How much would wages increase and which sectors would benefit most from the labor reform, according to the Government?

While various experts and economic groups have asserted that the Gustavo Petro administration's labor reform would discourage formal employment and destroy jobs, a new study by the Ministry of Labor, headed by Antonio Sanguino, asserts that the proposed measures would have a positive impact.

"The main criticism that has been raised is that the reform doesn't create jobs and that, paradoxically, what it will produce is destruction. This study presents evidence that contradicts this assumption," the research states.

This media outlet had access to the complete study conducted by the Ministry of Labor, which estimates that if the bill is approved, it would create nearly 91,000 jobs per year, while economic activity would grow by approximately 0.37 percent.

"The labor reform proposal promoted by the current government could imply an increase in wages that could range from 6 percent for formal employment to 4 percent for all employment. With the estimated elasticity of employment to wages, this would have a direct impact on job creation of between 80,000 and 100,000 jobs," the ministry projects.

These calculations were made through an exercise in macroeconomic simulations and the calibration of an input-output model based on the social accounting matrix.

While the report lists all the sectors that would benefit from the new labor changes, it does not mention which would be harmed by the increased labor costs that could result from higher night and Sunday surcharges, as experts have warned recently.

The idea is to move the night shift from 9 p.m. to 7 p.m., and for pay for Sundays and holidays to increase from 75 percent to 100 percent.

"An improvement in workers' wages can have a positive effect on job creation, through increased consumption," the study says.

The study states that the sectors that would benefit most from labor reform would be agriculture, with more than 17,500 jobs created annually (19 percent of the total); and commerce, with another 17,300 jobs (also 19 percent of the total).

Next comes entertainment and recreation services, with 12,258 jobs; industry, with 11,800 more people; and the accommodation and food services sector, which is expected to create 9,097 jobs each year.

Behind it appears the sector of public administration, education and health (7,778), transport (5,501), professional and scientific activities (4,607), financial and insurance activities (1,583), Information and Communications (1,433), construction (1,173), the real estate sector (816) and the exploitation of mines and quarries (230).

Additionally, it identifies how many people will benefit from the new labor measures and what the income increase will be due to the reform's effects. In total, it projects that more than 7.9 million wage earners will benefit , with an average income increase of close to 3 percent. However, since it does not benefit all jobs, the net increase is projected to be 1.83 percent.

In this regard, he says the sector that would benefit most from the reform would be public administration, which employs 1.9 million people. This is followed by the trade sector, with 1.2 million people, and manufacturing, with 1.1 million.

"The solution to the labor market's lack of dynamism to absorb the growing labor supply and improve the quality of the jobs offered should have been sought based on arguments other than the lack of labor flexibility and high labor costs. It is the growth model around which economic policy actions should be focused to strengthen job creation in a sustainable manner," the document states.

Two years ago, the Labor Market Analysis Group (Gamla) of the Bank of the Republic published a study concluding that if the government's original proposal were approved, salary costs would increase to such an extent that companies would be forced to lay off some 450,000 of their formal employees in a medium-term scenario within a period of three to four years.

The document indicated that the cuts would range from 152,000 to 746,000, equivalent to a 2.1 percentage point reduction in the formal employment rate. All of this is based on a medium-term scenario.

To make the calculations, they took into account night and Sunday surcharges, as well as changes in service-based contracts, severance pay, apprenticeship pay, the indexation of wages to inflation of up to two minimum wages, social security benefits for digital platforms, and the elimination of union contracts.

The Fedesarrollo think tank has also calculated the potential impact of the reform. According to its director, Luis Fernando Mejía, 451,000 jobs would be lost, with small businesses being the hardest hit.