Colombia’s Jobs Miracle Comes With A Shadow Labor Market

On paper, Colombia’s latest jobs numbers look like a small miracle. In October, the official unemployment rate fell to 8.2%, the lowest level for an October since 2017.

Roughly 2.1 million people were out of work and 24.3 million had a job, suggesting an economy that is still creating opportunities despite global headwinds. For an outsider, these figures say two things.

First, the country avoided the mass job losses some feared after the pandemic and recent tax debates. Second, more Colombians are actually in the game: around 65% of adults are now working or looking for work, and nearly 60% already have a job.

Big cities like Bogotá and Medellín post relatively low unemployment, closer to what you would expect in parts of Southern Europe. The story behind the story is less comforting. More than half of all workers – about 56.1%, or 13.6 million people – are in informal jobs.

They sell food on the street, drive motorcycles, do domestic work or rotate between short-term gigs. They pay little or nothing into pensions, often lack proper health coverage and can be fired overnight.

Many of the new “jobs” that helped bring the unemployment rate down came from this grey zone, not from companies putting people on formal payrolls. There are big regional gaps as well.

Colombia’s Jobs Recovery Masks Deep Structural Gaps

Cities such as Quibdó, Sincelejo and Riohacha still suffer double-digit unemployment, while places like Manizales or Bucaramanga are much closer to full employment.

Youth unemployment remains stuck around 15%, adding pressure to migrate or accept whatever informal work is available. For governments that like big programs and new regulations, it is tempting to celebrate the headline number and move on.

But business owners quietly highlight something else: high non-wage costs, complex labor rules and unpredictable politics make formal hiring risky, especially for smaller firms.

When it is easier to pay a worker “off the books” than to navigate bureaucracy, informality becomes the default business model. For expats, investors and foreign observers, the lesson is clear.

Colombia is energetic, young and busy. But until rules and incentives reward formal, long-term hiring, a large share of its growth will remain in the shadows.