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Risk in the recovery of employment in Colombia

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Risk in the recovery of employment in Colombia

In 2023, when a much more modest growth of the economy is expected, the situation of the labor market is also causing concern, and for the experts, this year could be marked by a lower generation of jobs, and by a new growth in unemployment, a rate that could return to double-digit terrain.

Added to the above is the 16% increase in the minimum wage, as a pressure for formal employers, plus the new rules of the game that some companies face after the new tax reform. Iván Jaramillo, a researcher at the Labor Observatory of the Universidad del Rosario, explained that, as a possible recession is expected, a natural containment effect of employability rates is inherited, which in October (9.7%) and November (9.5%) %) had closed in single digits.

According to the expert, due to the devaluation, the slowdown in GDP and the high levels of inflation, this “progressive improvement” would be slowing down, which will depend to a large extent on active policies and the maintenance of certain generation support programs of employment. «Inflation and devaluation impact confidence, and therefore the generation of employment. Production costs increase, there are more barriers to creating new jobs,” Jaramillo said.

Under this logic, Stefano Farné, director of the U. Externado Labor Market Observatory, assured that in the face of lower growth, expectations are lower, which will surely affect job creation. “In recent months, salaried employment continued to grow very well, which is a good indicator because it reflects the commitment of private companies. But since there is a slowdown, employment growth will also slow down, added to job losses in the public sector, ”he said.

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In the latest BBVA Research projection updates, the bank estimated that the unemployment rate in 2023 will be 11.2%, while for 2022 they calculate 10%, and in the case of urban unemployment this would be 12% this year. above the indicator of 10.5% estimated for the end of 2022. The bank expects GDP to grow 0.7% this year and that the economy will reduce its ability to create new jobs and this will be more concentrated in informality , affecting the capacity of private consumption.

In turn, from Banco de Bogotá, Gustavo Acero, senior economist at Economic Research and Market Analysis, stressed that the outlook for this year is not so favorable. He also added that the labor market has shown a significant recovery in relation to the decrease in the unemployment rate in 2022. However, he pointed out that the indicators of employed, and labor supply and demand have not shown the same recovery.

The director of Fedesarrollo, Luis Fernando Mejía, recently said that there is already a deterioration in the generation of employment and, therefore, an increase in the unemployment rate, since the seasonally adjusted unemployment figure (the one that isolates the calendar effects to compare it with the previous months) in October it was 10.5%, and that of November was 10.8%. In relation to the increase in the minimum wage for this year, which was set at 16%, there are also perceived risks.

Finally, Bancolombia highlighted in a recent report that, given the context of marked economic slowdown, it is foreseeable that some companies “must react by reducing their current or expected payroll”, and that the new value of the minimum wage would encourage hiring with informal schemes.

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