Monday, October 2, 2023

Double-digit minimum wage increase in 2024? That’s what business associations think

As every year, the discussion about increasing the minimum wage has occupied national public opinion in recent months, but the debate about the amount that will apply in 2024 began earlier than expected.

It all started with a statement from Deputy Finance Minister Diego Guevara, who said: “The government has no doubt that the increase in the minimum wage will be double-digit.”

This is taking into account the development of inflation so far last year, said Guevara, and the fact that Colombians who rely on this fixed amount will not lose their purchasing power.

José Ignacio López, executive director of economic research at Corficolombiana, assured that this is more than a proposal but a clear indication that the government expects higher inflation data than previously expected.

“We expect inflation to be 9.5% this year, very close to double digits. So if we add some productivity and some other elements, we will easily reach double digits.” “Hopefully the government will be a little more cautious and try to limit the increase after the increase in 2022 to consumer price index and productivity,” added the analyst added.

The latest inflation data provided by Dane is 11.43%, recording slight declines for five months. In addition, together with the productivity known at the end of the year, they form the set of criteria for evaluating the annual salary increase.

López added that a disproportionate increase or an increase significantly higher than inflation and productivity would cause inflation to remain on its sustained path.

“Companies are passing this increase in labor costs on to their consumers, and a further increase would bring a second round of inflation, and at some point when demand no longer allows this price to be passed on to consumers, we will have a weaker labor market with increasing Informality,” López added.

Jaime Alberto Cabal, President of Fenalco, said in dialogue with the RCN FM that the labor reform project must also be taken into account. “I think you have to be overly cautious before thinking about bizarre numbers. It is too early to predict the value of inflation this year, but it is likely to be around 9%. “It also needs to take into account what happens to the work project.”

Acopi warned about the effects of labor

The MSME union Acopi assured that the fiscal impact of the labor reform must be added to the factors already mentioned in the negotiation. The union estimates that if this article were adopted, non-wage labor costs would increase by 17% to 34%, which could lead to an increase in the unemployment rate of approximately 1.7% to 3.4%.

“Any significant increase in the minimum wage, together with the impact of the reform, could put pressure on labor market indicators,” said Rosmery Quintero, president of the minimum wage.

Nation World News Desk
Nation World News Desk
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