Losing a Job Costs More Than It Did: Unemployment Benefit Now Covers 64 Percent of a Lost Wage, Down From 70 Percent in 2015

Losing a job in Portugal costs more than it did ten years ago. A new analysis by the Bank of Portugal, published on Thursday, finds that unemployment benefit replaced about 64 percent of a claimant's last monthly wage in 2025, down from about 70 percent in 2015.

The benefit itself has not shrunk. The average monthly payment rose from about 500 euros to about 700 euros over the decade, an increase of 3.4 percent a year in nominal terms and 1.3 percent a year after inflation. But wages rose faster than the floors and ceilings that cap the benefit, which are tied to the social support index, the IAS. That index is updated each year in line with growth and inflation, and in recent years pay has outrun it.

Low earners lose the most ground

The drop was steepest at the bottom. Across all claimants, the replacement rate fell by 5.5 percentage points; for those on low wages it fell by 11 points, against 3.6 points for middle earners and 1.2 points for the best paid. Even so, the benefit still covers more of a small wage than a large one. In 2025 it was worth on average about 69 percent of previous pay for low earners, 66 percent for middle earners and 49 percent for high earners, a pattern the central bank attributes to the minimum and maximum amounts.

The bank adds a caveat in claimants' favour: unemployment benefit is not subject to income tax or to the worker's Social Security contributions. On general assumptions about tax, it estimates that the net replacement rate is about 13 percentage points higher than the gross figure.

Who claims, and for how long

The profile of new claimants has also changed. Workers aged 50 or over made up 26 percent of new claims in 2025, against 21 percent in 2015, and the average age rose from 38.9 to 40.6. Women's share rose from 51.6 to 53.4 percent. Foreign workers accounted for 26.6 percent of new claims, against 2.2 percent a decade earlier, which the bank says must be read against the large rise in the number of foreign employees in the workforce. People earning up to 880 euros made up 40 percent of new claims last year.

Most spells are short. About a third of claimants stop receiving the benefit within three months and more than half within six, while a quarter are still claiming after a year and about 14 percent after 18 months. Older claimants stay on longer, partly because the maximum duration depends on age and on how long a person has paid contributions. From six months onwards, foreign claimants are less likely than Portuguese nationals to still be claiming, which the bank links to shorter contribution records.

Back to work, but not always to the same pay

Of those who left the benefit in 2024, about 60 percent started a new job within a month, a sharp rise on 2015, while 31 percent took more than six months to return. A new job did not always mean the same living standard: about 40 percent of those who went back to work in 2024 saw their real wage fall. Roughly half returned in a different sector from the one they had left, most often between lower-paid fields such as administrative and support services, hotels and restaurants, manufacturing and retail.

The central bank concludes that income protection needs to go hand in hand with active employment policies that help people find work, update their skills and match with vacancies, particularly for those on long claims or at risk of returning on worse terms. For the monthly count of people registered as jobless, see our report on the August figures.