Colombia: Petro decrees a 16% increase in the minimum wage

By Sabrina Martin

The Colombian Government announced a 16% increase in the minimum wage, which will take effect on January 1, 2023.

The Minister of Labor, Gloria Inés Ramírez, announced this Thursday, December 22, that the decree that will establish the minimum wage at COL$1,160,000 (US$244.03) has already been signed; while the transport aid will rise 20%, reaching COL$140,000 (US$29.45).

The measure taken by the Government and that would have been agreed with employers and workers, will imply an imminent increase in prices of products and services, raising inflation.

One of the measures taken by the Petro government will be the de-indexation of elements and activities that are tied to the minimum wage. Among these, health copayments, prepaid medicine, notary expenses, fines, registration fees and transportation services.

According to Ramírez, next week another 120 services will be published that will be de-indexed from the salary. She also announced other measures related to energy tariffs, pharmaceutical prices, and the revision of the usury rate.

Regarding this, Gustavo Petro confirmed that he hoped that this will allow “the purchasing power, the level of income” of Colombians to be recovered and that “it will become the engine of economic growth.”

This announcement was presented after two intense weeks in which prolonged discussions were held between the labor unions, business unions and the national government.

According to the dean of the Faculty of Economics at the Externado de Colombia University, Juan Pablo Herrera, this increase is “greatly concerned” because despite recognizing the positive impact it would have on just over 6 million Colombians, the negative consequences in the formalization and generation of employment would be greater, even in the cost of food.

“There is no doubt that the adjustment of the minimum wage positively affects this subset of the population: however, as a recently published work by the Banco de la República has warned, there could be possible negative effects for the economic system in scenarios in which the adjustment of the minimum wage turns out to be above inflation”, he alerted.

“An adjustment of the minimum wage of 1% above inflation would not only generate a disincentive for the generation of new jobs, but in turn the destruction of existing jobs in the economy,” Herrera pointed out as one of the possible consequences.

With information from La Gaceta