Global Competition Intensifies for Skilled Youth Talent Retention

Duarte Dias, a Portuguese software engineer, has moved from Lisbon to Dublin and then to Seattle in pursuit of career advancement. Despite missing the laid-back lifestyle and family-friendly atmosphere he experienced back home, Dias doesn’t regret his international move.

In 2020, Dias accepted a job offer at Microsoft’s Dublin subsidiary. A year later, he joined another team at the company’s headquarters in Seattle, where he continues to work today. His decision was made easier by financial considerations: staying in Portugal would have been financially ruinous for him.

While completing his master’s degree at Lisbon’s Instituto Superior Técnico and gaining two years of job experience there, Dias earned €35,000 annually ($36,000; £29,000). However, due to high taxes—up to 40% on gross salary—he found it challenging to save money without living with his parents.

His move to Ireland offered a significant improvement in salary prospects. His income doubled almost immediately, reaching €60,000 per year. The pay is even better in the United States, where he now earns upwards of $160,000 before paying taxes at a 20% rate—a figure much lower than what he would have paid back home.

Dias intends to return to Lisbon with more savings within two years. However, his story reflects a broader concern for Portuguese authorities: the exodus of skilled workers. In response, the government launched IRS Jovem in 2020 under Socialist Party leader Antonio Costa’s administration. This program offers tax reductions for young workers based on their education level.

In March 2022, a snap election brought to power a center-right government led by Luis Montenegro. They expanded the program from five years and limited educational levels to ten years and all workers under 35 years old. According to official data, this new proposal could benefit up to 400,000 workers.

However, experts believe that such tax incentives alone will not be enough to keep young professionals in Portugal. Sergio Vasques, a professor of tax law at the Católica Lisbon School of Law, argues that professional opportunities are more abundant abroad and that the incentive applies only to yearly incomes under €28,000.

The Portuguese government’s high taxes also contribute to the exodus problem. The “tax wedge,” which is calculated as the ratio between what an average single worker without children pays in taxes and their corresponding total labor cost for the employer, stands at 42.3%—the eighth highest among OECD member countries.

Other factors such as low salaries also play a role in Portugal’s brain drain. Antonio Almeida, another software engineer like Dias, left Lisbon during the pandemic to work abroad. He initially moved to Berlin for €1,300 gross per month and later relocated to Brussels. While German taxes are high, his net gain was significant compared to what he would have earned in Portugal.

Dias agrees with Almeida: salaries outside Portugal will always be higher than those within the country unless there is a strong personal or familial connection tying someone to their homeland.

In conclusion, while tax changes and other incentives can help retain some young professionals, low wages and high taxes remain significant obstacles for many in Portugal who seek better opportunities abroad.