The high rates of labor informality and unemployment, both observed and structural; wage and unemployment gaps between men and women; the low productivity of workers; the high cyclical dependence of formal employment, etc., are Clear symptoms of the malfunctioning of the labor market in Colombia. A deep labor reform is undoubtedly required.
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Nevertheless, the project that is going through Congress a few days ago raises several concernsnot only because it will raise labor costs, but also because of the greater rigidity that it will bring to the labor market, which is already high.
The project increases dismissal costs, introduces greater requirements to terminate labor contracts, indexes wages between one and two minimum wages to the Consumer Price Index (CPI), makes job training more expensive, modifies the duration of daytime shift and Sunday surcharges, etc.
These changes may accentuate the malfunctioning of the labor market instead of turning it into a dynamic, flexible space (that assimilates the shocks that the economy receives), that facilitates the generation of formal employment that allows workers and companies to make the best contributions to the economic growth of the country.
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It would be convenient for the emphasis of the discussions in the Congress to include, among others, topics such as the flexibility of labor contracts, the divisibility of the working day and the implementation of hourly wages; the modification of the protocol for the annual review of the minimum wage by including the introduction of a differential minimum wage by region; the creation of institutions to strengthen and monitor labor productivity; the relevance of education and training for work; the adequacy of the Public Employment Service; the decoupling of the support for the maintenance of apprenticeships from the unemployment rate; and the modification of the financing of the family subsidy system.
These suggestions, which will be reviewed in the following paragraphs, will be based on the learning obtained over several years of research.not only their own, but also other highly qualified colleagues.
greater flexibility
First of all, the flexibility of contracts would allow real wages to go up and down depending on the performance of the firms, so that, in proven adverse situations of these, the most affected is not employment since, with the current rigidities -the nominal wage cannot be reduced-, what occurs is the dismissal of workers; In Colombia, formal employment in the manufacturing sector is highly cyclical.
This proposal is supported by recent publications carried out with Sergio Rivera and colleagues from the Inter-American Development Bank (IDB), in which the dependence of labor demand on the added value of firms is significant.
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Of course, the introduction of this measure requires establishing verifiable thresholds for sales declines, before putting the reduction in workers’ wages on the table. An example of this type of situation was the dismissal that occurred due to the pandemic.
In other countries, many companies negotiated with workers to reduce their wages rather than fire them; With this type of measures, the links between companies and workers are strengthened and the search costs for both companies are significantly reduced when sales boom phases are experienced again.
benefit for women
Secondly, the divisibility of the working day and wages is a measure that would favorably impact female employment.
The evidence
has shown
that increases in the minimum wage do not favor households located in the lowest part of the distribution
from income.
This suggestion, which we have been insisting on for several years, emerges from the research by Jaime Tenjo, Oriana Álvarez and María Jiménez, published by the IDB and the Banco de la República in the book Female unemployment in Colombia. According to the authors, it is difficult for women with small children to reconcile work with the responsibilities of caring for and attending to the home.
Consequently, Hiring by the hour and making working hours more flexible could help reduce unemployment among women and, in general, among secondary domestic workers, including students; At the same time, it would allow firms to use labor according to their needs.
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The salary variable
In third place, the minimum wage is a variable whose revision does not require the staging, between September and December of every year, of the usual actors and the tensions generated between them, which can affect social cohesion. As in many other countries, its review can be done every several years in a very judicious way, supported by empirical evidence to allow this figure to meet its objectives of reducing poverty and inequality.
Evidence has shown that increases in the minimum wage have not favored households located in the lowest part of the income distribution –the most vulnerable–, since the probability of households being below the income line increases. monetary poverty and that do not contribute to reducing inequality, measured by the Gini coefficient.
Proof of this compilation is presented in the volume of the magazine essays on economic policy (Espe), which is titled Macroeconomic effects of the minimum wage in Colombia and was recently published by the Banco de la República.
As noted there, in Colombia the minimum wage is 85 percent of the median wage (Kaitz index), while in the countries of the Organization for Economic Cooperation and Development (OecD), this relationship oscillates around 50 percent. hundred. In most of these countries, the minimum wage does not have the adverse effects that it does in Colombia.
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President Gustavo Petro during the filing of the labor reform bill, presented to the Seventh Commission of the House on March 16 of this year.
The way the minimum wage has not been implemented has favored the creation of formal employment, but it has caused a greater destruction of thisespecially in small companies in the manufacturing sector, according to the results of Sergio Rivera and the author of this text.
Adverse effects of increases in the minimum in formal employment, especially in companies with less than 20 workers, are found in the first section of the Espe document. Special attention should be paid to this given the emphasis on the ‘popular economy’ made by current designers of public policies.
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In a complementary way, The discussion on the labor reform could consider the possibility of introducing a differential minimum wage by region in Colombia.based on cities’ informality rates rather than past inflation and productivity, such as consolidating norms.
This measure, based on research carried out with Luz Adriana Flórez, has the purpose of reducing the great geographical heterogeneity of labor informality rates; on occasions, there are differences in the rates between cities that can be around 15 percentage points. The measure will also have the benefit of putting the issues of informality and the increase in labor productivity among the main objectives of municipalities and departments, since the territorial entities would make efforts because their indicators would allow increases in the minimum and other salaries in their region.
institutional arrangements
In fourth place, Institutions need to be created and strengthened for productivity growth. This requires the joint effort of the production unions, the workers, the Sena (renewed) and other institutions dedicated to training for work and formal education; local and regional administrations; and the ministries of Labor, Education and Commerce.
This new institutional arrangement requires a clear diagnosis of productivity in each region to set clear objectives that allow the reduction of labor informality and the increase in the real wages of all workers, taking into account the productive vocation and potential of each region. . Boosting labor productivity would gradually bring the Kaitz index to levels close to those of the OECD countries.
The previous policies emphasize, fifthly, of a more efficient Public Employment Service to achieve greater and better matching between search engines, that is, workers and companies. An agile, simple information system is required that shows the salaries and benefits offered by companies for each advertised position, which would limit (ex ante) the salary gaps between men and women.
additional notes
The same way, the Public Employment Service should disclose the labor policies of the companies that advertise their vacanciesincluding gender aspects, the qualification of the work environment carried out by the workers, the possibilities of promotion and training, etc. In the book Female unemployment in ColombiaEdited in the company of Francesca Castellani and Eduardo Lora, evidence is presented that unemployment episodes among women last less as vacancy announcements increase.
It is also recommended to study the convenience of maintaining the figure of the apprenticeship contract instead of turning it into a work contract, since it would make the apprentices more expensive. Likewise, it is suggested to reconsider the current increase in the monthly income of apprenticeships –sustenance support– in a practical stage when the national unemployment rate is one digit. The possibility of maintaining their maintenance support permanently at 50 and 75 percent of the minimum wage should be explored, depending on whether their training phase is theoretical or practical.
The document Espe pointed out before presents evidence of the detrimental effects on the demand for apprentices by companies due to the increase in support that took place in 2014, since in 2013 the national unemployment rate was 9.6 percent. .
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finally, The modification of the family subsidy financing system could also be studied.. Luz Adriana Flórez and I present evidence that this type of cost increases informality and unemployment significantly and heterogeneously between regions. The last section of the Espe document shows how public finances, through the pension and health systems, are highly affected by the performance of the labor market. The health and pension reforms should not lose sight of labor; should be analyzed together using general equilibrium models.
Remote work, digital platforms, artificial intelligence, automation and robotization have already arrived and, as we said at the beginning, the symptoms of the functioning of the labor market in Colombia are not encouraging. The Congress of the Republic, the Government, the workers (formal and informal), the companies and the academy have the floor.
LUIS EDUARDO ARANGO*
Special for EL TIEMPO
*The opinions expressed do not commit
to the entity to which it is linked.
