Colombia’s government Tuesday reset its annual minimum wage increase, changing it to a 4.0 percent hike rather than 3.4 percent after labor unions complained that higher-than-expected inflation data rendered the original increase insufficient.
The new increase leaves this year’s monthly minimum salary, retroactive to Jan. 1, at 535,600 Colombian pesos ($288).
The office of President Juan Manuel Santos said last week it planned to again raise the minimum wage for 2011, citing December’s consumer price inflation data, which came out just days after Santos decreed the original 3.4% wage increase.
Consumer prices rose 0.65% last month, more than double what economists had expected, according to the inflation data out last Wednesday. The data also showed full-year inflation was 3.17%, while a basket of goods typically purchased by low-income workers–those most affected by the minimum wage–rose by about 3.6%.
Unions said the inflation data meant low-wage workers’ purchasing power actually would decline this year with the 3.4% minimum wage hike. They threatened to take legal action and protest in the streets if an adjustment wasn’t made.
The higher inflation is mostly a result of torrential rains during the past six months that severely damaged food crops throughout the country, reducing supply and causing a surge in costs to farmers that are now being passed to the consumer.
Business groups last month were calling for no more than a 3.0% increase to the minimum wage, arguing they couldn’t afford to pay more.
The minimum wage affects some 5 million workers, but has an effect on other large segments of the population because it’s used for setting payments such as public pensions as well as traffic tickets.
(Dan Molinski / Dow Jones Newswires)
