Informal employment broke a three-year trend and rebounded again

So much was announced and warned by think tanks and economic analysts, until it finally came true, the economic slowdown is having direct effects not only on the capacity of the labor market to generate new jobs, but is also influencing an increase in informality, Although it is small for now, it marks the first warning bell on this issue.

According to the reports on formal and informal employment, delivered by the DANE this Monday – August 12 – for the quarter of April and June, of the 22.9 million Colombians who have a job, 55.8% are not contracted under the parameters required by national legislation. In other words, there are 10.1 million formal employees in the country and 12.8 million in the informal sector.

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This means that of the 92,000 jobs that were created in the last three months, 42,000 were informal. Likewise, when reviewing the year-on-year comparison, it can be seen that with this variation of 0.1 percentage points, not only is there an upsurge in this scourge in the country, but it also breaks a streak of more than three years with consecutive falls in this indicator, which began the year at 56.3% and has since advanced very slowly.

Another relevant fact that emerges from this comparison is that since January to date, 551,000 new jobs have been created, however, 203,000 have been informal, which is equivalent to 36.8%.

Urban informality

Reviewing the breakdown of this report by totals in main cities and populated centers and dispersed rural areas, it can be seen that while this problem continues to contract in the rural sector, the greatest impact is being felt, as with the general unemployment figures, in the urban sector, where the slowdown hits the different sectors of the economy the hardest.

This is clear when contrasting that in the period April-June 2023 there were 4 million of citizens in the informal sector and in this same period of 2024 this figure fell to 3.9 million. However, in the main cities this did not happen in the same way, since an increase was recorded with which it rose from 8.6 million to 8.8 million.

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Meanwhile, formal employment has increased from 10 million jobs a year ago to 10.1 million in the urban sector and from 791,000 to 741,000 in rural areas today, making it clear that although there has been a slight recovery, most of the work generated in the countryside and in the country’s scattered towns does not have the legal guarantees.

Informality by sectors

In the review of another aspect that cannot be overlooked in this report, related to the generation of employment by sectors, it is perceived that agriculture (2.1 million), commerce (2.3 million), artistic activities (1.4 million), accommodation and food services (1.2 million) and transportation and storage (1.1 million); they are the ones that employ the most informal labor.

Informality,

These data bring to the table a fact that is not minor, since at this time it is precisely the primary activities that are driving the most job creation in Colombia and with this it is clear that the jobs that are being created are not of quality, nor do they offer decent conditions for Colombians.

“For the period of analysis, of the 23 cities and metropolitan areas, Those that presented the highest proportion of informality were: Sincelejo (68.0%), Montería (60.6%) and Cúcuta (60.4%), while the cities with the lowest proportion of informality were: Manizales (33.0%), Bogotá (33.7%) and Tunja (37.6%),” reported Dane.

On the other hand, reviewing the behavior of informality according to the size of the companies, 84.7% of the employed population working in micro-enterprises was informal, while in small companies, medium-sized companies and large companies the proportion of informal employees was: 23.7%, 6.3% and 3.1%, respectively.

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Gender gap

To these data presented by the Dane, it is worth adding a recent analysis by María Paula Murcia, BBVA Research economist, who acknowledges that the labor market in Colombia has been characterized by historically high informality rates compared to the regional average.

To do this, it takes into account ILO figures showing that in 2023, the informality rate in Latin America was 51.7% compared to 55.9% in Colombia, a figure that is more worrying when looking at the cumulative figures for men and women separately, since although in general terms it is seen that men are the hardest hit, this reality changes in the analysis by activity.

Informality in Colombia.

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“According to ILO figures, in Colombia, men are more informal than women. In 2023, the informality rate for men was 58.0% and for women 53.0%, while in countries such as Peru or Chile, women have higher informality rates, with a difference compared to men in 2023 of 4.8 and 2.7 percentage points (pp), respectively,” he explained.

However, according to Murcia, when informal employment is analysed by similar subgroups, women have higher rates. For example, by educational level, the informal employment rate of women without basic education (92.2%), basic (83.0%) and intermediate (58.7%) was higher than that of men, with differences of 4 pp, 4p.p. and 6p.p. respectively. Additionally, women are more informal than men in rural areas (84.0% versus 83.6%).

Thus, this expert adds that once again it is clear that formality must be a public policy objective, “since the literature closely relates formality with social conditions, the first being a necessary condition for overcoming poverty, which should be the ultimate goal of any policy design.”