More than 10 Million Colombians Continue to Work in the Informal Economy

Being able to enjoy job stability is a benefit that many in Colombia lack, as many workers who, even working day after day, do not know what it is to have the right to enjoy a pension, decent salary, protection against risks while working, layoffs, vacations, or even being eligible for a loan.

In Colombia, for example, the reality of informal employment affected 58.2% of the employed population in 2022.

Photo: A vendor preparing street corn in Bogota’s Plaza de Bolivar. (Credit: Jared Wade)

This figure, according to the bulletin presented in the last quarter of last year by the National Administrative Department of Statistics (DANE), portrayed a decrease of 2.0% compared to 2021, when the percentage of Colombians who work in the informal sector in some capacity closed at 60.2%.

“For the 13 cities and metropolitan areas this rate was 43.8% in 2022, presenting a decrease of 2.1 points,” states the report. “Regarding populated centers and dispersed rural areas, the rate of informality was 84.7%, which implied a decrease of 1.2 points compared to 2021.”

The report also analyzed the 23 cities and metropolitan areas that showed the highest rate of informality in 2022, which were led by Sincelejo (69.4%) and Riohacha and Valledupar with the same percentage (67.4%).

On the other hand, the cities that showed the lowest rate of informality were: Bogota, 35.2%; Manizales, 36.2% and Medellin with 39.7%.

In addition, the DANE report noted that, in the fourth quarter of 2022 (October-December), the rate of informally employed population was 57.8%. That represents a drop of 1.4 points compared to the same quarter of the previous year (59.2%).

Regarding the gap between genders, the percentage of informal men reached 60%, which represented a decrease of 0.8% compared to the same quarter of 2021, when it stood at 60.8%. For women, in the last quarter of last year, 54.6% were informally employed, 2.1% less than in the same period of 2021.

It should be noted that, in this period, DANE recorded that “84.5% of the population that worked in micro-enterprises was informally employed, while in small, medium-sized and large companies (SMEs) the rate of informal workers was: 24.3%, 9.2%, and 5.0%, respectively.”

Colombia Has the Highest Rate of Informal Workers in Latin America

Similarly, the Organisation for Economic Co-operation and Development (OECD) released its “Informal Economy” report this year, where it was shown that Colombia is the country with the highest rate of labor informality among the nations in global group.

The study specifically stated that Colombia is in the first position with 53.1% of labor informality, surpassing by a wide margin the rest of the countries, such as Brazil (33.3%), Mexico (31.8%), Greece (31.8%), and Turkey (30.2%). Meanwhile, Norway is lowest on the the list with 4.7%.

So far this year, according to the period from December 2022 to February 2023, DANE highlighted that informal employment continues to fall slightly and decreased 0.7 points, compared to the same quarter of the previous year.

With these numbers, the current informality rate is 58.0%, which means that of the 22 million employed Colombians, 12.7 million work in some type of informal activity, a figure that continues to be concerning.

The Push for Labor Reform

Earlier this year, the National Government presented its labor reform to the Congress of the Republic, which will be evaluated by legislators for approval. Though the initiatives have largely stalled due to political realities, the purpose of this initiative is to reduce costs for the productive sector, as well as promoting savings, investment and job creation that, at the same time, would hopefully improve the quality of life for many Colombians.

In this context, the National Federation of Business Merchants (Fenalco) pointed out that this project must be based, in part, on the needs of those who are unemployed and those who, even having some kind of occupation, have neither employment benefits nor benefits related to labor legislation.

“The state tasks stated in article 2 of the Constitution make it demandable, from all branches of public power, to promote general prosperity, which is only achieved by promoting access to jobs that guarantee the enjoyment of fundamental rights,” contemplates the entity.

In view of this situation, Fenalco states that it is necessary to guarantee, through the labor reform, incentives that are presented to support unemployed people and workers who are in informal conditions, so that in this way they can access adjusted work contracts, in every sense, to the law.

The Ministry of Labor also highlighted that the business sector considers that along with the reform it is necessary to provide a more inclusive labor market, especially focused on the new generations, so that they are included in the formality. Additionally, they ensure that the workers of digital platforms, and independent service providers must be protected, as well as carry out the analysis of teleworking figures.

Colombia Had Almost 2.6 Million Unemployed People at the Start of 2023

It is important to note that Colombia closed 2022 with an unemployment rate of 11.2%, only 2.6% less than in 2021. However, in December of last year the figure reached 10.3%, an increase of 0.8 points compared to the previous month, when it was at 9.5%. This is how 2022 closed with 2.57 million people without work.

The trend in unemployment has been inconsistent throughout 2023, but the latest figures have shown a drop below 10% (to 9.3%) for the first time since November 2022.

Given this scenario, there is no doubt that, although informality has gradually been losing ground, much remains to be done to greatly reduce this figure and consolidate the job stability that the entire population needs and deserves.