faced by the same individual more explicitly in terms of their participation tax rate (PTR) and their marginal tax rate (MTR). The PTR is a measure of work incentives for an individual compared to not working at all: it measures the income lost due to taxes and lower benefit entitlement as a percentage of an individual’s gross earnings. A PTR of 0% means that the individual retains 100% or all of their gross earnings. A PTR of 100% (or higher) means that the individual is not better-off from working (or worse‑off) as all of their earnings are offset by taxes or reduced benefit income. For the example individual in the Social Unemployment Benefit household, working 20 hours creates gross earnings of EUR 420 per month. Social contributions and income tax amount to EUR 71, so the PTR is 15%. Working 40 hours equates to a gross income of EUR 840, income tax and social contributions of EUR 187, and the household loses EUR 509 of Social Unemployment Benefit. Overall, the PTR is 73%.
Social benefit income, net earnings, total income (Panel A), participation and marginal tax rates (Panel B) by weekly working hours at the minimum wage for an adult with a non-working partner and no children entitled to Social Unemployment Benefit, 2024
Note: Social benefit income shown as bars, net labour income shown as solid line and includes gross earnings minus social contributions and income taxes. Social benefits are not taxable. Marginal tax rates show the effective income lost due to increased social contributions, taxes, and lower benefits as a percentage of the marginal increase in earnings. Social Unemployment Benefit is completely withdrawn at a fixed threshold equivalent to working 33 hours per week, where the marginal tax rate at that earnings level is effectively infinite and illustrated by the blue arrow. Participation tax rate shows the same calculation of relative income loss but compared to not working. Up to 32 hours of working the marginal tax rate is constant and therefore equal to the participation tax rate. Income tax calculated on a household basis.
Source: OECD calculations.
MTR is a similar concept to PTR, except that it shows the marginal incentive to increase earnings at every given level of earnings. It measures also measures lost income from higher taxes and benefit reduction as a percentage of the change in income as a result of earning incrementally more. For instance, earning an additional euro when earning under EUR 342 per month only incurs additional social insurance contributions at a rate of 11%. Earnings above this level also incur income tax at the initial rate of 13.25%, and so the overall MTR is higher: 24.25%. At the earnings threshold where Social Unemployment Benefit is fully withdrawn, the MTR is effectively infinite (shown by a vertical up-arrow in Figure 16).
Minimum Income Benefit provides a strong incentive to work for single adults
In contrast to other solidarity benefits, Minimum Income Benefit provides stronger and smoother incentives to work because it is means-tested by higher household income reducing the level of benefit support. Support is withdrawn against net labour income at a rate of 50% in the case of new employment and 80% otherwise. This means that, while entitled to support, every euro of labour income in a month reduces Minimum Income Benefit support by 50 or 80 cents (Figure 1.19 Panel A).
The effect on PTRs and MTRs is a much smoother profile of work incentives compared to Social Unemployment Benefit. The gradual reduction of Minimum Income Benefit as earnings increase means that the PTR is consistently below 100%: the individual is always better-off working (Figure 1.19 Panel B). The inevitable trade‑off is that the gradual reduction in support results in a higher MTR for lower levels of earnings while the individual is still entitled to Minimum Income Benefit.
Social benefit income, net earnings, total income (Panel A), participation and marginal tax rates (Panel B) by weekly working hours at the minimum wage for a single adult with no children entitled to Minimum Income Benefit, 2024
Note: Figure shows Minimum Income Benefit with 80% income deduction rate. Social benefit income shown as bars, net labour income shown as solid line and includes gross earnings minus social contributions and income taxes. Social benefits are not taxable. Marginal tax rates show the effective income lost due to increased social contributions, taxes, and lower benefits as a percentage of the marginal increase in earnings. Participation tax rate shows the same calculation of relative income loss but compared to not working. Up to 14 hours of working the marginal tax rate is constant and therefore equal to the participation tax rate.
Source: OECD calculations.
The means-testing approach, combined with the low level of benefit, means that net income, after taxes and social contributions, when working full-time at the minimum wage is more than three times higher than Minimum Income Benefit support for a single non-working adult, equivalent to a participation tax rate of 44%.
The more generous 50% earnings deduction rate (not shown) only applies when a pre‑existing recipient of Minimum Income Benefit moves into employment from unemployment and for the first 12 months of employment. The different earnings deduction rates effectively reward individuals for stopping work and re‑entering the labour market compared to maintaining their employment. Although this is a relatively small incentive problem for single adults, the issue is more substantive for larger households with entitlement to higher levels of benefit.
Providing different benefits for those who are newly working compared to those who have existing jobs is not an uncommon feature of social security systems. Estonia, Greece, Latvia, Romania and Spain all provide higher temporary Minimum Income Benefits for those starting a new job (OECD, 2024[14]). Beyond these examples, other countries also provide additional and temporary “into-work” work incentives for contributory benefits recipients where social contribution requirements limit incentives to deliberately stop and restart work to receive higher benefits.
Portugal has greater incentives to work for a single adult entitled only to Minimum Income Benefits compared to most other OECD countries, and almost all other EU countries. In 2023, Portugal had a participation tax rate of just 38%, compared to 48% OECD average (Figure 1.20). This mechanically reflects the low level of Minimum Income Benefit in Portugal compared to other countries (see Section 1.2).
Participation tax rates for a single person working full-time at minimum wage entitled to only minimum-income benefits, OECD and partner countries, 2023
Note: Single adult in good health with no children. No housing benefits are included. Calculations assume full take up of family and in-work benefits where these benefits exist. Where benefit receipt is subject to activity tests and other behavioural requirements (such as active job-search or being “available” for work), these requirements are assumed to be met. Where benefit rules are not determined at the national level but vary by region or municipality, results refer to a “typical” case. When adults are in work, they are assumed to have full work capacity and to work in the private sector with a “standard” employment contract. Countries without a national-level minimum wage are excluded.
Source: OECD tax-benefit model. Model version 2.6.0.
Individuals in larger households are incentivised to work part-time instead of full-time
Individuals in larger households face reduced incentives to enter work because entitlement to higher Minimum Income Benefit extends to higher earnings levels. As Panel B in Figure 1.21 shows, an adult in a household with two adults and two children faces a participation tax rate for full-time (40 hours per week) minimum wage work of 64% compared to 44% for a single adult. Entitlement to Minimum Income Benefit extends to the equivalent of working 27 hours per week at the minimum wage, compared to just 13 hours for a single person. This reflects the more generous support provided to households with children. There are two earnings levels where the individual faces very high MTRs, the points at which Child Benefit reduces in generosity by a step.
Where only one adult is working, the household can maximise their income by working-part-time at 26 hours per week at the minimum wage (Figure 1.21 Panel A). This is due the income limit means-test for Minimum Income Benefit at 30 hours of work for this household, as well as the reduction in Child Benefit at 26 hours of work. Although after this point the household faces a lower marginal tax rate, they are only better-off if they earn more than the equivalent of 46 hours at the minimum wage.
Social benefit income, net earnings, total income (Panel A), participation and marginal tax rates (Panel B) by weekly working hours at the minimum wage for an adult with a non-working partner and two children entitled to Minimum Income Benefit and Child Benefit, 2024
Note: Social benefit income shown as bars, net labour income shown as solid line and includes gross earnings minus social contributions and income taxes. Social benefits are not taxable. Marginal tax rates show the effective income lost due to increased social contributions, taxes, and lower benefits as a percentage of the marginal increase in earnings. Minimum Income Benefit is completely withdrawn at a fixed threshold equivalent to working 31 hours per week, where the marginal tax rate at that earnings level is effectively infinite and illustrated by the blue arrow. Child Benefit (specifically the Child Guarantee) is withdrawn at 27 hours, also resulting in an infinite marginal tax rate at that earnings level. Participation tax rate shows the same calculation of relative income loss but compared to not working. Up to 26 hours of working the marginal tax rate is constant and therefore equal to the participation tax rate. Income tax calculated on a household basis; household assumed to benefit from child tax allowances.
Source: OECD calculations.
Participation and marginal tax rates vary substantially and present a confusing array of work incentives which depend on the size of the household and other earnings. In particular, in very large households (with six or more persons) the second earner will face reduced work incentives compared to a four‑person household (a participation tax rate of 54% compared to 15%). This is because the larger household in effect shifts eligibility for benefits higher up the household income scale, meaning that the higher MTRs apply to second and subsequent workers in a household.
This mechanical effect of individuals in larger households being subject to higher participation tax rates is common across most OECD countries. However, the issue is more acute in Portugal, which has the 10th highest participation tax rate for an individual starting work in a non-working two‑adult two‑child household of 76% (compared to an OECD average of 55%, Figure 1.22). This relatively poor performance for work incentives for larger families contrasts with the relatively strong performance for single adults as discussed above.
Participation tax rates for an adult with a non-working partner and two children working full-time at minimum wage entitled to only minimum-income benefits, OECD and partner countries, 2023
Note: Adult has a non-working partner and two children aged 8 and 9. All persons assumed to be in good health. No housing benefits are included. Calculations assume full take up of family and in-work benefits where these benefits exist. Where benefit receipt is subject to activity tests and other behavioural requirements (such as active job-search or being “available” for work), these requirements are assumed to be met. Where benefit rules are not determined at the national level but vary by region or municipality, results refer to a “typical” case. When adults are in work, they are assumed to have full work capacity and to work in the private sector with a “standard” employment contract. Countries without a national-level minimum wage are excluded.
Source: OECD tax-benefit model. Model version 2.6.0.
Child Benefit income tiers create a very strong incentive for some households to work fewer hours
Tiered support for Child Benefit means households can be financially worse‑off when receiving small pay increases. This is because a small increase in household earnings can mean that a household moves into a higher earnings tier and sees a sharp reduction in Child Benefit that makes them financially worse off. These effective marginal tax rates of over 100% are concentrated at household income levels around five thresholds which vary depending on the number of children in the household. For a household with one child, thresholds lie at: EUR 415, EUR 594, EUR 1 188, EUR 2020, and EUR 2 970 per month. For households with more children the thresholds are higher.
Returning to the previous example of a household with two adults and two children (Figure 1.21) earnings of EUR 620 per month is entitled to EUR 260 of Child Benefit. An increase in earnings of EUR 20 results in the household moving into the higher income tier and losing entitlement to the Child Guarantee. This reduces Child Benefit entitlement to EUR 160, leaving the household overall EUR 80 per month worse‑off. At each Child Benefit threshold, the household needs to increase their earnings by a substantial amount, often representing a 10% increase or more, to see an improvement in their take‑home income.
Disability Benefit disincentivises non-disabled partners from working
The design of Disability Benefit creates a disincentive to work for the partners of disabled persons. The combination of support through Disability Benefit and the Minimum Income Benefit means that benefits are deducted twice for any earnings in the household and results in a PTR of 119% for a non-disabled partner working full-time at the minimum wage (Figure 1.23 Panel B). The MTR is significantly higher than 100% for working between 4 and 25 hours per week, meaning that at no point over this earnings range is working more incentivised. To be better-off the household would need to earn at least the equivalent of working 47 hours at the minimum wage. Earning anything between the equivalent 6 and 49 hours at the minimum wage means the household is worse‑off compared to not working at all (Figure 1.23 Panel A). Such disincentives to work part time are especially problematic in these circumstances, as partners of disabled persons may only be able to work part-time due to caring commitments at home.
Social benefit income, net earnings, total income (Panel A), participation and marginal tax rates (Panel B) by weekly working hours at the minimum wage for an adult with a disabled non-working partner and no children entitled to Minimum Income Benefit and Disability Benefit, 2024
Note: Social benefit income shown as bars, net labour income shown as solid line and includes gross earnings minus social contributions and income taxes. Disability Benefit shown as separate individual and household components. Social benefits are not taxable. Marginal tax rates show the effective income lost due to increased social contributions, taxes, and lower benefits as a percentage of the marginal increase in earnings. Minimum Income Benefit is completely withdrawn at a fixed threshold equivalent to working 19 hours per week, where the marginal tax rate at that earnings level is effectively infinite and illustrated by the blue arrow. Participation tax rate shows the same calculation of relative income loss but compared to not working. Income tax calculated on a household basis.
Source: OECD calculations.
The very high participation tax rate facing households with disabled persons reflects three of features of disability benefit design: first, social support for household with disabled persons is concentrated at very low-income households; second, the majority of Disability Benefit support depends upon household income; and third, that the household is entitled to two separate benefits that vary depending on income. Each of these factors increase the PTRs and MTRs as they increase the relative value of out-of-work benefit income to working income and increase the amount of benefit withdrawn as earnings increase.
Incentives to work are moderately stronger for disabled persons living alone. However, they remain weak. A single, moderately disabled person (defined as having a disability severity between 60‑80%) has a participation tax rate of 95% when moving into full-time work as they are also entitled to both Disability Benefit and Minimum Income Benefit when not working.
These participation tax rates for disabled persons and their households are high compared to other OECD countries, where rates vary from 20% to 110% (MacDonald, Prinz and Immervoll, 2020[6]). Countries with lower participation tax rates for disabled persons tend to promote work incentives via a combination of a more gradual phase out of support (for example Belgium, Denmark, Estonia, Ireland, the Netherlands and Poland), and additional support for newly working persons (for example Ireland, where those who return to work receive a different payment, the Partial Capacity Benefit, which is worth between 50% and 100% of the original disability benefit, depending on the severity of the disability).
Complex benefit interactions make work incentives unclear
The complex interaction of a wide array of social benefits mean households are unlikely to be fully aware of the financial work incentives. This may dissuade some individuals from working altogether. Each social benefit has different rules on how earnings, other household income, and other social benefit income is taken into account when calculating benefit awards. For instance, a multi-generational household may be theoretically entitled to Social Pension, Minimum Income Benefit, Disability Benefit, Social Unemployment Benefit, Rent Benefit, Child Benefit. In practice, the income from some of these benefits means a household will not be entitled to support from others, but this can vary as the household circumstances and earnings change. For instance, a household in receipt of Pensioner Social Assistance Benefit may not, depending on the number of children, be entitled to Social Unemployment Benefit or Minimum Income Benefit. Given such a complex picture, households are unlikely to be aware of how their financial situation may change if their earnings change and a desire to avoid losing essential income may make them more hesitant about entering work.
1.3.2. Non-cash benefits and mutual obligations
Non-cash benefits also reduce work incentives
It is not only cash benefits that can affect work incentives. Benefits-in-kind provided as free or reduced-cost goods and services effect household finances. When these non-cash benefits are provided on the basis of household income, they affect work incentives as households in-effect incur these extra costs as their earnings increase. For example, if a household is entitled to free public transport while on a low income but has to pay for public transport when on a higher income, this acts as an additional disincentive to work.
Calculating the exact financial impact of all these services is difficult as there is no centralised data on what the cost of all these benefits are and how they relate to households in different situations. Estimates of the value of some of the main non-cash benefits in Portugal are as follows:
EUR 100 per month of discounted water, electricity, gas, and telecoms rates set at the national or municipal level for households with annual incomes below EUR 6 000 or who are entitled to social benefits.
EUR 20 per month per person of social transport pass awarded per person to households with annual incomes below EUR 6 000.
EUR 25 per month per child for school social action. This can include discounted school meals, reimbursement of transport fares and school supplies.
50% reimbursement of medicines and 75% for prescription glasses, contact lenses and dental prostheses for beneficiaries of the Pensioner Social Assistance Benefit.
For a four‑person household with a very low-income, the monthly value of means-tested services could be as much as EUR 200 per month. However, once one adult is working full-time, they will no longer be entitled to this support.
Factoring in the value of this non-cash support means a household may be worse‑off in work compared to not working. With EUR 200 of additional non-cash support when not working, a two‑adult two‑child household faces participation tax rates for one person to work full-time at the minimum wage of 110% (compared to 89% without the additional non-cash support).21
In addition to this purely financial impact, the loss of non-cash benefits may create additional uncertainty. Indeed, for households on limited means, already struggling to make ends meet, the loss of healthcare benefits may be seen as too great a risk.
Some non-cash benefits, however, also play a role in helping households to work. the ongoing roll-out of free childcare for children under school age removes an important barrier to work that should enable more parents to enter employment.22 Though not means-tested, free childcare is likely to be especially important for the labour market participation of low-income families as it may provide the means for parents to return to work when childcare would otherwise be unaffordable or inaccessible.23
Mutual obligations support improved work outcomes, but not for all social benefit recipients
Beyond financial incentives to work, benefit systems also motivate and support individuals into work by applying job search and other activation requirements alongside providing training and employment guidance to benefit recipients. Well-designed activation programmes are able to address multiple barriers to labour market participation by ensuring individuals have the motivation to work and the opportunities to do so. In Portugal such requirements are in place for the working-age unemployed, for some inactive individuals who are able to work, but not always for individuals with disabilities and their partners, nor those with significant caring responsibilities.
Among the Portuguese social benefits detailed in this paper, only recipients of Social Unemployment Benefit and Minimum Income Benefit are subject to these activation requirements. Recipients are typically expected to register with the employment service in Portugal and produce evidence that they have been looking for and applying for work. In the case of Minimum Income Benefit, recipients may additionally or alternatively be required to complete other mandatory activities if they are not considered work ready. These conditions might include meeting with a social worker or attending training. Somewhat unusually for OECD countries, conditions are also imposed on children in recipient families, requiring that they attend school to encourage social integration for future generations.
Partners of recipients of other social benefits are not subject to activation requirements despite individually being able to work. While the main recipient of other social benefits may be unable to work due to their circumstances (for example Caregiving Benefit), the absence of activation requirements extends to all other members of the household regardless of their circumstances. Unless the household is also claiming Minimum Income Benefit, adults who are able to work may in-effect live in a household receiving social benefits without any work search obligations.
Sanctions for non-compliance with activation requirements can be severe in Portugal, with the household potentially losing entitlement to Social Unemployment Benefit and Minimum Income Benefit support for up to 12 months. In comparison to other countries, Portugal has one of the strictest applications of benefit sanctions where support can be withheld due to a refusal of the first job offer, voluntary resignation from a previous job, or refusal to engage in active labour market policies (Immervoll and Knotz, 2018[8]). Evidence shows that activation requirements generally lead to improved employment outcomes, both at an individual and economy-wide level (although there is no clear evidence that stronger sanctions for non-compliance are any more effective) (Abbring, Berg and Ours, 2005[15]; Knotz, 2019[16]).
Responsibility for these work search or social integration requirements rests with municipal level organisations in Portugal who then communicate with the nationally run benefits agency on whether recipient families have met their requirements. Such organisation is not unusual among EU or OECD countries (Immervoll and Knotz, 2018[8]), however it makes it more likely that households will receive different levels of support services and face different work search requirements as each municipality may adopt different approaches.24
References
[15] Abbring, J., G. Berg and J. Ours (2005), “The Effect of Unemployment Insurance Sanctions on the Transition Rate from Unemployment to Employment”, The Economic Journal, Vol. 115/505, pp. 602-630, https://doi.org/10.1111/j.1468-0297.2005.01011.x.
[12] Almeida, De Poli and Hernandez (2022), The effectiveness of Minimum Income schemes in the EU, https://joint-research-centre.ec.europa.eu/publications/effectiveness-minimum-income-schemes-eu_en.
[9] Bargain, O., H. Immervoll and H. Viitamäki (2010), “No claim, no pain. Measuring the non-take-up of social assistance using register data”, The Journal of Economic Inequality, Vol. 10/3, pp. 375-395, https://doi.org/10.1007/s10888-010-9158-8.
[13] Bhargava, S. and D. Manoli (2015), “Psychological Frictions and the Incomplete Take-Up of Social Benefits: Evidence from an IRS Field Experiment”, American Economic Review, Vol. 105/11, pp. 3489-3529, https://doi.org/10.1257/aer.20121493.
[4] DGAEP (2025), IAS values, https://www.dgaep.gov.pt/index.cfm?OBJID=3E74CF19-DA87-4B8F-81E2-51E0649AAA9F.
[2] Diário da República (2007), Bases gerais do sistema de segurança social, Lei n.º 4/2007.
[17] Düll, N. et al. (2018), “Faces of joblessness in Portugal: A people-centred perspective on employment barriers and policies”, OECD Social, Employment and Migration Working Papers, No. 210, OECD Publishing, Paris, https://doi.org/10.1787/b0fa55e7-en.
[10] Eurofound (2015), Access to social benefits: Reducing non-take-up, Publications Office of the European, https://www.eurofound.europa.eu/en/publications/2015/access-social-benefits-reducing-non-take.
[3] Hernanz, V., F. Malherbet and M. Pellizzari (2004), “Take-Up of Welfare Benefits in OECD Countries: A Review of the Evidence”, OECD Social, Employment and Migration Working Papers, No. 17, OECD Publishing, Paris, https://doi.org/10.1787/525815265414.
[11] Hyee, R. et al. (2020), “How reliable are social safety nets?: Value and accessibility in situations of acute economic need”, OECD Social, Employment and Migration Working Papers, No. 252, OECD Publishing, Paris, https://doi.org/10.1787/65a269a3-en.
[8] Immervoll, H. and C. Knotz (2018), “How demanding are activation requirements for jobseekers”, OECD Social, Employment and Migration Working Papers, No. 215, OECD Publishing, Paris, https://doi.org/10.1787/2bdfecca-en.
[16] Knotz, C. (2019), “Does Demanding Activation Work? A Comparative Analysis of the Effects of Unemployment Benefit Conditionality on Employment in 21 Advanced Economies, 1980–2012”, European Sociological Review, https://doi.org/10.1093/esr/jcz041.
[6] MacDonald, D., C. Prinz and H. Immervoll (2020), “Can disability benefits promote (re)employment? : Considerations for effective disability benefit design”, OECD Social, Employment and Migration Working Papers, No. 253, OECD Publishing, Paris, https://doi.org/10.1787/227e7990-en.
[14] OECD (2024), Benefits and wages, https://www.oecd.org/els/soc/benefits-and-wages/.
[1] OECD (2023), Main Findings from the 2022 OECD Risks that Matter Survey, OECD Publishing, Paris, https://doi.org/10.1787/70aea928-en.
[7] OECD (2023), Pensions at a Glance 2023: OECD and G20 Indicators, OECD Publishing, Paris, https://doi.org/10.1787/678055dd-en.
[5] OECD (2019), OECD Reviews of Pension Systems: Portugal, OECD Reviews of Pension Systems, OECD Publishing, Paris, https://doi.org/10.1787/9789264313736-en.
← 1. The exceptions are the individual element of Disability Benefit for severely disabled persons, which is not means-tested at all, and Funeral Allowance, which has an indirect means-test as the deceased must not have been in receipt of a contributory benefit.
← 2. With the exception of Social Unemployment Benefit, which is both contributory and means-tested and falls under the social protection system as a social benefit, as well as Minimum Pensions which are also effectively means-tested and also subject to social contribution requirements.
← 3. Source: OECD TaxBen policy descriptions (OECD, 2024[14]).
← 4. Using 2024 values means that they are consistent with the analysis presented in Chapter 2 looking at the impacts of proposed reforms.
← 5. Social Parental Benefit and other family-related solidarity benefits are more generous when multiple children are involved, for instance in the case of multiple births.
← 6. The Minimum Pension is not a completely separate benefit, it is a top-up to the level of contributory pensions in the insurance benefit system to specified minimum levels. The support is essentially provided on the basis of a means-test that the individual’s contributory pension (without the top-up) is below the minimum level. The Minimum Pension therefore forms part of the social benefit system and similar to other social benefits it is also funded from general taxation (in contrast to other contributory benefits which are funded from social contributions).
← 7. The annual income limit for Child Benefit in 2024 is equal to EUR 17 824 multiplied by one plus the number of children in the household.
← 8. The Portuguese Government has recently implemented the removal of non-resident children of pensioners from the means-test for Pensioner Social Assistance. In some cases, this would have meant pensioners were only entitled to Social Pension and not Pensioner Social Assistance Benefit, but this is no longer possible.
← 9. This is not especially clear from the rules, however. In practice many disabled households may only claim the disability benefit.
← 10. EUR 99 per month compared to, for example, EUR 285 per month for the Minimum Income Benefit.
← 11. Source: OECD, Social expenditure aggregates. Includes spending under family benefits. Note these comparison figures includes Child Benefit, other children-related social benefits, and other support beyond social benefits in Table 1.2 which are also focussed towards children.
← 12. A small number of social benefits are not means-tested and are targeted to specific personal circumstances such as having care needs.
← 13. Source: Eurostat (ilc_li02), data relates to 2024.
← 14. This calculation only considers social benefit income, and not income from contributory benefits. It therefore differs from the Eurostat poverty figures which consider the impact of all social transfers (including contributory benefits). Including contributory benefits (but not pensions), the at-risk-of-poverty rate is 4.8 percentage points lower (16.6% compared to 21.4% in 2024). Source: Eurostat (ilc_li02, ilc_li10).
← 15. Including all income, a single adult two‑child household working 20 hours per week at the minimum wage has an income of 40% of the average wage. This compares to an average income level of 44% across OECD countries.
← 16. 13 OECD countries. See (Hyee et al., 2020[11]).
← 17. A full description of the modelling process is set out in (Hyee et al., 2020[11]).
← 18. Existing income may include contributory benefit income, or income from savings.
← 19. Social integration conditions for receiving Minimum Income Benefit are set at a local level in Portugal and are tailored to each household.
← 20. Pensioner households are excluded for international comparisons to avoid distortionary demographic effects. A relatively larger pensioner population will skew the ratio of contributory benefits to social benefits higher given pensioner benefits are mostly contributory based due to retirement benefits.
← 21. Assumes a household receiving EUR 905 of Minimum Income Benefit, Child Benefit when not working, compared to EUR 156 of Child Benefit with one‑adult working full-time earning EUR 957 per month.
← 22. Currently available to children under the age of 1.
← 23. Indeed, research prior to the introduction of the free childcare policy identified “mothers with care responsibilities and limited work experience” as a particularly salient group of jobless individuals in Portugal (Düll et al., 2018[17]).