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The occupational scenario in Colombia: Recent situation and challenges

During both terms of former president Juan Manuel Santos there were different situations that impacted the occupational indicators:

  • During the first term, there was a notable reduction in the unemployment rate which reached almost 20% in four years. Informal employment but less pronounced and higher occupational participation endured the same trend.
  • In the second term, the figures showed a deterioration in occupational terms; unemployment grew, informality reduction and job creation stanched and the occupational participation had a slight reduction.

The oil boom was not used to invest in infrastructure and sectoral policy to allow facing a different context as that of the second Santos term when the price of oil fell to almost half of its normal price and the local currency devaluation trend commenced.

Despite the potential benefits of the devaluation for the industry, also accompanied by a low demand for imports, for years the improvement recorded in this economic sector was insignificant. The country has been seriously impacted by the oil price reduction, despite the statement of the Minister of Finance in 2017 saying that “the worst for the Colombian economy has passed,” However, a year later, unemployment continued to grow.

Employment by activities and occupational position

Of the close to 1,800,000 newly occupied people during the first four years of the 2010 – 2018 period, more than 500,000 of them were independent workers. Furthermore, 25% of the new employees did not have access to occupational rights in their employment.

In this sense, the balance in terms of employment linked to new job positions would be relatively positive because, in the aforementioned time period, the unemployment rate was reduced by 13% and informality by 11%. In spite of this, this same result shows the limited improvements in these indicators, as informality continues to be high and urban unemployment is still 11%.

A critical aspect is that, of the urban employment created, the manufacturing industry– which on average shows it has the best job positions – is the one which had the worst performance during the recent period. In fact, contrary to the expected by the devaluation, this industry was the only branch of activity which reduced the total amount of occupied people in the cities (see chart). Inclusively, it was worse than between 2010 and 2014, when the US dollar was below COL $2.000 during most of the period.

Geographic heterogeneities

Colombia shows great geographic differences regarding occupational issues. As is observed by the following chart. While in the main cities of the Caribbean coast the unemployment rate is just one figure, in Armenia, Cúcuta, and Quibdó it surpasses 15%.

Added to this is that job quality also differs in regards to the productive structure and situation and changes in regional economies. While Bogotá and Tunja show the best performance compared to other cities, there are extreme cases in other cities, such as Cúcuta, where informal employment is greater than 70%, and Quibdó, which has an unemployment rate of 18%. The former city has been impacted by the migration coming from Venezuela, implying that on the short-term people accept informal jobs, while in the latter, institutional neglect persists and the economic lag explains the highest unemployment rate of the country.

The situation of demographic groups

An important aspect of the occupational problems is the situation faced by demographic groups such as women, youngsters, impoverished workers, and low personal qualification people. Women have the lowest occupational participation less than 20% with respect to men; even so, their unemployment is considerably higher (13.9% and men 9.2%), demonstrating their exclusion in the occupational market. Added to this is the segregation of low-quality activities, such as housekeeping and non-paying activities. An aspect which continues to be an issue is lesser compensation for women for the same work and qualification level as men (14% on average).

The unemployment rate of young people is at 23.5%; they have the greatest employment instability and although they work less as independents, they do work for a salary without any type of contract of occupational guarantee.

Finally, low-qualification workers (experience and educational level) are the ones a with greater probability of having low quality and low wage jobs and end up forming families with life levels that do no surpass the poverty thresholds.

Challenges and occupational policies

As opposed as what new president Duque said during his campaign, the occupational issue cannot be solved only by promoting a reduction in wage costs and work demand, as the latter is derived from increasing production levels and only makes sense if there are people with enough income to maintain their consumption levels.

Therefore, incentivizing employers to hire more workers reducing the occupations cost and taxes is only a part of the possibilities of this policy. Intervening the occupational matter should also consider the importance of the offer and the income level of the workers.

To offset the low levels of economic growth it is essential to think on employment and sectorial policies to guarantee the sustainability of consumption and link them to poverty reduction and inequality objectives.

Therefore, it is essential to implement policies focused on groups to reinforce family income, such as heads of households and in sectors that create formal employment such as the industry; but also policies on high unemployment and informality rate groups such as women and young people, besides working closely with local governments to fight against large occupational issues of cities such as Cúcuta and Quibdó.

 

Consejo Editorial