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Although the increase was above the private sector proposal, businessmen consider the adjustment to be “responsible.” Workers’ centrals believe that it is not enough to reactivate consumption by Colombian households.
The 3.5% increase in the minimum wage for 2021, which leaves it at $ 908,526, had the challenge of considering the arguments of the employers and those of the workers represented by the labor unions. The latter pointed to an increase close to 14%, so that the salary would remain at one million pesos, while the private unions yielded a bit: they went from putting 2% on the table to 2.7%. Although the figure set by the Government is 0.8 points above the businessmen’s proposal, it was undoubtedly closer to the private position.
It may interest you: Employers raise their proposal to increase the minimum wage for 2021 to 2.7%
Transportation assistance (Decree 1786 of 2020), received by those who earn less than two minimum wages, also rose by 3.5%, to $ 106,454, still far from the $ 120,000 that the unions were asking for.
Despite the fact that on December 18 the Minister of Labor, Ángel Custodio Cabrera, had said that, after seven sessions without consensus, the door for agreement would remain open, it was inevitable that the Executive would set the increase by decree (Decree 1785 of 2020), without agreement, before the deadline that expired on December 30. The Government highlighted that, taking into account an inflation (increase in the cost of living) caused for the previous year of 1.5%, the real increase in the purchasing power of workers will be 2% (by subtracting 1.5 from 3, 5 increment). It must be taken into account that in Colombia about two million people earn the minimum wage.
The arguments in tension were, on the business side, negative productivity (-0.06%), relatively low inflation (mainly a consequence of the drop in consumption), prospects for economic growth (close to -7% for 2020 and a growth of 4 to 5% in 2021) and the need for companies to have conditions to maintain and generate jobs. On the side of the workers’ centrals, the call was to leave behind the “economic orthodoxy”, given the exceptional situation, of crisis, that the country is going through. According to spokesmen for workers and pensioners, households need more money in their pockets to be able to consume more and, consequently, reactivate the economy and create new jobs.
Other requests of the workers were a subsidy to the entire payroll of MSMEs, establishing a basic income in Colombia and the repeal of Decree 1174 of 2020, which regulates the minimum floor of social protection (aimed at those who earn less than the minimum wage because they work part time and not full time). In the midst of the concertation attempts, the Government was emphatic in that it has already implemented aid such as Solidarity Income, extraordinary transfers of transfers such as Families in Action, VAT refund, as well as support to the payroll of companies and the payment of the service premium. On the side of Decree 1174, according to Minister Cabrera, with its issuance only one legal mandate (of the Development Plan) was fulfilled, setting a date for the social protection floor to start up (February 2021).
Diogenes Orjuela, president of the Central Unitaria de Trabajadores (CUT), commented that the fixed increase is equivalent to an increase of one thousand pesos a day, which he considers “outrageous.” “It ignores the needs of the reactivation of the economy and does not put money in the pockets of the less favored sectors.” He announced that in the first quarter of 2021 there will be mobilizations, in protest against this and other measures, on dates to be defined in January.
Bruce Mac Master, president of the ANDI business union, assured that although during 2020 many companies went through difficult times, even to the point of losing viability, the salary increase “is an act of solidarity with Colombian workers, in line with what has been happening during the last 20 years, in which there have been increases that have allowed the salary to have been growing in real terms ”. He added that the 3.5% increase is “responsible” from the point of view of job creation, that is, he believes that there will be investment that will help recover the nearly 1.5 million jobs destroyed in the pandemic that have not yet have recovered.
In the framework of the minimum wage debate, some views, such as that of Martha Elena Delgado, director of macroeconomic and sectoral analysis at Fedesarrollo, made a call not to forget that about half of the workers in the country earn less than the minimum. “The minimum wage is important, but the main focus must be on informality and on those who lost their jobs, so that they can move on to formality,” the economist told this newspaper on the eve of the start of the agreement. He recalled how important formality was during the pandemic, as it serves not only to pay taxes, for example, but also to be visible when it is necessary to receive aid such as Solidarity Income.
Salary deindexation
Traditionally, at the beginning of the year, the increase in the minimum wage is synonymous with the fact that some rates will also go up, such as those for fines and traffic tickets, pension contributions, among others. However, the 2018-2022 National Development Plan (Law 1955 of 2019) established in its article 49 that all “charges, penalties, fines, rates, fees and stamps, currently denominated and established based on the legal monthly minimum wage current, must be calculated based on their equivalence in terms of the Tax Value Unit (UVT) ”and that“ from now on the updates of these values will also be made based on the value of the current UVT ”.
The UVT is defined by the DIAN at the end of each year and rises based on inflation (variation of the CPI) for 12 months with cutoff to October. For 2021, this unit of measurement was $ 36,308, after an increase of 1.97%, based on the behavior of the IPC.
It may interest you: What is UVT, how is it calculated and how does it affect your pocket?
Although the UVT was to come into force as a unit of measurement for rates expressed in minimum wages as of this year, it was not until August 2020 that the matter was regulated. Now, it is expected that from January 1, 2021, this de-indexation of the minimum wage will begin to be implemented. For all this, the Government stressed that in 2021 the rates that in the previous conditions would rise 3.5% (taking the salary as a reference) will now rise less (1.97%), since the UVT is taken as a reference.
