This week the Dane presented the productivity data that the Labor Concertation Commission will use to define the increase in the minimum wage and these generated concern among businessmen and economic study centers. because some indicators were above expectations.
Due to this, the director of this entity, Piedad Urdinola, said in a conversation with Portafolio that everything was done under strict technical parameters and applying the same methodology that the country has known for three years. He also recalled that his job is to put all the available figures on the table.
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How was the calculation done?
The total productivity of the factors and the two labor productivities that we produce, both per hour and per person, come from a methodology called the Laklems methodology, which comes from a global project developed by Professor Dale Jorgensen of the Stanford University, and it is LA because it is for Latin America.
This model has adaptations that correspond to the economic realities and also to the statistical production of each of the regions. This is an OECD methodology, and this 2021 methodology is very recent, because one of my interests is also to have production with the most recent methodologies that are at the forefront.
Minimum wage discussions 2025.
Is this the first time it’s been used?
Since 2022 we are implementing this methodology. At the negotiation tables for the minimum wage for 2022, 2023, and now 2024, exactly the same methodology was used, which, as I already said, has all its documentation in the same Laklems project, also in ECLAC and in our databases.
Why was productivity so high?
Starting from a topic that is very technical, there are production functions on which estimates are made, which are the same as those made for the calculation of GDP, that added value is taken, and the production function is reviewed, What is the contribution of capital, labor, services, energy, factors.
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From this added value we begin to review in the production function, how much the contribution of each of these factors is, measuring the contribution of capital and the contribution of labor or the worker.
Did all this influence?
We have made a great effort to present the monthly ISE (Economy Monitoring Indicator), which gives all users an idea of how production is being generated in economic statistics, and we are always presenting quarterly information on the Quarterly GDP. That said, let’s remember that in all these productivity issues, we are always looking at the capital-labor ratio.
Piedad Urdinola, director of Dane.
In the letter they only talk about labor productivity per hour worked, 3.43%; but we take that and also the labor per person employed, which is 1.76% and also the total productivity of the factors, which is 1.73%.
Let’s delve into the hours worked…
What we are seeing there, regarding the relationship between capital – labor and what has happened, you can review the historical data, is that the capital stock has been growing in the economy throughout this year. Then we have a reduction in effective hours worked and a growth in capital.
When one makes that relationship, I have a numerator increasing and a denominator decreasing. In such a way that we reached that productivity that is higher than what many analysts were expecting, because perhaps they did not take that type of information into account. They were looking at the global figure, the value added figure, the GDP figure, but they forgot to review these details that are very important in this estimate.
Did this influence total production?
The labor productivity indicators, which are derived from the Total Factor Productivity (TFP), is the starting point for these calculations, they are much more complete indicators than before, when there was only an average productivity, which however is an indicator very basic.
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Precisely from the TFP equation, contributions to the growth of labor productivity per hour worked can be derived. Labor productivity per hour is TFP, plus the contribution of capital per hour, plus the composition of labor. That’s what we’re seeing there in hourly productivity.
Did the reduction in working hours have an influence?
In 2021, the average effective hours worked per week, according to our large integrated household incorporation, was 44 hours per week in 2021. In 2024, 42.1. In other words, in these four years we have seen a reduction of almost two hours for the entire economy.
Manufacturing production
And when we disaggregate sector by sector, we see this same reduction, which is gradual year after year, in some more than others, for example, financial intermediation, real estate, business and rental activities, it goes from 43.4 to 42. A reduction practically of three hours. That said, what we are observing is that in the total economy and for each of the lines where we measure, there is a drop in the effective hours worked per week.
Will they attend to those who ask for explanations?
Yes, as you saw in the letter that we gave you in the response, this is very important, because we knew that it is a new methodology and when we brought it we explained ourselves. Last year we gave entire training sessions in sessions that were parallel sessions attended by all the participants at the table.
Dane is an entity with technical independence and will always present all the figures, not one figure or those that suit one sector or another, but the figures produced with the highest quality standards and following and accepting all the alignments and good international practices.
