An extraordinary leap of 23.78% in the Colombian minimum salary per month brings it to a symbolic COP$2,000,000
An unprecedented hike in the Colombian minimum salary for 2026 was announced on Monday 29 December, bringing the rate to two million pesos per month. That represents an increase of 23.78% on the 2025 number. That’s the biggest jump ever – only 1997 comes close in recent years with 21.02%.
The minimum salary itself (SMMLV or Salario Mínimo Mensual Legal Vigente) has gone up to COP$1,750,905. There is also a transport subsidy (COP$249,095) which brings the effective minimum salary in Colombia for 2026 to two million on the nose.
Business leaders had suggested a rise of around 7.21%, keeping it above annual inflation (5.3% as of November), while trade unions and syndicates had called for an optimistic 16%. Both were left in the dust by Petro’s extraordinary decision.
The extraordinary rise is not due directly to inflation, nor to the rising cost of living, but represents a fundamental change in the rationale behind the number. Colombian president Gustavo Petro explained that the minimum salary should be considered a household income, not individual.
Whether the household basis for the minimum salary holds up to scrutiny is hard to say. It certainly was the case, but like most other middle-income countries Colombia is rapidly changing. The idea of a single income supporting a family is less true every year, with Colombian households under 3.5 people on average and with 1.5 workers. That means a true dependency ratio of nearly one to one.
It was calculated by working around the price of a basket of goods for the average family (canasta básica), logged at nearly 3 million pesos for four people. Using that number of 1.5 workers gave the convenient round number of two million.
The minimum salary (not including the transport subsidy) is the baseline number that in turn influences a whole lot of other values in Colombia, such as fines and public salaries which are counted as multiples of the SMMLV. That includes, happily for Congress, politicians’ pay.
What does the increase in the Colombian minimum salary mean for the economy?
Far harder to work out is the long term impact of this rise in the Colombian minimum salary. Petro claims it will further stoke private spending in the country as the increased wages percolate throughout the economy and allow continued growth.
It will increase labour costs for a number of businesses, especially small companies, some of which will struggle to keep their heads above water with such a sudden rise in payroll. For medium and larger size businesses, this includes mandatory SENA apprentices.
Massive firms who are liquid enough to be able to absorb costs will likely be absolutely fine, even if there are a couple of high-profile exceptions. Companies that are dodging the system, either through informal working or false self-employment, will also likely thrive.
Of course, the new reforma laboral promises to regularise and/or eliminate such practices. On paper, that is. In reality, these are the potential counterintuitive effects that could be the legacy of this increase in the Colombian minimum salary.
Colombia saw a sharp downtick in the number of employees on minimum salary this year, while informal work and self-employment has risen to around 55% of the workforce. This trend could continue much more rapidly with companies unwilling to pay the high new Colombian minimum salary.
A further issue is how close the minimum salary is now to the average. This will particularly affect smaller businesses and recent graduates. The former will find it hard to offer salaries that are significantly above minimum to attract quality employees, while the latter will find themselves often close to minimum salary and waiting longer for a return on their studies.
It is worth remembering that both minimum salaries themselves and increases to them are often bitterly opposed the world over and predictions of chaos are frequently sown. In most cases there is short term turbulence followed by long term stability.
Is this a political power play?
Despite Petro’s official line about household incomes, many will see this as a nakedly political move ahead of next year’s elections. It certainly will play well among the Colombia Humana base and potential voters as a reason to keep faith with the left and cast their vote accordingly next year.
A more charitable view would be to say that it’s one of the last significant acts that Petro can take before leaving office, so he’s gone big to deliver an achievement. Those have been in short supply over his time in the Palacio Nariño.
What’s undoubtable is that this creates a massive headache for next year. Regardless of who takes power, they won’t be expected to deliver quite such a large rise. However, they will have to be careful how far they go below it.
Any successor to Petro will at least be able to say their allies prepared the ground and maybe get away with a modest increase. An incoming fiscal conservative will be under pressure to deliver another big increase against their natural instincts and take heat for not doing so, while actually cutting the rate would be close to political suicide.
While a lot of candidates in the 2026 election might say that this was a fiscally imprudent move, they will have to be careful how far they push it. Many in Colombia will agree with them, but those same people are also likely benefiting from the increase.
There are also the optics of a rich politician arguing against the very many voters who are on minimum wage or even those who aspire to earn minimum wage. It’s not a good look to argue against giving stuff to the people whose vote you want.
Short term gains, but long term problems?
So in the end this is a huge play from Petro, which has won him a useful political victory for today. It backs up his rhetoric, as he can easily claim he’s acting on behalf of the workers. There’s plenty of truth in that, as many Colombians work on minimum wage.
It may be a bribe to the electorate, but many will claim that no one else has at least offered them anything like this ever before, so good on him. Going into the 2026 election candidates on Petro’s side will be able to point to this achievement, while opposition candidates face pressure to offer at least something similar or be painted as rich folk denying the poor.
It’s hard to see a short term in which we won’t see a lot of businesses go bankrupt. The longer term is harder to read, as most companies will be unhappy but able to keep going. The effect on public salaries is potentially alarming with the state already running a deficit, unable to achieve fiscal reform and still expanding.
Ironically, it’s entirely possible that the increase in the Colombian minimum salary for 2026 might lead to more informality and less dynamism in the economy. However, it’s also completely believable that the economy is resilient enough to handle it with ease. This may be Petro’s biggest gamble yet and even he doesn’t know how it’ll play out.