The minimum wage in Colombia should be reduced to open up more job opportunities for young people, according to Christopher Passarides, who was awarded the Nobel Prize for Economics in 2010.
As a result of the rising minimum wage, nearly 50% of Colombian employees are working without a job contract, Passarides told a conference in Cartagena de Indias, according to Bloomberg.
Under pressure from labor unions and leftist organisations, Colombia’s government, headed by President Ivan Duque, raised the minimum wage by 6% earlier this year, pushing it up to about 86% of the median wage.
In Europe, Pissarides said, the minimum wage is about 40%-45% of the median.
The Colombian economy has been expanding in recent years, yet its unemployment rate is still above 10%, which means a large number of workers are without a job contract. Barely a month after raising the minimum wage, Alicia Arango, Colombia’s labor minister, conceded that around 44% of the country’s workers are receiving less than the minimum wage.
Passarides, who is a British-Cypriot citizen, said the government could improve the situation by lowering the minimum wage.
Lower wages were one of the primary reasons why foreign companies expanded operations to Colombia. In a 2017 study conducted by Nearshore Americas, Colombia was ranked as the top Latin American location for low-wage call center workers.
The rising minimum wage makes the country less attractive to foreign investors, because companies sponsoring foreign nationals on work visas must maintain a monthly balance exceeding 100 minimum salaries in their bank accounts.