Colombia Raises Minimum Wage by 22.7% to Help Workers

BOGOTA, Colombia, Dec 29 (Reuters) – Colombia’s government will raise the country’s minimum wage to 1.75 million pesos per month ($470), President Gustavo Petro announced on Monday, marking a 22.7% increase. The new minimum wage, which will benefit approximately 2.5 million workers across the Andean nation, is set to take effect in 2026.

In his speech, Petro stated that the wage hike aims to reduce inequality and ‘democratize wealth so that working people, who make up the majority of the Colombian population, can live better.’ This increase significantly exceeds the previous year’s rise of 9.54%, which brought the minimum wage to 1.42 million pesos ($380).

Furthermore, this announcement comes as the leftist administration’s final wage hike before elections in late May 2026. It also surpasses predictions for next year’s inflation, which the central bank estimates at 3.6%, reduced from 5.1% expected this year. Petro acknowledged that the increase might pressure inflation rates.

David Cubides, chief economist at Banco de Occidente, described the raise as ‘absolutely unsustainable,’ indicating widespread economic impacts, including on government payroll and pension costs as well as the informal labor market. ‘Inflation figures will have to be revised,’ Cubides projected, anticipating potential increases in interest rates in the medium term.

The new minimum wage was confirmed by decree after negotiations between business associations and trade unions ended without agreement. Additionally, Petro announced a transport subsidy for workers earning up to two minimum wages, potentially raising total monthly remuneration to 2 million pesos.

In a follow-up announcement, Petro emphasized that this is the largest minimum wage increase since the 1980s. He indicated that those receiving travel expenses would see earnings rise to 2 million pesos by January 2026. Since taking office in August 2022, Petro stated that his administration has increased the minimum wage by 36% adjusted for inflation, aiming to establish a living wage for workers.

Petro claimed that the wage hike would directly benefit about 15% of workers earning minimum wage and indirectly benefit lower-class communities. While concerns were raised about potential job losses due to increased wages, he pointed out the country currently experiences its lowest unemployment rate of the century and declining poverty levels.

The wage increase was met with mixed reactions, with employer associations opposing the measure, arguing that it may force businesses to reorganize workforces and consider layoffs. In contrast, labor unions celebrated the decision, with Fabio Arias from labor union CUT asserting that this increase history closes the large income gap that has persisted in the country.