Wednesday 22 September 2021

Low Productivity: the Elephant in the Room in Colombia’s Minimum Wage Debate

Paying the bills

Latest

Carlos Alvarado denounces violations of the Daniel Ortega regime to the UN

QCOSTARICA - In New York, Costa Rica President Carlos...

High Number of European Tourists Traveling to Costa Rica in Spite of the Pandemic

QCOSTARICA - A total of 21,969 tourists from European...

Costa Rica second last in economic recovery in the region

QCOSTARICA - The Central American region experiences very different...

TOP-5 real estate communities for a family life

Despite the fact that COVID-19 is slowing down the...

Today’s Vehicle Restriction September 22: Plates ending in “5 & 6” CANNOT circulate

QCOSTARICA - For today, Wednesday, September 22, vehicles with...

Group charged migrants US$22K to get them to the United States.

QCOSTARICA - A Costa Rican-Panamanian criminal structure charged migrants...

Laura Chinchilla calls to avoid a dynastic dictatorship in Nicaragua

QCOSTARICA - Former President of Costa Rica, Laura Chinchilla,...
Paying the bills

Share

Negotiations on the minimum wage in Colombia are fast approaching. On the one hand, unions will demand an increase above inflation to safeguard their purchasing power, which has been badly hit by the recent tax reform. On the other side, entrepreneurs will be arguing that the remuneration for work must be aligned with labor productivity.

Colombia is gearing up for its annual minimum wage negotiations (IMGBB).

The discussion, surely, will discuss arguments to protect workers, while ignoring structural realities when it comes to productivity in a global economy. The results of the Private Competitiveness Council are astounding; it takes around four Colombian workers to produce what one does in the United States.

There are two main reasons that can help to shed light on the reasons for our lack of productivity: 1) poor investment in innovation and training for work and 2) a high rate of informality.

- Advertisement -

Ricardo Hausmann, in an article published by Projec Syndicate, suggests that copying models such as Silicon Valley, without having gone through the previous steps for a similar ecosystem to occur, is innocuous, and gives suggestions to promote innovation in countries going through the process of development. This economist reminds us that most of the investments in research and development in the developed world were driven by large companies, such as AT & T, which had a monopoly position in the market. This company invested large sums of money in laboratories and think tanks and developed technologies such as fax, lasers, radars, and satellite communications, among others.

Unfortunately, Colombian monopolies invest little in innovation and talent training. Most of their efforts are aimed at protecting their businesses from global competition and sustaining deficient production structures, which generate a higher cost to users for poor quality service. It’s time to change the way we look at the cartels that dominate our economy; either we pass true antitrust laws or we look for ways to get more involved in improving labor competitiveness and innovate.

For this, we need to develop a synergy between the corporation, the academy, and the state. The education system must be more relevant to real work experience, and workers must be taught about new technologies. The business sector must clearly define its needs when it comes to human resources, and the state must curtail its protectionism, which seeks to stifle competition through trade restrictions and tax benefits which aid Colombian corporations at the expense of the Colombian consumer.

Additionally, Colombia has the second highest rate of labor informality in the region, surpassed only by Peru. This is due to a combination of several factors: very high taxes, a lackluster education system, and a high minimum wage compared to the average salary. The minimum wage exceeds the average salary in only six of Colombia’s 32 states.

Informality is the main explanation of low productivity; it generates disincentives for the accumulation of human capital. One in three workers in the formal sector requires high levels of complex cognitive skills, while only one in six in the informal sector requires them. To reverse the trend, it is necessary to find ways for these workers to access training programs for work. Policies such as trade schools and government training programs such as “Ser Pilo Paga” (a Colombian program translated “It Pays to be Smart”) can be effective in breaking the vicious circle, as they give children of informal workers access to quality education.

We do ourselves a disservice by adhering to the same old arguments. If the problem of low labor productivity is not addressed, we will continue with high rates of informality in the labor market, and will be ill-equipped to compete in the global economy.

- Advertisement -

Article originally appeared on Today Colombia and is republished here with permission.

- Advertisement -
Paying the bills
Q24N
Q24N is an aggregator of news for Latin America. Reports from Mexico to the tip of Chile and Caribbean are sourced for our readers to find all their Latin America news in one place.

Related Articles

Mu variant of coronavirus: what we know about this mutation present in Costa Rica

QCOSTARICA - All viruses change over time. SARS-CoV-2 has already mutated...

Covid-19 deaths skyrocket throughout September in Nicaragua

TODAY NICARAGUA – In the past week, a total of 329...

Subscribe to our stories

To be updated with all the latest news, offers and special announcements.

Article originally appeared on Today Colombia and is republished here with permission.

Log In

Forgot password?

Forgot password?

Enter your account data and we will send you a link to reset your password.

Your password reset link appears to be invalid or expired.

Log in

Privacy Policy

Add to Collection

No Collections

Here you'll find all collections you've created before.