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Income Inequality and Poverty in Colombia - Part 1. The Role of the Labour Market

Author

Listed:
  • Isabelle Joumard

    (OECD)

  • Juliana Londoño Vélez

    (OECD)

Abstract

Income inequality in Colombia has declined since the early 2000s but remains very high by international standards. Income dispersion largely originates from the labour market, which is characterised by a still high unemployment rate, a pervasive informal sector and a wide wage dispersion reflecting a large education premium for those with higher education. Reducing income inequality is a key government objective and this requires improving the performance of the labour market. Raising educational outcomes for all and enhancing training programmes would help improve labour supply and productivity. Formal job creation however remains heavily constrained by restrictive labour market regulations, in particular very substantial non-wage labour costs and a minimum wage which is high compared to average incomes. The 2012 tax reform reduces non-wage labour costs but more decisive steps are needed to create the right conditions and incentives to boost formal employment. Inégalités de revenu et pauvreté en Colombie - Partie 1. Le role du marché de travail Les inégalités de revenu se sont atténuées depuis le début des années 2000 mais elles restent beaucoup plus fortes que dans la plupart des autres pays. La situation sur le marché du travail explique dans une large mesure ces inégalités, avec un taux de chômage qui reste élevé, un vaste secteur informel et d'amples écarts de salaires révélant un très net avantage pour ceux qui ont fait des études supérieures. La réduction des inégalités de revenu est un objectif important du gouvernement. Pour l'atteindre, il est nécessaire d'améliorer les performances du marché du travail. Réformer le système éducatif pour garantir un meilleur niveau de connaissances pour tous et améliorer la formation professionnelle contribueraient à améliorer l'offre de main d'oeuvre et la productivité. La création d'emplois dans le secteur formel reste néanmoins fortement entravée par des réglementations du travail restrictives, en particulier des coûts non-salariaux particulièrement importants et un salaire minimum qui est élevé par rapport aux revenus moyens. La réforme fiscale de 2012 réduit les coûts non-salariaux mais des mesures plus ambitieuses sont nécessaires pour créer des conditions and incitations plus favorables à la création d'emplois dans le secteur formel.

Suggested Citation

  • Isabelle Joumard & Juliana Londoño Vélez, 2013. "Income Inequality and Poverty in Colombia - Part 1. The Role of the Labour Market," OECD Economics Department Working Papers 1036, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1036-en
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    File URL: http://dx.doi.org/10.1787/5k487n74s1f1-en
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Enrique López-Bazo & Juan C. Duque & Gustavo A. García & Paula Herrera-Idágarra, 2015. "Heterogeneidad regional en las diferencias por género en las tasas de desempleo en Colombia," IDB Publications (Working Papers) 89037, Inter-American Development Bank.
    2. Barón Ortegón, Brayan Alexander, 2016. "Distribución del ingreso rural en Colombia y línea de pobreza: 2004-2014
      [Rural income distribution and poverty line in Colombia: 2004-2014]
      ," MPRA Paper 86734, University Library of Munich, Germany.
    3. repec:ilo:ilowps:482088 is not listed on IDEAS
    4. Paula Herrera-Idárraga & Enrique López-Bazo & Elisabet Motellón, 2016. "Regional Wage Gaps, Education and Informality in an Emerging Country: The Case of Colombia," Spatial Economic Analysis, Taylor & Francis Journals, vol. 11(4), pages 432-456, October.
    5. Barón Ortegón, Brayan Alexander, 2016. "Distribución del ingreso rural en Colombia y línea de pobreza: 2004-2014
      [Rural income distribution and poverty line in Colombia: 2004-2014]
      ," MPRA Paper 86737, University Library of Munich, Germany.

    More about this item

    Keywords

    Colombia; Colombie; discrimination des femmes; education; gender discrimination; impôts sur le travail; inequality; informal economy; inégalités; labour taxes; pauvreté; poverty; économie informelle; éducation;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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