The labor market could be experiencing an internal boom and a shift towards formality due to the minimum wage
The labor market and its high informality pose great challenges to the pension system. Photo: Image generated with Artificial Intelligence - ChatGPT
TL;DR
- Formal employment in Colombia grew by 2.5% while informal employment fell by 6% between January 2025 and January 2026, defying expectations after a 23% minimum wage increase.
- Micro-businesses saw the strongest growth in formal employment (10.9%), followed by small businesses (3.2%), with large companies showing more moderate growth (1.5%).
- Sectors like commerce and artistic activities experienced a direct substitution of informal jobs with formal ones.
- Despite the shift towards formality, over 55% of employed individuals in Colombia remain in informal conditions, highlighting the persistence of structural weaknesses in the labor market.
- The observed phenomenon is seen more as an internal recomposition of employment rather than a significant expansion of total employment or a structural improvement of the economy.