As Colombia’s employers and unions begin their annual negotiation about the country’s minimum wage earned by more than half of the population, banks on Tuesday proposed a 6% increase, the expected inflation rate for 2015.
In December, a tripartite committee comprised of the government, employers and unions, will meet to discuss the increase in the minimum wage, which will be established in 2016.
Colombia’s National Association of Financial Institutions (ANIF) warned of the difficult task that employers and banks have; promoting formal employment while maintaining the purchasing power of workers, of whom about 55% earn the minimum wage of $220 per month.
The bankers highlighted some of the major issues that will affect or be affected by the changing of the minimum wage in 2016.
Inflation has exceeded its limit of 4% and, according to ANIF director Sergio Clavijo, is heading towards 6% by the end of 2015 due to the economic slowdown spurred by a drop in commodity prices and troubles in the Chinese economy.
Due to this slowdown, Colombia’s recent consistent drop in unemployment came to a halt at 9% in the first half of the year. According to Clavijo, if there is any increase in the minimum wage, unemployment rates could increase to between 9.5% and 10%.
Inflation is currently at its highest level in ten years due to the rapid 35% decrease in the value of the peso in 2015 as a result of the global devaluation of oil, which in turn has hiked up the price of imports.
On top of that, the El Niño weather phenomenon that has instilled long lasting and widely spread droughts across the country, has resulted in increased prices of food.
“ANIF has been suggesting that the readjustment of the minimum wage should adhere to the so-called “universal formula,” where the change in the salary depends on inflation and labor productivity,” said Clavijo.
“Clearly a 7% increase for 2016 would aggravate an unemployment situation, probably taking the rate to a threshold of 9.5%-10% by the end of 2016,” continued the report.
Colombia’s labor unions and employers’ association have not yet made up their position