A recent study by the Fiscal Observatory and the Labor Observatory at Universidad Javeriana reveals that over the past decade, both formal and informal workers in Colombia have seen their wages lose ground relative to the minimum wage. The study, which analyzed labor market trends from 2013 to 2023, indicates that while the average wage ten years ago was 1.39 times the minimum wage, it has now slightly decreased to 1.37 times.
Stagnant Wages
The report highlights that the overall average wage for Colombians has remained relatively stable due to an increase in formal employment rather than actual wage improvements in either formal or informal sectors. For informal workers, who lack social security and other basic conditions, the situation is more severe. Their average earnings have dropped from 0.93 times the minimum wage to 0.78 over the past decade.
“We can conclude that the average salary of all Colombians remains relatively constant (1.39 vs 1.37) due to the increase in formality, not because average incomes have improved in either the formal or informal sectors,” the report states.
Shift Towards Minimum Wage Earnings
An increasing number of people are earning the exact minimum wage, which is not necessarily positive. The proportion of workers earning between one and three times the minimum wage has decreased. In 2013, 5% of workers earned the minimum wage, but by 2023, this figure rose to 11%. Meanwhile, the share of those earning between one and three minimum wages dropped from 41% to 34%.
The study also notes that 46% of the population continues to earn less than the minimum wage, 5% earn between three and five times the minimum wage, 3% earn between five and ten times the minimum wage, and 1% earn ten or more times the minimum wage.
Aging Workforce
Mauricio Salazar Saénz, Employment Director at the Fiscal Observatory, pointed out that the workforce is aging. The proportion of students relative to the total population has decreased, not because children and adolescents are studying less, but because the society is aging, resulting in fewer children and adolescents.
Additionally, fewer adolescents are working and more are studying, which is positive for future preparedness. However, the proportion of young people who neither study nor work, known as “ninis,” has also increased.
Juliana Morad Acero, co-director of the Labor Observatory, noted that formal employment has grown in the last ten years, partly due to incentives like the 2012 tax reform that exempted employers from certain payroll taxes.
Regional Disparities
The study also examined regional disparities, finding that formality in Bogotá and Cundinamarca increased by nearly 20 percentage points over ten years, while wages improved only slightly relative to the minimum wage. In contrast, Antioquia saw an increase in formality of less than 10 percentage points.
Recommendations
In response to these findings, the observatories recommended considering the implementation of an industrial policy aimed at increasing labor and business productivity as a key strategy for wage growth. They emphasized that business productivity is closely linked to the ability of companies to generate higher revenues, which can translate into higher wages.