Colombian coffee farmer. CIAT/Flickr. Some rights reserved.In January 2015, the Colombian Government revised the level of the minimum wage. This was an important step for the 1.25 million Colombians vulnerable to poverty: that is, those not technically poor, but living at the lowest levels of what might be considered an acceptable standard of life in the national context. Such an event is at the heart of discussions around economic justice and is certainly pertinent for international consumers of Colombian goods.
The level of the Colombian minimum wage is re-evaluated every year by the tri-partite “Consultation Committee of Wage and Labor Policies”, composed of representatives of workers' organisations, employers and the government. In January this year, workers’ representatives proposed an increase of 9.5 percent while the representatives of employers proposed 4.2 percent. Eventually, the government mandated a 4.6 percent increase in the level of the minimum wage. The unions described this as insufficient, highlighting that 30.6 percent of the population are defined as poor (rising to 43 percent in rural agricultural areas) and national inequality is registered at 53.5 on the GINI index, making Colombia the twelfth most unequal country in the world.
Minimum wages in theory and practice
In principle, the minimum wage policy promotes the idea of a minimum income, and therefore is based on a socially aspirational aim: the belief that all human individuals deserve a minimal standard of life. However, the application of minimum wages within complex economies rarely produces universally positive outcomes; especially in economies such as Colombia where the informal sector, unprotected by legal minimum wages, provides around 55 percent of employment.
Indeed, when minimum wages are introduced, a number of potential outcomes emerge: some formal workers will keep their jobs and earn more under the minimum wage; others might be dropped from protected formal sector jobs and forced into lower paid and unprotected informal work; others might find themselves entirely unemployed; and those currently unemployed might have to wait longer for an opportunity to work either in the protected or the unprotected sector as overall economic activity might be reduced. One reason for the negative impact of minimum wages is that companies attempt to avoid increased costs by reducing their labour force. In some cases, this will result from efforts to maintain profits, but in others, where employers operate with small margins and profits, the overall sustainability of the company might be compromised when buyers are not prepared to pay more for the final products or services.
