US embassy cable - 04BOGOTA1563

UNCLAS SECTION 01 OF 02 BOGOTA 001563 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN, ECON, ELAB, CO, PGOV 
SUBJECT: COLOMBIAN UNEMPLOYMENT AT SEVEN-YEAR LOW 
 
 
1. (U) SUMMARY:  Reflecting the economy's 3.5 percent 
increase in 2003, Colombia's unemployment rate has fallen to 
12.3 percent, a seven year low.  Underemployment has 
increased slightly to 31.9 percent.  Unemployment continues 
to be a top issue among the public.  Some analysts, while 
praising the turn of events, see the new job creation as 
insufficient.  Others also question the quality of the new 
jobs.  The GOC understands these criticisms and is focusing 
efforts on export sectors that can generate more, and 
better-paying, jobs. END SUMMARY. 
 
2. (U) According to the National Statistics Department 
(DANE), 1.2 million new jobs were created in Colombia in 
2003, bringing unemployment to a seven-year low of 12.3 
percent. The number of under-employed, however, rose 1.7 
percent to 6.6 million, or one third of the labor force. 
Unemployment in urban areas, where three quarters of the 
population lives, registered 14.3 percent in December 2003 
for the 13 largest cities, with a higher rate of 16.7 percent 
in Bogota. Urban underemployment dropped by 1 percent to 31.1 
percent, and DANE set rural unemployment at 9 percent. 
 
More Jobs, but More Underemployment 
 
3. (U) The majority of the increases came in the construction 
and service sectors. According to a leading labor think tank, 
Externado University's Labor Market Observatory, higher 
paying manufacturing jobs decreased 2 percent in 2003, 
leading to a 4 percent drop in wages overall.  The 
Observatory notes that the mining sector and utilities showed 
important productivity gains, but little new employment.  The 
Labor Market Observatory's director, Dr. Stefano Farne, 
acknowledged that there were new jobs, but challenged the 
number of new jobs the government reported.  Farne also saw 
the increase in underemployment as worrisome.  He pointed to 
a recent study by the Observatory that 67 percent of jobs are 
"informal" in Colombia's thirteen largest cities, meaning, 
among other things, they are not registered with the social 
security system. (Note: This can be explained by the fact 
that 65 percent of new jobs were created by small and medium 
size enterprises, defined to have less than 25 employees. 
Officially, any company under ten employees is considered 
informal. Therefore "informal" sector jobs may not 
necessarily mean illegal or sub-standard employment. End 
Note.) 
 
Unemployment Rates High Among Public Concerns 
 
4.  (U) In a poll of residents of the four largest cities 
published January 5 by leading weekly Semana, 40 percent of 
respondents rated unemployment as the most serious issue 
facing Colombia, trailed by corruption (29 percent), the 
security situation (24 percent) and narcotrafficking (5 
percent).  Sixty-one percent of the respondents said they 
were not working.  Other polls indicate President Uribe 
continues to enjoy high overall job ratings of close to 80 
percent.  His approval rating specifically for dealing with 
unemployment, however, runs at just 35 to 40 percent. 
 
Government Reforms Having a Positive Fffect 
 
5.  (U) One of the causes for the employment upturn in 2003 
was 2002's labor reform that reduced the cost of layoffs, 
inserted flexibility into the scheduling of the workweek, 
lengthened the number of hours covered under daytime wage 
regimes and reduced Sunday labor rates.  DANE estimates that 
labor costs overall dropped 5.7 percent as a result of the 
reform, while labor costs in the textile and chemical sectors 
were reduced by 15 percent and leather industry labor costs 
dropped by nearly a third. Both these sectors grew in 2003 as 
a result of ATPADEA.  This reform was originally expected to 
generate 300,000 new jobs, but the data now suggests upwards 
of 600,000 new jobs resulted. 
 
6.  (U) The minimum wage process has also had an effect on 
employment levels.  As of December 2003, the minimum wage is 
USD 126 per month, and it has not changed in real terms since 
1990.  While businessmen argue that the wage is high by 
regional standards, wages in export industries, such as 
textiles, mining and light manufactures are significantly 
higher.  The real impact of the minimum wage is in the 
services sector, where more workers are pushed into 
informality as the minimum wage increases.  The minimum wage 
is insufficient to meet the basic needs of urban workers, 
however, as reflected by a January 5 Semana poll indicating 
that only 16 percent of workers felt they could run their 
household on 1.5 times the minimum wage (US$184). 
 
7.  (U) The employment and job creation numbers are positive 
and reflect the success of labor reforms as well as 
ATPADEA-led export growth.  The GOC recognizes, however, that 
much more needs to be done and is focusing resources on 
export sectors since these sectors generally offer 
higher-paying jobs. The GOC is also looking to tighten its 
controls of the informal sector. 
WOOD