COLOMBIAN UNEMPLOYMENT AT SEVEN-YEAR LOW

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