Government proposes minimum wages
By Manuel Rueda, Editorial Director
Friday, February 19, 2010
Colombia´s national office for economic planning has proposed to abolish the national minimum wage and move the country to a regional minimum wage scheme as it looks for ways to create jobs and promote investment in the poorer areas of the country.
“Colombia´s minimum wage is quite high for its GDP,” said national planning director Esteban Piedrahita in a recent interview with EL TIEMPO. “The minimum wage is approximately 3,000 dollars a year and national GDP per capita is at 5,000 dollars a year,“ he explained.
“Why not think of a minimum wage for Bogota, which has the same per capita income as Uruguay (approx. 11,000 USD) and a minimum wage for Chocó, which has a similar per capita income to that of Bolivia? (approx. 4,400 USD)”
Citing that “Colombia used to have a rural and urban minimum wage and that countries like China currently practice such a policy,” the planning director argued that “such a move would bolster investment in Colombia´s poorest regions, where the unemployment rate hovers around the 15% mark.”
His proposal has been met with skepticism from economic experts like former finance minister Juan Camilo Restrepo, who said that “segmenting the minimum wage by regions is not a feasible proposal.”
Restrepo said that “the minimum wage is calculated on an amount of money that is required to fulfill basic needs,” and that “having different GDP levels does not mean that the minimum amount of money needed to survive is significantly different from one region to the next.”
Economists also fear that setting a higher mínimum wage in Bogota, Medellin, and other cities with high per capita incomes would fatten the misery belts of the capital and other large cities by luring unskilled workers towards cities with higher minimum wages.
Some analysts have also reacted to the proposal by saying that more important issues need to be addressed by the government if it wants to create jobs.
Alejandro Gaviria, Dean of Economics at Los Andes University, says it is more important for the government to eliminate taxes on employment and lower tax exemptions on investments and imports of capital, in order to encourage companies to hire workers.
Meanwhile, union leader Tarcisso Mora urged the government to improve infrastructure and basic services in Colombia´s poorest regions, in order to encourage investment and job creation in those parts of the country.
Colombia had a 12% national unemployment rate in 2009, the highest in Latin America after Puerto Rico. The minimum wage currently stands at 515,000 pesos, or approximately 260 US Dollars per month.
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