Monday, September 25, 2023

Colombia has one of the lowest minimum wages in Latin America

The increases in workers' salaries, which began to be applied at the beginning of 2023, show that the amount is not as competitive as that of other nations in the region. however, the percentage increase is one of the most significant

QCOLOMBIA – 2023 starts and with it many of the workers will begin to earn a little more in their salary. Every year, nations make certain economic adjustments, and among those salaries increase, and for this year there was an important point to determine the adjustment and it was inflation.

Colombia is one of the Latin American countries with the lowest minimum wage for its workers. Source: Infoabe

In the case of Colombia, this concept was at its highest margins in history, which is why the government took certain measures to try to control the impact of this phenomenon, and this ended up being essential to determine what the rate for workers would be.

If you compare 1,160,000 Colombian pesos, compared to what employees in Latin America receive, the nation is one of those that would be paying the least to labor.

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The 16% increase, if we look at it from that value, is very significant, in fact, the second highest in the region, only surpassed by Mexico, which increased it by 20%; and it is that the average was between 6% and 9%, although according to some data compiled by Bloomberg, countries such as Venezuela, Peru, the Dominican Republic, and El Salvador did not register variation, to date.

But, to determine which would be the nation with the best salary, since each country has its own currency, what is done is to standardize it in an international reference value, which in this case would be the dollar. Thus, there are several changes, compared to what was presented in 2022.

Colombia, which was in the top 5 with the highest compensation, is now in the last places.

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If you look at the Market Representative Rate with which 2023 was opened, that 1,160,000 pesos is equivalent to US$242 dollars, this being one of the lowest values along with Venezuela’s US$8, Argentina’s US$189, and the Dominican Republic’s US$205.

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In contrast, the ranking would be led by Costa Rica, with US$603 dollars, a country where the increase was not higher than its accumulated inflation figure, no less a detail, since many others left it above that reference, followed by Chile with US$475, third Uruguay with US$540 and fourth Ecuador with US$450.

Minimum wages vs inflation, a confrontation that increases are winning

The international monetary situation had strong repercussions during the year 2022; and it had serious implications for people’s purchasing power, taking into account that inflation grew in such a way that consumers had to restrict themselves, even when buying certain foods, as was seen in Colombia.

If we broaden the spectrum to the Latin American level, the Economic Commission for Latin America and the Caribbean (ECLAC) presented a document in the middle of last year, where it was estimated that regional inflation was at 8.4%, practically double the average recorded during the past decade.

That is why in a more recent document, the entity predicted a slowdown, realizing that salary increases, instead of being helpful, could be counterproductive in the consequences of the inflationary phenomenon:

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“The repercussions of a very difficult situation, characterized by a slowdown in world economic activity, growing inflationary pressures, greater exchange rate volatility and less space to promote expansionary policies, suggest a new slowdown in GDP.”

In the annual report “Preliminary Balance of the Economies of Latin America and the Caribbean” they assure that the growth of this 2023 will be only one third of what was expected. This is why the recommendation is to stimulate investment and productivity, which helps to meet social demands; among other topics that reduce the gaps, and likewise mitigate the impacts of the international monetary situation.

“The monetary policy responses adopted worldwide in 2022, in a context of rising global inflation, have caused increases in financial volatility and risk aversion levels and, therefore, have induced lower capital flows towards emerging economies, including the economies of the region. But the reduction that is expected in global inflation for 2023 will tend to moderate the increases in the monetary policy rates of the main central banks”, concludes ECLAC.


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