Petro Controversy Analysis of the Impact of Labor Reforms

Amid discussions on the labor reform presented by the government of President Gustavo Petro, the Labor Market Analysis Group (GAMLA) of the Banco de la República. Presented a study of the future effects of this bill on the Colombian economy and labor market.

(The labor reform will eliminate 450,000 formal jobs).

One of the most outstanding findings, and at the same time controversial, has to do with the fact that the reform, as presented, would increase labor costs, leading to unprecedented job cuts.

“This would cut around 450,000 formal jobs over the horizon between three and four years in a medium impact scenario”Gamla is called.

Following publication of the analysis, President Gustavo Petrou cited the study, which he criticized and described as “Suspicious”.

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“Both Keynes and political economy, for example, claimed that there was no labor market, this group says yes. For Keynes as for political economy, which we rely on, employment depends on the productive capacity of society. Given that we have an abundant unemployed population, employment will depend on making credit and energy cheaper, protecting foreign trade in employment-intensive production, producing land, etc., and not on the anachronistic thesis that employment increases because wages are cheap, which has been verified by data, this is not true for Colombia. The entire economic policy of the government revolves around economic theoretical ideas, which are different from the theoretical basis of the article in question. If wages Had fewer jobs been created, Colombia would have been at full employment as it is one of the countries in the Americas with the lowest minimum wage in the region and Germany would have had the highest unemployment rate in the world. Contrary to the article’s false theory, Colombia has one of the worst wages, longest working hours, very low productivity and a real wage unemployment rate that reaches 60% of its active population. The president wrote about a message written by journalist Jorge Espinosa, who shared the findings of the Gamla study on his social networks.

Also from within his network, the President referred to a message from Andy’s Chairman Bruce McMaster, in which the President presented his perspective on the economic principles he defends.

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“It is always said by those in power that if wages are increased, unemployment increases. Lie. The history of European and North American capitalism shows high wage societies with a lot of employment. In Colombia the belief that returning slave labor generates more money is a lie. We have the lowest productivity in the OECD. Colombia will never have peace with business leaders who believe that wealth is generated by slave labor. The Social Pact includes dignifying the working conditions of Colombians”.

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