Minimum Wages, Maximum Headaches: reflections on Colombia's minimum wage policy

Every year around this time, Colombia's politicians, labor unions and entrepreneurs have one of the most difficult tasks in the country: bargaining about the rise of the minimum wage. And every year history repeats itself: the discussions do not lead to an agreement and the government ends up proclaiming the new minimum wage by decree.

For 2008, Colombia's minimum wage was set a mere 461,500 pesos a month plus 55,000 pesos for transportation (around US$200 plus US$25). Powerful labor unions (such as the Central Unitaria de Trabajadores, CUT, and the Confederación General del Trabajo, CGT) complain that this is too little, and demand that the government decree a rise of 14%. CEOs and other employers, backed by the government, consider that such a steep increase of the minimum wage is "unthinkable".

As of today, the representatives of Colombia's largest employers have proposed to augment the minimum wage by 6.5% for 2009. According to the country's Constitutional Court, this would be illegal: in 1999 the Court ruled that the increase could never be below inflation, which is likely to be 7,5% for this year.

So far, the negotiations between the parties have stalled and it is difficult to tell what will happen. The workers complain (rightly) that Colombia's minimum wage is simply too small. El Tiempo, a newspaper, estimates that today's minimum wage has the same purchase power as the minimum wage of the year 2000. To put it bluntly, the four million Colombians who earn the minimum wage are no better today than they were eight years ago, even if their salaries have increased continually in nominal terms.

On their side, employers complain (rightly, as well) that production costs have risen uncontrollably this year already, and that a steep rise of the minimum wage would hinder their ability to give and maintain jobs. The Colombian state, itself the country's largest single employer and the greatest payer of pensions, is also concerned about the adverse effect that a sharp increase of the minimum wage could have on public finances. A higher minimum wage, of course, means greater expenditures on the part of the state.

Colombians seem to have put themselves into a situation from which there is no easy exit. Regardless of whatever decision the government makes, someone is bound to be disappointed. What should be done? Compassionate people and leftists (please note the difference) will argue that four million workers earning just about US$ 200 a month is an utterly unacceptable reality that needs to be changed. The government should put the interests of the workers before those of their greedy, rich employers, and decree the 14% rise demanded by the labor unions. It is time to make some justice.

Well, not quite. A steep rise of the minimum wage would be a dangerous and probably ineffectual measure. It is also likely to backfire. Labor unions complain that the high inflation is the reason why they need a 14% rise on their salaries. But listening to those demands would only exacerbate inflation, because 4 million people would, all of a sudden, have 14% more money in their pockets, making prices rise along with the minimum wage. If the government approves a sharp increase of the minimum wage, Colombia's central bank, Banco de la República, will be more reluctant to lower interest rates, given that it would be obliged to fight the effects of a larger money supply in the market. In the medium term, even with a 14% increase, workers would find themselves in the same situation as today -discovering that their money's worth is not what it used to be.

In addition, with unemployment standing at around 10 to 11%, it would be irresponsible to increase the minimum wage by, say, more than 8 or 9%. Colombia's small and medium enterprises (SMEs) already hire a disproportionate amount of minimum wage earners. Yielding to the labor union's demands and giving them a 14% increase, would put hundreds of small and medium entrepreneurs in a very difficult position: with the same money they could pay for 10 employees in 2008, they would only be able to hire 8 in 2009 -labor (especially unskilled labor) would become more expensive. Hence, employers would have to make a choice between assuming that rise in labor costs (those who can afford it will do so) or firing some employees that are not completely essential in order to keep things running. Augmenting the minimum wage by 14% is likely to create more unemployment in an already slowing economy (the World Bank estimates that Colombia's output will grow a sad 2.5% in 2009). Needless to say, those more likely to be fired under the 14%-rise scenario are unskilled workers, for they are those who earn the minimum wage- and these workers usually come from the poorest ranks of society. Paradoxically, a sharp increase of the minimum wage could harm those it is meant to protect.

As I said, there is no solution that could possibly please everybody. Give the labor unions what they want, and many will probably salute the measure as a great advance for social justice, but it would be a blow for employers and state finances. Increase the minimum wage by less than 7,5% and strikes of angry workers will ensue, not to mention a likely rebuke from the Constitutional Court.

In principle,the minimum wage is a beneficial mechanism: the state protects employees from exploitation, making sure that everybody receives a fair amount of money for his labor. Moreover, the minimum wage is also better than other welfare-state mechanisms: at least people are being paid in order to work and not for sitting at home and staying poor.

In reality, however, the minimum wage creates a lot more difficulties and problems than it solves: as we saw, it is likely to exacerbate price increases, worsen unemployment, hurt small businesses and affect unskilled workers by making them unemployable under the salary ordered by the state. A minimum wage can also help increase the size of the so-called informal sector, that part of the economy that functions outside the boundaries of the law: while 4 million people earn the minimum wage, 8 million Colombians earn lower salaries. Although these numbers may be exaggerated, the point is that the informal economy in Colombia is huge: between 40 and 50 per cent of urban employees work under some sort of informal agreement outside the control of the State. Many of them earn less than the minimum wage. To me, this shows that minimum-wage policies fail to produce all of the benefits they are supposed to create while leaving behind a good deal of social, political and economic trouble.

Granted, having a minimum wage may be good for many people who are receiving more money for their unskilled labor than they would in a totally free economy. Nonetheless, many more unskilled workers are rendered unemployable or are being pushed to the informal economy, where the State can neither work as an umpire in labor disputes nor uphold contracts.

I believe that a modern, civilized and prosperous society can exist without a minimum wage. For example, Hong Kong, Denmark, Singapore and Norway are places with buoyant economies where there is no minimum wage law. On the other hand, we need to acknowledge that 90% of countries do have some type of minimum wage policy in place. Needless to say, no one thinks about scrapping the minimum wage in Colombia: it would be political suicide. In the meantime, people somewhere in Bogotá continue to bargain in heated discussions that will lead nowhere, as usual. The likeliest scenario is that the government will end up decreeing the rise in the minimum wage by 7,5 to 8%. This will stop the debate which is bound to resume a year from now.

Conmoción Nacional de Televisión: RCN, Caracol, el tercer canal y la usura de la CNTV

Muy pronto, y gracias a la sabiduría providencial de las instituciones que regulan la televisión en Colombia, es probable que el televidente empiece a notar un declive en la ya objetable calidad de sus canales de televisión. ¿Por qué? Esta nueva entrada responde a esta pregunta y hace un pequeño recuento de los últimos acontecimientos relacionados con este tema

Empecemos por el comienzo: en Colombia, por disposición constitucional, el espectro electromagnético es propiedad del Estado. Esto quiere decir que los medios de comunicación que utilizan este espectro (radio, televisión) deben pedirle permiso al Estado para funcionar. Dicho permiso, llamado licencia, debe ser comprado al Estado por los canales de televisión a un precio fijado por la Comisión Nacional de Televisión (CNTV, el ente estatal encargado de regular la televisión). Actualmente, en Colombia hay un duopolio en lo que se refiere a la televisión: Caracol Televisión y Canal RCN son los dos únicos canales privados a nivel nacional. Ambos canales producen una variedad modesta de telenovelas, series, talk shows, reality shows, y magazines de calidad aceptable, aunque no extraordinaria. Los noticieros de ambos canales tienden a favorecer los puntos de vista del gobierno y generalmente utilizan las mismas imágenes de las mismas noticias. Al final de cada emisión de noticias en ambos canales hay una sección de farándula en la que modelos y ex-reinas de belleza se prueban como presentadoras de televisión. Siendo francos, la variedad en la televisión colombiana es bastante restringida.

Así pues, el Estado colombiano decidió que era hora de entregarle una licencia a un tercer canal privado de televisión. El proceso de licitación se abrió hace algún tiempo y, hasta ahora, hay tres consorcios que están en concurso por la licencia. Evidentemente, Caracol y RCN están en contra de la entrada de un tercer canal en la competencia: el duopolio no les sienta nada mal y les deja jugosas rentabilidades. Según ellos, la cantidad de publicidad que se maneja en el país no es lo suficientemente grande para sostener a tres canales de televisión. Esto, claramente, es totalmente falso, la realidad es que la pauta publicitaria en Colombia es pequeña justamente porque hay sólo dos canales de televisión que se la reparten. La aparición de un tercer canal abriría más espacios para liberar el crecimiento de la pauta publicitaria. La prueba está en que mucha publicidad colombiana ahora está siendo atrapada por canales privados de suscripción por cable (Fox, Sony, The Warner Channel, etc.), a los cuales los televidente están recurriendo dada la mediana calidad de las transmisiones de Caracol y RCN.


Pero ambos canales no pararon de quejarse allí. Resulta que ahora, diez años después de su fundación, tanto RCN como Caracol deben renovar sus licencias para el uso del espectro electromagnético, que, como vimos, es monopolio del Estado. La CNTV y el ministerio de comunicaciones acordaron que el precio que cada canal debe pagar por la renovación es de 189.000 millones de pesos (82 millones de dólares) "como precio fijo y, de igual manera, el 7.5 por ciento de los ingresos brutos que obtenga cada [canal] al año" (ver http://www.eltiempo.com/enter/telecomunicaciones/home/ARTICULO-WEB-PLANTILLA_NOTA_INTERIOR-4699947.html) Inmediatemente después de saber esto, Caracol y RCN pusieron el grito en el cielo. La cantidad a pagar es absurdamente alta, aseguran, y me temo que tienen toda la razón. Gabriel Reyes, presidente de RCN, calcula que cada canal habrá pagado, en los próximos diez años, un total de alrededor 500 mil millones de pesos (250 millones de dólares) por la renovación de la licencia, una cantidad cuatro veces superior a los 117 mil millones que debieron pagar hace 10 años.

Con esta decisión la CNTV y el Ministerio de Comunicaciones están rayando en la usura. Quienes se muestran a favor de que se les cobre tan alta suma a Caracol y RCN arguyen que las enormes ganancias de ambos canales justifican el precio de la licencia. Sin embargo, ése es un argumento moral y económicamente debatible, pues siguiendo esa misma lógica, estaríamos muy cerca del peligro de querer ponerle límites, quizás por decreto, a cuánta propiedad o cuánto dinero puede ganar un individuo o una empresa. En la práctica, esos límites a la riqueza terminan quebrando empresas y asfixiando a las economías, pues simple y llanamente se está estimulando el hecho de ganar menos. En la práctica, gracias a la política de la CNTV, RCN y Caracol tendrán un incentivo para trabajar y esforzarse menos: para obtener una cierta ganancia, ambos canales tendrán que asegurarse de obtener entradas 7.5% mayores al valor de su objetivo. Es decir, por cada 100 pesos que quieran ganar, tendrán que asegurarse de producir 107,5 para cumplir con el costo anual de la licencia. Dado el riesgo implícito en el mercado televisivo (telenovelas se hacen muchas, pero sólo pocas tienen éxito), ambos canales serán mucho más cautos en sus planes de expansión y con el tipo de programas que le presentan a sus televidentes. Las inversiones gigantescas en nuevas mega-producciones serán vistas con mayor recelo, y a la larga, el mayor afectado será el televidente colombiano que tendrá que soportar una televisión de menor calidad.

Pero eso no es todo. Si se quiere culpar a alguien por la anémica condición de la televisión en Colombia, por la triste calidad de sus programas y de su cubrimiento noticioso, todos los dedos deberían señalar al Estado colombiano. Cabe recordar que es la gigantesca maquinaria estatal colombiana la que posee la mayor cantidad de canales, con uno de cubrimiento nacional (Canal UNO) y ocho canales regionales (Teleantioquia, Telepacífico, etc.). Dado que RCN, Caracol y miles de ejemplos de otros países fuera y dentro de latinoamérica han demostrado que la empresa privada es totalmente capaz de hacer televisión, uno se pregunta por qué diablos el Estado sigue gastando miles de millones de pesos en dinero del contribuyente en mantener toda una red de canales que producen programas de calidad aún más baja. El Estado, dueño único del espectro electromagnético, ya tiene poder absoluto para decidir quién tiene derecho y quién no de transmitir tal o cual mensaje. ¿Por qué necesita entonces poseer y administrar más canales para emitir lo que sea?

Digamos, si se considera de vital importancia que haya un canal con programación cultural y educativa (documentales, etc.) el Estado bien puede abrir una licitación para que un ente privado abra y opere ese tipo de canales. Señal Colombia y la presencia del Estado en la televisión no son realidades inevitables. Muchos creen erróneamente que si se deja que la empresa privada se encargue de la televisión los canales de arte, historia y educación desaparecerán, puesto que asumen que sólo habrá enfoque en series de acción, violencia, pornografía, frivolidades de farándula... Sin embargo, canales exitosos como People and Arts, the History Channel y Discovery Channel son propiedad de empresas privadas y ofrecen emisiones culturales de muy buena calidad. Si se siguiera este ejemplo, la calidad y la oferta de la televisión colombiana aumentarían y el Estado podría ocuparse en lo que verdaderamente le concierne, como bajar el crímen, mejorar las cárceles y asegurarse que haya un sistema judicial eficiente.

De cualquier forma, tal vez Caracol y RCN mostrarían algo más de independencia frente al gobierno si no se supieran a merced del Estado colombiano. Es difícil no ser gentil con aquel que carga la espada que en cualquier momento puede cortarnos la cabeza.

Al crear ese tipo de políticas usureras y antieconómicas como el cobro exagerado por la prórroga de la licencia de Caracol y RCN, el Estado está impidiendo el surgimiento de un mercado televisivo diverso y dinámico, algo que sólo puede traer beneficios para la sociedad colombiana en términos de libertad de expresión y mejora en la calidad de las emisiones. El cobro anunciado por la CNTV debe ser visto como un retroceso, sin lugar a dudas. De igual manera, la parsimonia para la apertura del tercer canal privado, que sólo comenzará a emitir sus primeras señales en el 2010, el arraigado pensamiento burocrático y antiprogresista del Estado colombiano. En vez de un solo canal, se deberían abrir dos o tres canales más. Un triopolio es poco menos indeseable que el duopolio existente. Si ya hay tres consorcios interesados en invertir en la televisión colombiana, ¿por qué no darles la oportunidad al menos a dos de ellos? ¿Qué hay qué perder? ¿Cuál es el miedo? Al fin y al cabo, los únicos ganadores serían todos los colombianos.

Crafters of Peace. The uphill battle of UN peacekeepers.

Recently, I have been introduced to the complex and often frustrating world of UN Peacekeeping. Of course, I had heard before of the Blue Helmets and of different Peacekeeping missions that the UN maintains around the globe. What I did not know, however, is how the concept of Peacekeeping came to be, nor how many difficulties it has had to develop. The story of UN Peacekeeping, I am afraid, symbolizes all too well the structural constraints of the United Nations as a whole, as I will try to show in the following paragraphs.

When it was founded in 1945, world leaders had little idea that the United Nations would become the incredibly complex organization it is today. An organization chart of the UN lists as many as sixty committees, offices, banks and other institutions that deal with a wide range of issues, from world poverty and human rights issues to nuclear energy and tourism. Since its inception, the UN has been growing in complexity and scope. Perhaps even spontaneously,and often as a response to crises, the UN has started to grow different bodies (for instance, take the Institution for the Advancement of Women, INSTRAW, formed in 1975, or UN-HABITAT, created in 2002 and meant to provide "shelter for all"), and as the organization has become bigger, the UN has found itself short of cash to cope with all its responsibilities.

The truth is that the UN is a poor organization: it's annual budget is around a mere US$ 1.9 billion (although this is without counting Peacekeeping, programs like the UN Program for Development, and the expenditures by other agencies; counting these in, the UN spends around 15 billion a year). A UN website says that the $1 trillion plus of the world military expenditures could "pay for the entire UN system for 67 years". If only. The truth is that states like to call in the UN whenever they need it, but very few countries like paying for the service. America, for example, supposedly owes US$ 1.2 billion in membership dues, although many doubt the accuracy of that number (it must be acknowledged that the U.S. still pays for over 20% of the total UN budget, a great deal more than any other country. Perhaps Madeleine Albright was right about the "indispensable nation" thing).

But now let's go back where we started: Peacekeeping. The invention of the concept owes much to men like Lester B. Pearson, a Prime Minister from Canada, and Dag Hammarskjold, a UN Secretary General who died tragically in 1961 as he was still in office. The first UN Peacekeeping missions, in Israel in 1948 and in the India-Pakistan border in 1949, had the role of monitoring ceasefires between conflicting parties. In the 1950s, UN Peacekeepers were charged with more complex missions, such as the supervision of troop withdrawal (as after the Suez Crisis in 1956) and the prevention of movement of troops and weaponry across borders (in Lebanon in 1958). After that, UN Peacekeeping missions often had more ambitious purposes, such as trying to keep the massive Democratic Republic of the Congo from falling apart (1960) or the protection of civilians in the former Yugoslavia in the first half of the 1990s (Later, the UN Peacekeepers became more worried about their own survival as the conflict got nastier).

As I see it, and this is not meant to be a formal explanation, the essence of UN Peacekeeping is to send a number of impartial international troops into an area of conflict with the approval of the states concerned, in order to prevent the escalation of the crisis and, hopefully, help find a long-term solution to the situation. If you think carefully about some of the words of that last sentence, it will become obvious why UN Peacekeeping is such a difficult endeavor.

First of all: "number" and "international", how many troops are you going to send? where will they come from? Thus far, the UN relies entirely on the good will of member states to send military and civilian personnel to help in Peacekeeping missions. Of course, when you can only send 20,000 men in uniform to deal with a terrible mess in a country as big as the US west of the Mississippi (the Congo, 1960), you realize that their chances to succeed are very limited, to say the least.

Also, consider the word "impartial". UN Peacekeepers are supposed not to take sides in the conflict; they are simply supposed to stop the fighting. Imagine a teacher who sees two students fighting and who separates them, without wanting to favor this child or the other in the argument. To limit the conflict is paramount, and that, essentially is the task of Peacekeepers. However, what happens when your moral values compel you to take sides, what happens when you can clearly identify an aggressor? Is it right to remain impartial? Does impartiality mean indifference or inaction? Sadly, sometimes this is what has occurred with UN Peacekeepers (UNPROFOR, for instance).

Finally, consider the "approval" needed from the country that will host the Peacekeeping mission. In UN parlance, they prefer the word "consent", which basically underscores the same fact: entering a country's territory unauthorized would be a violation of sovereignty, equivalent to an act of war, even if you are the UN (the UN charter provides for this type of eventualities, when the sovereingty of one nation may be violated in order to keep the peace, although those actions commonly fall under Chapter VII of the charter). In principle, promising to respect sovereignty is good, otherwise, few states would abide to the rules of a game that can put in jeopardy their own independence and control over their territory. But for example, take the UN Emergency Force, which operated on Egyptian territory, had to leave the country when Nasser decided it was time in 1967. Nasser wanted to attack Israel and UNEF was the only thing between him and his enemy -one simple act of sovereignty led to war and left the UN incapable of maintaining the peace in the region as it had done for the last 10 years.

So far, there have been 63 Peacekeeping operations since 1948. Currently, there are nine operations in Africa, three in the Middle East, two in Europe (counting the one in Cyprus),two in Central Asia, one in the Caucasus, one in Oceania, and one in the Americas. In total, there are over 111,000 people serving in these 19 missions.

Although most of the men and women who serve as UN Peacekeepers are admirable and hardworking people who are simply trying to make the world a better place (a few of them, though, have proven to be no better than ordinary thugs, spending their time committing crimes like theft, rape and murder),their efforts rarely serve to resolve the conflicts in which they intervene. The story of UN Peacekeeping is one of mixed results: the expansion and sophistication of the concept may be an indicator of its success, yet most missions simply fail to leave long-lasting solutions behind them. In some cases, like in Cyprus, where UNFICYP has been operating since 1964, UN Peacekeepers seem condemned to remain stationed there for endless decades, monitoring a tense absence of conflict in the face of a lack of political agreements.

All this leads many to believe that the world should strengthen the UN and its Peacekeeping capabilities. Perhaps, giving the UN a permanent and independent army so that the organization
does not have to depend on the will of member states in order to deploy Peacekeepers. Moreover, defenders of this idea, argue that a permanent UN army would minimize problems of 1) unequal training of Peacekeeping troops coming from many different military traditions 2) financing and supply for the operations, which won't have to depend on others' charitable spirits 3) coordination of troops and unity of command, etc. Most of this is nonsense. Of course, UN Peacekeeping is not a perfect institution, and I doubt it will ever be, but endowing the United Nations with a permanent army of a yet undefined number of men and counting with a yet undefined budget is unlikely to solve any problems.

The problems of financing UN Peacekeeping operations, for example, are not related to the fact that the UN lacks an army of its own, but rather to the reality that member states are either unable or unwilling to pay their dues to the organization. Creating yet another UN institution, let alone one as costly as an army, will most likely create a greater hole in the finances of the United Nations and will not make countries in any way more eager to pay membership dues. Secondly, although inequality of training is a true problem for pluri-national Peacekeeping troops who need to coordinate their actions, having a UN army with an equal training scheme for all its soldiers does not necessarily mean having a better training scheme. You may still prefer having really well trained Swedish or Canadian soldiers serving as UN Peacekeepers than a group of international troops trained under standard but poor techniques. With how underfunded the UN is and has always been, I can imagine a UN army being a noble but ultimately ineffectual attempt to train very committed men and women with nothing but a few available resources.

In conclusion, UN Peacekeeping is a good thing. It is a noble attempt to deal with some of the many evils that lurk around, and, without it, we probably would have seen many more wars and death. However, Peacekeeping is also a victim of the high expectations it creates in the minds of idealists and those who regard the UN as an atrophied world government. Sometimes, you need to accept that there is only so much you can do in order to make the world a better place. Out there, you will always find the same old evil people and states vying for power at the expense of others. It does not matter how hard you try, chaos and conflict reproduce and get out of control faster than you can think. But this does not mean that we have to stop trying. If Peacekeeping has developed into the complex institution it is today, helping thousands of vulnerable people around the world, it is also thanks to those same idealists who never stop dreaming of a better future. In the meantime, we, the realists (without a capital R), need to remind those idealists that grandiose plans to save the planet seldom work as intended. Reforming Peacekeeping without thinking of the consequences could lead to more problems. On their part, they, the idealists, can help us realists leave behind, at least for a second, our rather gloomy vision of the world.