What is known about the process of negotiating the minimum wage for 2021

This date was confirmed in the permanent commission for the Agreement on Labor and Salary Policies by the Minister of Labor, Ángel Custodio Cabrera, who asked to advance in the discussions due to the crisis that the country is experiencing due to the pandemic.

On the other dates, it was confirmed that the National Government will intervene on December 2 and 3 with presentations from the Ministries of Labor and Finance, the Bank of the Republic and the National Administrative Department of Statistics (Dane), while on December 9 December unions and unions will present formal proposals.

This bid for the salary increase for the reactivation in 2021 will advance with the format of virtual meetings, with an eventual face-to-face appointment. Although the proposal of a minimum is not known by businessmen or the Government, the workers and pensioners centrals have already disclosed their common and unified commitment.

As for the minimum wage, these sectors asked for an increase to 1 million pesos, which would represent a rise of 13.92%, and in turn they proposed that the transportation assistance be 120,000 pesos.

Challenge of reducing unemployment

This formal start at the tripartite table where negotiations between business unions and workers unions will begin will take place in the midst of the challenge facing the country to recover employment, affected by the pandemic.

According to the National Federation of Merchants (Fenalco), the proposal of the workers’ centrals to reach 1 million pesos may be exorbitant, since the country is experiencing an atypical year in which it must recover 5 million lost jobs.

Against this background, the president of the Central Unitaria de Trabajadores de Colombia (CUT), Diógenes Orjuela, asked the Government for an active role “to further subsidize the payroll of micro, small and medium-sized enterprises and give basic income to populations without income and without a job ”.

Recently, the Banco de la República published the Labor Market Report in which it forecast for Colombia an unemployment rate of between 15.9% and 16.7% on average for the end of 2020.

Factors that are key

Regarding the negotiation criteria, the commission recalled that there are four economic factors established to determine the increase in the minimum.

The first is the Consumer Price Index (CPI), which according to the National Administrative Department of Statistics (Dane) had an annual variation of 1.75% compared to October 2019; while the year-to-date variation was 1.38%.

On the Gross Domestic Product (GDP), the second element to take into account, the Dane pointed out that it presents a decrease of 8.1% in the current year of 2020 (January-September), compared to the same period of the previous year.

In the case of inflation expectations, the monthly survey of Banco de la República gives 1.73% on average for December 2020 (negotiation period), with a minimum of 1.50% and a maximum of 2% .

In this sense, the inflation figure for the year following the negotiation is estimated at an average of 2.83%, with a minimum of 2.45% and a maximum of 3.79%.

On the other hand, total factor productivity (TFP), which according to Dane figures, decreased 0.45% in 2019, while labor productivity grew 0.21%.

Regarding the 2020 figures, Alejandro Torres, professor in the Economics department of Eafit, although he did not want to give an estimate on the calculation of productivity, assured that “it is essential to consider that the increase in the minimum should not be too much inflation ”.

The academic stated that the country’s macroeconomic indicators would not support a significant increase in the minimum as demanded by workers (higher than 13%), since the effect could be counterproductive, and would delay the reactivation process as well as that of the generation of job.

“It should be taken into account that the economic growth data for 2020 has been negative in the second and third quarters. We are talking about a collapsed economy that has to start to recover, ”said Torres.

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