The minimum wage in Colombia will increase by more than 10% in 2024, according to sources from the Colombian government. This is a measure that significantly impacts the country’s salaried workforce, as many workers base their income on the monthly minimum wage, which is established annually through negotiations between social partners and the government at the labor negotiation table.
In case an agreement is not reached, as was the case in 2021, the government can regulate it by decree. For the year 2023, the increase was 16%, equivalent to 160,000 COP. Considering the high inflation rate as of December 2022, the real increase at that time was 3.5%.
Deputy Minister of Finance Suggests Minimum Wage Increase
Although there are still 3 months left to determine, through negotiation or by decree, the minimum wage increase for 2024 in Colombia, the Deputy Minister of Finance has already sent the first message: this increase will not be less than 10%. Currently, inflation in the country remains above that figure, specifically at 11.43% for August 2023. However, predictions from the Central Bank of Colombia and the government itself place the Consumer Price Index (CPI) between 9% and 9.5% by December.
Thus, the minimum wage increase for 2024 in Colombia, which affects a majority of the salaried workforce, would once again be above the annual CPI. This was affirmed by Diego Guevara, Deputy Minister of Finance, who stated a few days ago that “the adjustment for 2024 will have to be in the double digits, at least 10 percent,” thus unofficially initiating negotiations with social partners to determine the final increase value in December.
High Inflation Reduces Purchasing Power
The government’s focus is on reducing the high inflation experienced in the country, especially in the context of international hyperinflation, particularly since the start of the war in Ukraine in early 2022.
This year’s historic increase in the minimum wage, at 16%, has been overshadowed by a still high price index that erodes consumers’ purchasing power. At the beginning of each year, annual price increases for schools, transportation, and even food are determined, with the latter experiencing constant increases throughout 2023, putting significant strain on struggling family finances.
Although the CPI started to decrease in April, it not only remains very high but has already almost surpassed the additional 160,000 COP per month received by minimum wage earners during the first 3 months. This means that prices grow annually at a rate higher than the minimum wage, which affects 60% of the country’s workers.
Hopes for a Reduction in the Interest Rate
Another concern of both the government and citizens is the decision of the Central Bank of Colombia regarding the interest rate, which is currently at 13.25%. Although the central bank has kept it frozen in recent months, there are increasing calls for an extended period of rate cuts, as consumer loans and mortgages are linked to this index, further straining family finances and slowing economic growth in Colombia by curbing consumption.
The Central Bank of Colombia must soon make a decision on this matter and determine whether to opt for a slight decrease or, as in the United States, to maintain or even raise the rate; this is unlikely in Colombia, where the situation is similar to that in the European Union, which is still struggling to contain inflation in the eurozone.
Money Doesn’t Stretch Far Enough for Families
The fact remains that the money doesn’t go far enough in workers’ pockets, and consequently, for their families. The minimum wage increases in 2021 and 2022 were 3.5% and 10.07%, respectively, below the real CPI at the end of those years, which was 5.62% for the first case and 13.12% for 2022. Therefore, over the two fiscal years, Colombian workers lost in terms of consumption capacity by an amount exceeding 5%.
In this regard, Italo Cardona, Director of the International Labor Organization (ILO) Office for the Andean countries, stated, “The data for 2022 indicates that rising inflation is causing real wage growth to be in negative figures in many countries. The increase in the cost of living affects lower-income individuals and their households to a greater extent. This is because they spend most of their available income on essential goods and services, which generally experience greater price increases than non-essential items.”
The ILO is a United Nations agency that deals with labor and employment-related issues.