Chapter Thirteen: The Birth of the Welfare State from 'The People's History of the Portuguese Revolution'

The name change from ‘insurance’ to ‘security’ carries profound significance, marking a fundamental shift in its essential meaning. Portugal retained, until recently, one of the world’s finest healthcare systems and for many years delivered outstanding public education services (today, we have more PhDs than the total number of certified teachers in 1970). Its social security system generally encompasses two main domains. The first comprises retirement/pension schemes funded by worker contributions—or non-contributory pensions financed through state budget transfers—both of which were feasible only against the backdrop of rising national wage totals. The second domain consists of so-called ‘social action’ policies designed to alleviate poverty and involuntary unemployment. A female worker from the Candidianha Fashion Studio described pre-revolution conditions: ‘Back then, we earned only seventy or eighty escudos a day—but the garments we stitched in three days sold for thirty or forty thousand escudos. Just look how much they siphoned off! [33]’ Before the revolution, apprentices at this fashion studio earned 20–40 escudos per day, assistants earned 50 escudos, and senior dressmakers earned 100–125 escudos. After the April 25th uprising, their wages rose to 3,300 escudos per month; by May, they had increased further to 4,400 escudos. The universal social security system born during the revolution embodied two interrelated core principles. These reflected a ‘transfer’ of capital income to workers—the largest such wealth transfer in contemporary Portuguese history, amounting to a staggering 18% (see Table 13.1). Secondly, there emerged a societal and public commitment to universal welfare, replacing the former discriminatory, arbitrary, and charity-dependent system, while simultaneously broadening the scope of social protection. This expansion extended beyond basic subsistence—encompassing education, healthcare, and pensions—and included labor training, culture, sports, and leisure. To understand the birth of social security, one key point must be grasped: without understanding it, the overall evolution of Portugal’s welfare state remains incomprehensible—namely, wage growth, i.e., the transfer of part of profits to workers. In those years, wage growth was achieved through multiple channels: direct increases in cash wages; establishment of minimum wage standards (3,300 escudos in May 1974; 4,000 escudos in May 1975); institutionalization of entitlements to benefits (e.g., unemployment, maternity, and paternity leave); provision of free healthcare and education; price freezes; and creation of a basic-consumption ‘shopping basket’ used to formulate price indices. Substantial capital was also converted into wages via other means—such as uncompensated nationalizations, state intervention in firms whose capital fled abroad (over 300 companies in total), and direct curbs on exorbitant salaries (in 1975, salaries exceeding 12,000 escudos were frozen). The number of beneficiaries under the general social security system and the General Pension Fund (Caixa Geral de Aposentações, CGA—the civil service social security scheme) rose from 607,000 in 1973 to 943,000 in 1975. Within the CGA system, expenditures increased from 7.7 million escudos in 1973 to 11.637 million escudos in 1975.

What lesser-known facts about Portugal do you know?

The Constitution of the Portuguese Republic explicitly declares Portugal a socialist state in its Preamble. The original constitutional text reads: On April 25, 1974, the Armed Forces Movement overthrew the fascist regime, bringing to a triumphant close a long-standing resistance struggle and embodying the deepest aspirations of the Portuguese people. Liberating Portugal from dictatorship, oppression, and colonialism entailed a revolutionary transformation and inaugurated a historic turning point in Portuguese society. The revolution restored to the Portuguese people their fundamental rights and freedoms. Exercising these rights and freedoms, the people’s legitimate representatives convened to draft a constitution aligned with the nation’s aspirations. The Constituent Assembly affirms the Portuguese people’s resolve: to defend national independence; to safeguard citizens’ fundamental rights; to establish the basic principles of democracy; to ensure the primacy of a democratic state founded on the rule of law; and, respecting the will of the Portuguese people, to open the path toward a socialist society—thus building a freer, fairer, and more fraternal country.

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