The Colombian justice system mandates that the minimum wage for 2024 must increase above inflation. This was established in a ruling from 1999, setting a precedent for negotiating the amount annually. With these notes in mind, considering that the latest known inflation rate was 10.48% for October, the final increase in the minimum wage will undoubtedly be in double digits.
According to the data being worked on by the government and economic actors, Colombia is expected to close the year with inflation around 9.5%. However, the decision on the minimum wage hike must be made earlier, so the figure as of December 31st will not be considered. Given this scenario and following the judicial ruling, the minimum wage for 2024 is set to rise between 10% and 11%.
For this 2023, the minimum wage in Colombia stood at 1,160,000 pesos, excluding transportation assistance, meaning that in the last 10 years, wages have increased by more than 500,000 pesos, driven by high inflation in the last two years. It’s worth noting that, for example, the increase for this current year was 16%, nearly 3 points above the annual inflation rate.
Discussion at the negotiating table
The negotiating table, bringing together workers, employers, and the Colombian government, will start discussions to determine the increase on November 28th. They will have approximately two weeks to reach an agreement because the minimum wage for the upcoming year must be known before December 15th.
Various variables will be considered in the discussion: the Gross Domestic Product (GDP) generated and projected for the next year, the productivity index, the contribution of wages to national income, and primarily the Consumer Price Index (CPI) or inflation. Regarding the latter, Labor Minister Gloria Inés Ramírez recently announced that the inflation rate as of November 30th will be considered, which experts estimate will be around 10%.
The same 24-year-old judicial ruling establishes that if an agreement is not reached through negotiation, the government will make the decision, considering parameters such as the inflation target set by the Banco de la República for the following year and the productivity agreed upon by the tripartite productivity committee coordinated by the Ministry of Labor, in addition to other parameters like the CPI and the annual GDP, which as of September was in negative territory, hinting at an intriguing economic downturn.
Ramirez, the first communist minister
It’s worth recalling that Gloria Ines Ramirez, Labor Minister, is Colombia’s first communist minister in history. The minister pushed for a significant increase in the minimum wage a year ago, thanks to an agreement between business associations and labor unions, negotiations that the law mandates but which rarely yield an agreement.
The minister aims to achieve the same success as the previous year when the substantial increase was unanimously agreed upon at the negotiating table. In this regard, the minister has stated that they will ‘have the opportunity to hear the proposal from business leaders, their analyses, as well as those from the workers. We’ll bring in academia, and of course, the Government will also conduct its analyses, and from there, we hope to agree on a minimum wage that allows us to maintain the purchasing power, which this year has been a very good bet, and to move forward so that Colombia is not heavily impacted by inflation or interest rates.’
The minister emphasized that thanks to the measures adopted in negotiating the minimum wage for the current year, they have managed to maintain a real increase of over 4%, whereas in 2022, this figure was negative and affected the purchasing power of Colombians.