According to Colombian law, the increase in the minimum wage can never be less than the inflation of the year that endsso that households do not lose their purchasing power.
(The factors that will determine the rise in the minimum wage for 2023).
Due to the above, the panorama of the negotiations on the increase in the basic salary, which began in December, becomes complex. Bearing in mind that annual inflation rose from 10.8% to 11.4% between August and September.
But, what does it mean that the minimum wage grows more than inflation?
According to Stefano Farné, director of the Labor Market and Social Security Observatory of the Externado University of Colombia, this means that employees can acquire, at least in the first months of the year, more products when they go to spend their income.
According to the expert, the minimum wage, in turn, has an effect on inflation, that is, they have a direct correlation, since the increase in the basic salary puts pressure on the price level, mainly in the first months after the increase.
(Minimum wage: the path that begins to travel for its definition).
“What would happen is that companies begin to adjust the prices of their products a few months after the salary increase,” Farné explained. Therefore, during the negotiations on the salary increase, which begin in December, he contemplates this phenomenon.
Another effect of the increase in the basic salary could be given in employment. “Although it is discussed, what is found in the international literature is that there is no effect on formal employment, however it can have an effect on informal employment,” said the expert.
(Inflation, a big problem: experts predict how long it will last).
And he detailed: “it is likely that the minimum wage will serve as a “lighthouse effect”, it increases the minimum wage in the formal sector, which is where it is paid, but this leads to a rise in the informal sector as well. But it may not happen, then those who lose are those with lower incomes, who are the ones who find fewer opportunities to have a formal job”.
Of course, according to Farné, “those who benefit from the increase are not only those who receive the minimum wage, but also people with the highest income”, that is, those who earn a full salary that must be at least 13 minimum wage.
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