Colombia’s President Ivan Duque raised the country’s monthly minimum wage 6% to almost $268 (COP877,803) after employers and labor unions failed to come to an agreement.
The labor unions, emboldened by public support for recent national strikes, demanded a minimum wage of a million pesos ($305), an increase of 8.1%.
Business associations initially wanted to go no higher than a 5% increase, but agreed to 5.8% last week.
Duque, after consulting with Labor Minister Alicia Arango, decreed on Thursday that the minimum wage would go up by 6% on January 1.
The decree also raised the monthly travel subsidy by 6% to $31 (COP102,854).
How many people will benefit from the increase is unknown; no statistics on how many people are formally employed for a minimum wage exist.
Mixed reactions
The labor minister told radio station La FM she was content with the decree that followed the failed negotiations, claiming that “we are complying with the ‘higher wages less taxes’ as the president has said.”
How Arango’s comment applies is unclear as those earning minimum wage are exempt from paying income tax while the cost of formal employment will go up.
Health payments paid by employees will go up as much as the minimum wage.
Diogenes Orjuela of the country’s largest labor union CUT called the president “miserable” for raising the minimum wage by 6% after granting controversial tax discounts for large companies.
Labor union leader Diogenes Orjuela via El Pais
Both Arango and the president of the Business Council, Jorge Enrique Bedoya, criticized the labor unions for not agreeing to a wage hike that for many is not enough to eat.
Business Council president Jorge Enrique Bedoya via La FM
Minimum wage not always a living wage
Miriam Bolivar (Screenshot: Caracol)
Commercial television network Caracol talked to a Bogota woman and calculated that after expenses like rent, transport and public utilities, Miriam Bolivar would be left with $62,75 (COP205,857) to provide for herself, her mother and her daughter.
According to Caracol, the Bogota resident who works six days a week came COP50,000 ($15) short for food alone.
“I have to see if they will lend me [money] to eat, to sustain ourselves,” Bolivar said.
Nearly half of Colombia struggled to afford food in past year: Gallup
Change for formal employers
While those receiving a formal minimum wage will receive a 6% increase, those paying see the cost rising 6.45%, according to independent statistics bureau Valora Analitik, which calculated the additional payment cost increases.
Formal employers will have to pay an additional 55% of the minimum wage in transport expenses and social security costs, the firm calculated.
Labor cost
Source: Valora Analitik
This increased cost for formal employment could put additional pressure on Colombia’s rising unemployment and labor informality rate.