Increases in the minimum wage in Colombia have a much stronger effect not only on the cost of companies but also on the generation of new jobs than in developed countries, due, among other reasons, to the fact that In the country, said salary is earned by a greater number of workers, despite the fact that its amount is not as high as in other nations..
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This is just one of the conclusions of the analysis prepared by Sergio Rivera, Master in Economics from the Universidad del Rosario and PhD student in Economics at the University of Maryland, who participated in the Seminar on Economy and Development carried out by the National Planning Department (DNP), in which he presented a study on the effects of the minimum wage on the activity and labor dynamics of the Colombian manufacturing industry.
“The individual amount of the minimum wage in Colombia is not high, but given the number of people who earn a similar salary –which in the country is lower than the average salary– lVariations in this affect many more workers than in a developed country and, therefore, have a substantial impact on the labor costs of companies, due to their tendency to solve their productivity problems through wages. and not by introducing innovations in technological processes”, said the expert during.
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According to data from the National Administrative Department of Statistics (Dane), It is estimated that in Colombia more than 3.4 million people receive a minimum wage, that is, 15.7 percent of the economically active population in the country.
Rivera argued that the minimum wage has a high cost in Colombia, which slows down the growth of companies and has an effect on the entire economy to the extent that it causes job losses. This phenomenon especially affects small businesses. According to the results of his analysis, the variation in the minimum wage reduces employment growth whether conditional (effects over time) or unconditional models are estimated.
The unemployment rate in Colombia has been declining, but is still at double-digit levels, which will last at least this year, according to analysts.
Juan Pablo Rueda. WEATHER Archive
In fact, among the results of his study is that a 1 percent increase in the minimum wage in the country causes a loss of 2,800 jobs in one year, with which if that single increase were maintained for 15 years, the loss in jobs would be around 42,000 jobs.
Another of the effects found by this variation in the minimum wage in the industry has to do with the hiring of labor as these changes occur. “The results show significant long-term minimum wage elasticities in labor demand, which means that the minimum wage puts pressure on the substitution of skilled workers for unskilled workers”, noted the economist.
Although these factors have an impact on the entire productive sector, smaller companies are the ones that are most exposed to the adverse effects of possible increases in the minimum wage.
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In addition, the largest employment-generating sectors are more sensitive to variations in the minimum wage and own prices, which reveals the presence of heterogeneity within manufacturing, says the expert.
impact of the pandemic
Job offers in Medellín and the rest of the Aburrá Valley
Courtesy Comfenalco
When recalling the issue of the impact of the pandemic on employment in the country, Rivera said that many companies were destroyed during that period, because In Colombia, there are no mechanisms that allow wages to be reduced in times of extreme harshness. or other extraordinary circumstances that significantly affect the production costs of the companies.
He also said it is worrying that in Colombia, when total productivity grows, employment does not grow, while it is imperative that the necessary conditions be created in the country to reduce the high level of informality.
