Minimum wage for next year would increase more than 6%, driven by inflation

A key factor when arranging the minimum salary For next year it is caused by inflation, which has been on the rise since April, after the shock of the national strike and after rises in the prices of food and raw materials, due to internal and external factors, such as problems in the international logistics chains.

The CPI projections are already close to 5% by the end of the year and, with this outlook, several analysts consulted by LR estimate that the salary increase for 2022 would be between 6% and 6.5%.

“Given that price levels are going to grow this year by close to 5% and productivity has maintained a growing path so far in 2021, the agreement on the minimum wage for 2022 will be at levels higher than 6%, surely,” he said. Juan Camilo Pardo, economic analyst at Corficolombiana.

Along the same lines, Sergio Olarte, chief economist at Scotiabank Colpatria, added that “assuming that labor productivity is what it has historically been, an increase in the minimum wage between 6% and 6.5% could be expected by 2022”.

And the fact is that the Banco de la República foresees that inflation will remain above the goal (4%) until mid-2022, a factor that drives a wage increase of the aforementioned magnitude since, otherwise, workers would lose part of their purchasing power, amid a recovery in household income after the pandemic.

“Normally, said increase in the minimum wage should be at least equal to inflation, and sometimes even higher, because otherwise, the people who have this remuneration would be losing purchasing power, as the products of the basic consumer basket become more expensive. at a higher rate than the income obtained from said salary would increase ”, explained Antonio Alonso González, dean of the Faculty of Economic and Administrative Sciences of El Bosque University.

If an increase such as the one projected by analysts occurs, the minimum wage would go from $ 908,526, to be in a range between $ 963,038 and $ 967,580.

However, experts foresee that, in the midst of the agreement, it will be discussed whether a higher salary increase may affect the recovery of jobs, especially after the impact of the pandemic on the labor market, which is even it has taken longer to recover than the level of productive activity.

“It is important to take into account the productive capacity of companies, an aspect that is in line with the dynamism of the economy, because if wages are increased and there is no demand for personnel or available vacancies, an adverse effect will be generated. in the recovery of employment ”, indicated Jorge Castelblanco, CEO of Crowe Colombia.

Not only that, the experts also point out that a wage increase of that proportion could increase the levels of informality, taking into account that the recovery of employment in the country has been marked, precisely, by the creation of informal jobs.

“It can increase informality, since some entrepreneurs, especially medium and small ones, can cost a little more if they cannot increase the prices of their products and services in the same way that their labor costs increase, due to an increase very high of the minimum wage ”, said Olarte.

However, in light of this discussion the work of one of the winners of this year’s Nobel Prize in economics, David Card, is brought to the table, showing that raising the minimum wage does not necessarily lead to fewer jobs. Although it should be noted that the research was carried out in New Jersey, USA, so the results could not be directly extrapolated in Colombia.

“The recent winner of the Nobel Prize in Economics demonstrated in his analysis that raising the minimum wage does not lead to a decrease in the number of employees nor does it contribute to job destruction. We should reconsider that economic fallacy that we are told and repeated over and over again, ”said González.

Thus, before the discussion begins, the Permanent Commission for the Agreement on Labor and Wage Policies (Cpcpsl) and the National Government will be at a crossroads, since they must strike a balance between not affecting the purchasing power of households and not slow down the recovery of the labor market.

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Minimum wage for next year would increase more than 6%, driven by inflation

Hank Gilbert