Risk for companies, hunger and unemployment, alerts that unions see due to an increase in the minimum

After the announcement of President Gustavo Petro of increase the minimum wage by 9.54% by 2025, remaining at 1,423,500 pesos, The country’s business associations responded and showed their disagreement with the president’s decision.

“We consider that President Gustavo Petro’s 9.54% increase is totally high and populist. It is to ingratiate himself with the workers and unions of the country“he assured Jaime Alberto Cabal, president of the National Federation of Merchants (Fenalco).

(See: This was the moment when Petro announced the increase in the minimum for 2025).

Cabal added that The decreed increase has no economic, social or technical basis, and argued that “Inflation in 2024 ends at 5.1% and productivity does not go beyond 1.75%“so raise the minimum 9.54%”puts at risk the reductions in interest rates and the fight against inflation that the Bank of the Republic is doing“.

“With this decision, President Petro not only puts at risk the viability of hundreds of micro, medium and small businesses (97% of the Colombian business fabric), but also affects the generation of new jobs, risks the jobs that already exist. and encourages informality“Cabal said.

He also called on the workers, to whom he stated that “they celebrate that they are going to have
higher incomes”, but they do not take into account that “they will also have higher costs“.

(See: Minimum wage 2025: President Petro announces that it will rise 9.54% starting in January).

“Within companies, it is important to keep in mind that it is not the 9.54% increase decided by the Government, it is an increase of approximately 68%, derived from parafiscal and other labor costs.“, he added.

Reactions from more experts to the increase in the minimum for 2025

Bruce Mac Master, president of the National Association of Industrialists (Andi), followed Cabal’s line and commented that “Populist decisions end up being a celebration for a few days and hunger for the future“.

“It is almost always about making announcements that many people can celebrate, but ends up generating immense costs for the entire society in the future, especially for the most vulnerable. This is not new, this has already been put into practice by many leaders in many places on the planet, and the results are always more poverty, less development, more unemployment, more fiscal costs for the State and finally despair of the rulers.“he added.

(See: How much transportation aid was set for 2025 with an increase in the minimum wage).

The president of the Colombian American Chamber (AmCham Colombia) María Claudia Lacouture, He insisted that the increase in the minimum will impact SMEs, inflation goals and will require measures to create employment.

“The increase in the minimum wage by 9.54% by 2025, which exceeds expected inflation by more than 4 points, poses challenges for economic growth and the reduction of projected inflation. This increase especially affects MSMEs by raising labor costs above productivity. It is essential that this measure be complemented with responsible and coherent public policies that promote formal employment and ensure business sustainability.“, he valued.

Luis Fernando Mejía, Executive Director of Fedesarrollo, explained that the 2025 increase is one of the highest in the silo in real terms (discounting inflation).

“This increase is similar to that of 2022, which generated negative effects on the labor market and prices, by increasing inflation during that year and the following year.“.

Besides, asked formal employees to consider some effects: “First, by substantially increasing the cost of formal employment, it will further induce informal hiring, especially in microenterprises. Second, it will put upward pressure on inflation, delaying the reduction of interest rates by the Bank of the Republic“.

(See: How much was the minimum and maximum that the salary could increase if an agreement was not reached).

Rodolfo Correa, president of Acopi, the union of micro, small and medium-sized entrepreneurs in the country, He said that the 9.54% increase is outside the budget of the sector it represents, since They projected an increase of 7.5% at most.

“This increase has profound repercussions: it increases productivity costs by increasing labor costs, which implies that new jobs will not be generated and existing ones are put at risk. Informality will also increase, which already exceeds 60% of the population (…) In Colombia, only 3.7 million people earn the minimum, inflation goals will not be met and the national economy will be put in difficulties“, he analyzed.

José Ignacio López, president of the Anif economic studies center, He described Petro’s decision as ‘unfortunate’ and said that ‘workers excluded from formality’ were not taken into account.

“(The informals are) A silent, hardworking, unrepresented mass that suffers the consequences of unjustified increases in technical arguments“, held.

CAMILO HERNÁNDEZ M.
Digital Portfolio Editor