The Minimum Wage in Colombia
The minimum wage in Colombia is $296 per month, plus $135 for transportation. With this, workers can afford a mortgage and other expenses. Negotiations are complicated, but they aim to preserve the income of workers while preventing negative effects on employment. This amount is even paid to pensioners. Inequality in health care and employment in the informal sector are some of the problems that workers face. Here, you will learn more about the minimum wage in Colombia.
Average salary in Colombia
The average salary in Colombia is much lower than the average wage of the United States. Although Colombians generally prefer to work in finance-related jobs, they will not necessarily get paid as much as their private-sector counterparts. In many cases, private-sector workers are not covered by labor rights and receive fewer benefits. The basic goal of a job is to make enough money to cover the employee’s basic expenses (such as housing and food), and in Colombia, this means at least COP 1’600,000 or USD 654) per month.
The average Colombian salary may include housing, health insurance, and other mandatory deductions. However, an employee’s salary will also be affected by government benefits such as social security, pension, and death risks. In Colombia, employees are usually expected to contribute to the social security system at a rate of around 20-30% of their base salary. The percentage of this contribution varies based on the company and the economic situation in the country.
Inequality in health care
Ethnic-racial status has been associated with the type of health insurance a person is eligible for in Colombia. This factor, together with socioeconomic status, is a structural factor underlying inequity in health care services in Colombia. For the poorest groups, this factor only heightens their disadvantages. Consequently, health insurance coverage is often inadequate for these people. In Colombia, only one in ten citizens has adequate health insurance coverage.
Inequality in health care in Colombia has been studied both in the broader Latin American context and the country itself. The country is expected to double its population of older adults by the end of the century, making health services promoting healthy aging more important than ever. Garcia-Ramirez, Nikoloski, and Mossialos explore these issues in a recent paper. To read the full paper, click here.
Informal sector employment
In Colombia, the proportion of workers employed in the informal sector varies between 62 and 90 percent. This high level of informality is largely attributed to the low levels of education of workers. On average, these workers receive one third of the minimum wage. In the rural areas, the percentage of workers employed in the informal sector is even higher. However, despite the high unemployment rate, the minimum wage is still a good way to improve labor conditions and wages.
The decrease in informality is linked to the level of education. Workers with post-graduate education and higher levels of education are more likely to be formal than those with little or no education. The increase in formality is partially offset by the increase in income, which also reduces informality. La Porta and Shleifer argue that the biggest cause of labor informality is a lack of human capital. It is vital to increase education and reduce informality.
Changes in minimum wage since 2010
Using GIHS data for the last quarter of 2008 and 2017 in the analysis of the minimum wage in Colombia, the study examines the wage gap between the formal and informal sectors in the country. The DFL semiparametric approach is used to calculate the logarithm of the real monthly wage for each sector, adjusting for gender, work intensity, and year. It also uses binomial logit models to estimate propensity scores and year of employment for each sector.
The study conducted in Colombia found that most firms raise base wages annually, and most of these increases occur in the first quarter, a sign that Colombia’s wage adjustments are time-dependent. While the inflation rate was increasing at the same time, no firms cut wages, suggesting that wage increases were largely related to the observable level of inflation. While the observed inflation rate drove wage adjustments in Colombia, the factors associated with performance were the primary determinants. The link between wages and prices was stronger in sectors with higher labor costs and labor productivity.
Changes in mean FTR after an increase in minimum wage
There are considerable differences in financial disincentives to formal employment across countries, with Colombia experiencing the largest change in mean FTR. Female informal workers in Colombia face higher FTRs than their male counterparts, by a factor of 12.2. This gender gap is driven by the characteristics of informal workers in Colombia: females in this sector tend to be low-skilled self-employed workers, which likely explains their lower incomes.
Although this analysis focuses on the impact of an increase in Colombia’s minimum wage on the informal sector, it is important to note that other countries have similar results. In Ecuador, the effect of the minimum wage increase is negative, as firms in this sector are evading the contractual arrangements and thus becoming tractable for the regulatory body. In Colombia, the coefficient of the informal sector for female workers is positive, though the results are not conclusive. Further work is needed to extend the study to include data from more recent periods.