As of January 1, 2025, as is customary, the minimum wage in Colombia will increase. According to the decree issued by the President of the Republic, Gustavo Petro, the increase will be 9.53%, which will lead to the indicator going from $1,300,000 to $1,423,000, and, therefore, the transportation subsidy will have an increase of $38,000, which will reach $200,000.
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Thus the accounts, the total that an employer must pay to a worker who earns the minimum wage will be $1,623,500 with transportation assistance including.
Based on the above, the Fiscal Observatory of the Javeriana University carried out a study on what has happened to salaries in the last 10 years, that is, between 2013 and 2023. According to this academic center, during this time income has not presented an improvement.
Under this premise, it was announced that, in 2013, workers earned on average 1.39 times the minimum wage that year, while in 2023 this proportion decreased slightly to 1.37 times the minimum wage.
“Thus, average salaries have not improved more than the minimum wage and this is an indicator that the Colombian economy has not improved in efficiency and for labor earnings the minimum wage is as relevant as it was 10 years ago. Since average salaries are very close to the minimum wage (this proportion is not 2 times the minimum)”, notes the report.
Furthermore, he highlighted that, when this variable is presented, it is highlighted that during those 10 years there are still many salaries that are below the minimum, making the minimum income far from being the minimum wage of the economy.
What was the value of the minimum wage in the last ten years?
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Why are the level of salaries falling?
Another point that the study provided has to do with the relationship between the minimum wage and average wages, since according to the Observatory’s conclusions these have been decreasing in recent years.
“It is observed that there is a downward trend in average salaries in relation to the minimum wage in the formal sector and in the informal sector. But not only that, the average salaries paid in the informal sector have been lower than the minimum wage and therefore are increasingly lower relative to the minimum wage (going from 0.93 to 0.78)”is highlighted in another section.
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At the same time, he noted that this has been presenting as a generalized phenomenon in the Colombian labor market, where workers experience a decrease in their income in relationship with the minimum wage. This trend raises questions about the factors that could be contributing to the reduction in the purchasing power of workers in different sectors of the economy and the increase in labor non-participation in Colombia.
With the above, he highlighted that this has occurred mainly due to the increase in formality, but not because average income has improved in formality or informality.
At the same time, the Fiscal Observatory of the Javeriana University highlighted that the significant increases in the minimum wage in the last two years could have contributed to the decrease in the purchasing power of workers with respect to the minimum wage.
“Although the increase in the minimum wage can be a measure to improve the conditions of low-income workers, it is essential to evaluate its impacts in terms of inflation and general purchasing power of the working population and on the possibilities of the productive apparatus (formal and informal) to translate increases in the minimum wage into generalized wage increases”, noted the document.
Why are inflationary pressures generated?
The study also analyzed why increasing the minimum wage annually would continue to generate some important inflationary pressures, which, in turn, weaken the purchasing power of workers.
“The increase in the minimum wage can generate inflationary pressures, especially if it is not accompanied by a proportional increase in productivity and company income. “This may result in a general increase in prices, which would dilute the positive impact of the wage increase in real terms,” the academy reviewed.
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In addition, he mentioned that a disproportionate increase in the minimum wage could have negative effects on the competitiveness of companies, especially in sectors with tight profit margins. This could lead to a reduction in hiring or even the closure of companies, which in turn could increase the unemployment rate and negatively affect economic stability.
Among the conclusions of this report, the Observatory indicated that in 10 years the average salaries of formality lost ground compared to the minimum wage, but the average salaries of informal workers lost much more ground.
“The consequences of these movements on medium and long-term education, training and coaching decisions must be considered and hopefully measured.””, he pointed out.
LEIDY RUIZ
Portfolio Journalist
