Colombia Hikes Minimum Wage by 12%

Facts

• Colombia's Labor Minister Gloria Inés Ramírez has announced that the minimum wage in the country will rise by 12%, or 140K pesos ($36.63), to 1.3M pesos ($340) per month. In 2023, the minimum wage was increased by 16%.¹
• The hike comes after workers, employers, and government failed to reach an agreement despite month-long negotiations. The government accepted the union's proposal despite opposition from employers a day before the legal deadline to set the minimum wage was set to expire.²
• In early December, Finance Minister Ricardo Bonilla had called for discussions about the minimum wage hike to be 'realistic,' stressing the need to consider productivity 'amid an economy that had a negative third quarter.'³
• According to the National Administrative Department of Statistics, Colombia's economy contracted by -0.3% in the third quarter. The steepest decline since 2021 reportedly sounded alarms within the government about a looming recession if the downturn persists.⁴
• The Colombian justice system mandates that the country's minimum wage must be raised above the annual inflation rate, which means the increase for 2024 had to be in double digits as the most recent documented inflation rate was 10.48% in October 2023.⁵
• Though Colombia's inflation rate is more than twice the target range and among the highest in the region, the country's central bank decided to relax monetary policy for the first time since 2020 and cut borrowing costs to 13% in a split decision at its December meeting.⁶

Sources: ¹Reuters, ²Colombia One (a), ³Bloomberg Línea, ⁴The City Paper Bogotá, ⁵Colombia One (b) and ⁶Bloomberg.

Narratives

• Left narrative, as provided by Ultimas Noticias. Because inflation is expected to further trend down in Colombia and unemployment has fallen to 9%, this wage increase — as well as a 15% raise in monthly transportation allowance — will help millions of vulnerable citizens nationwide boost their purchasing power.
• Right narrative, as provided by Forbes. It's a popular misconception that increasing the minimum wage will benefit low-skilled workers. As this move forces the price of labor up, it ultimately reduces formal job opportunities. Rather than imposing the minimum wage in a nation like Colombia, politicians should be focused on human capital to boost productivity.

Predictions