The Economic Thinking Center of Anif has warned of the negative effects of the 23% minimum wage increase, which will generate an additional fiscal cost of 3.8 trillion pesos for the Government in 2026. Though celebrated by the administration, this measure will raise labor costs and could boost informality and inflation. The entity highlights impacts on public payroll, pensions, and tax revenue.
The 23% increase in Colombia's minimum wage, decreed by the government, has been one of the administration's most touted decisions. However, Anif, a respected economic analysis center, estimates that this measure will impose an additional cost of 3.8 trillion pesos on the non-constitutional spending (GNC) in 2026.
Historically, minimum wage hikes have exceeded the combined inflation and productivity growth by an average of 1.3 percentage points. This time, the real increase is 17.9%, based on the vital wage and International Labour Organization (ILO) methodology. It will primarily affect micro and small enterprises, which make up 98% of the country's business fabric, by raising their labor costs.
Vulnerable sectors such as agriculture, artistic activities, lodging, and food services face heightened informality risks, as their wages hover near the minimum. Inflationary pressures are also evident in aggregate demand, shown by the recent 100 basis-point hike in the Bank of the Republic's intervention rate.
Fiscally, the impact is notable amid budget constraints. The payroll for around 800,000 directly contracted public servants will rise by approximately 300 billion pesos. For pensions, 55.4% of Colpensiones affiliates—over one million people—will receive minimum-wage adjustments, adding 3.1 trillion pesos to spending. The lifetime annuity slippage coverage mechanism will jump from 990.792 billion to 1.5 trillion pesos.
Anif also forecasts a 3.5 trillion peso drop in corporate income tax revenue for the 2026 tax year, due to higher deductible costs eroding profits. 'In a context of high fiscal tightness facing the country, a minimum wage increase of this magnitude introduces additional rigidities on spending inflexibility, reducing the government's room to maneuver in sanitizing public finances,' the entity concluded.
These effects highlight the need to balance labor policies with fiscal sustainability, particularly with potential rises in minimum guarantee fund beneficiaries from recent decrees.
