Minimum Wage Increase = Unemployment and Informality

The Panamanian business sector believes that increasing the minimum wage under current conditions will generate more unemployment and increase informality in the labor market.

Wednesday, December 18, 2019

With the possibility of an increase in the minimum wage next year, the National Council of Private Enterprise (Conep) insisted that in the context of the economic slowdown, it is not possible to increase workers' pay.

You may be interested in "Never-ending Struggle for Minimum Wage"

Julio De la Lastra, president of Conep, told that "... We are optimistic that the country's economy is moving forward, that is why we are respectfully requesting a year to be able to evaluate how that economy will be and to make the same analysis so far."

The article adds that "... Businessmen say that each 1% increase in the minimum wage represents an additional $30 million in payroll for all businesses in the country, with the greatest impact on small and medium businesses, which represent 96% of the business park."

Since workers and employers did not reach an agreement, the government will have to decide whether or not to make adjustments in the minimum wage for the periods 2020 and 2021. The decision will have to be communicated before the end of the year.

More on this topic

Bad Time to Standardize Salaries

November 2019

Costa Rican businessmen warn that the government's decision to standardize wages in 2020 will lead to more unemployment, affect workers with less education and reduce competitiveness even further.

For the business sector is imprudent to approve and implement the wage standardization in 2020, since it will have a strong impact on productive sectors such as agriculture, trade, transport, tourism and construction, explains a statement from the UCCAEP.

Labor Tax Stifles Formal Employment

October 2017

The higher the percentage of wages paid by employers, the less formal employment will be generated, particularly affecting unemployed young people and distorting the economy by rewarding informality.

This is notorious in Costa Rica, where despite sustained growth of the economy in recent years, unemployment remains at around 10% of the economically active population, and informality represents around 40% of employment.

Costa Rica: More Informal Employment

November 2015

In the last year the number of people with jobs outside the formal market grew by nearly 3%, showing the deterioration of the competitiveness of the Costa Rican economy.

From a statement by the Costa Rican Union of Chambers and Associations of Private Business Sector (UCCAEP):

15 thousand laid off in Honduran Bread Making Industry

January 2009

The Association of Bakers announced that the sector is preparing to lay off 15,000 workers because they can absorb the increase in minimum wages.

According to "After a meeting of business owners from the sector, it is estimated that each bakery has an average of 70 to 75 employees of which 10% will have to be fired, for a total of 15 thousand persons.

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