Colombian companies must apply basic labor standards to reach OECD standards

23 July 2018 5 min. read

Colombia was invited to join the Organisation for Economic Cooperation and Development in earlier this year, in May. A civil war with guerrilla insurgents and right-wing paramilitaries – which official ended in 2016 – as well as continuing strife with narco-traffickers has taken its toll on the central government’s rule of law. However, today the country is putting these issues behind it and facing perhaps an even tougher battle.

As a prerequisite of joining the Organisation for Economic Cooperation and Development (OECD) a country must bring its laws, policies, and practices up to OECD standards. These standards make up the values that make the OECD such a prestigious institution, often cited as a club of the world’s most prosperous countries.

For Colombia, the OECD insisted that in joining, the country must reform its justice system, corporate governance of state-owned enterprises, anti-bribery, trade, and labor issues, as well as create new national policies on industrial chemicals policy and waste management. 

The country is already in full swing in overhauling these institutions and the Colombian Government is busy with projects enhancing the country’s trade initiatives. One such initiative which is in line with the OECD’s requests is the contract which the Colombian Mining and Energy Planning Unit put out for waste reform – turning urban waste into bio-gas.

Companies must apply basic labor standards in Colombia for country to reach OECD standards

Incoming Colombian President, Iván Duque said in his election victory speech: “What we most want is for Colombia united to completely smash corruption across all the territories. We are going to return to our population the hope and ability to believe in our institutions. We will be the government that like never before in our country will confront this cancer.” Duque also said that his government would convert Colombia into “the country of social justice and political equality.”

Another pressing issue for Duque is reform to the country’s labor laws. The rules and regulations that govern working conditions in Colombia must be brought up to the standards of the OECD, which includes both Mexico and Chile as members. Both of these countries have set the standard in Latin America when it comes to minimum wage, job security, worker’s representation rights – i.e., union membership – and health and safety in the workplace.

For the OECD, these standards can be established via either legislation or collective agreements, or a combination of both. “Governments and firms may indeed be tempted to put pressure on working conditions and social protection in an effort to improve competitiveness in world markets, generating what has been called ‘social dumping,’” stated an OECD article titled ‘Labor Standards and Economic Integration.’

The fear is that once membership is achieved then these standards can drop to improve trade competitiveness within the membership bloc. Carlos Mario Sandoval, EY Colombia’s resident expert in labor law and a partner with the consulting firm commented on what must be done to achieve Colombia’s goals of aligning itself with other members of the organization.

Basic labor standards

"One of the general premises of the Organization for Economic Cooperation and Development in the workplace is to promote the application of basic labor standards, which are linked to the protection of human rights in the workplace in improving productivity, the standard of living of member countries, and reducing gaps between rich and poor,” Sandoval commented. 

Four issues will have to be addressed: minimum wage, pensions, labor guarantees and reduction of collective agreements. These issues will prevail throughout Duque’s presidency, especially when it comes to violence against union leaders, informal labor, undue hiring in the production chain, as well as the way in which the Ministry of Labor oversees this issues.

By addressing minimum wage in certain regions and ages, as recommended by recent OECD policy, the country can enhance its ability to create formal employment opportunities. Currently, the country’s minimum wage is roughly $265 a month. This is higher than the current minimum wage in both Mexico and Venezuela.

Mario Sandoval also brings into focus the need to revisit the pension system in Colombia. The system is – like the vast majority of basic services Latin America – split between public and private, which causes a defined gap between the rich and poor. By addressing the fundamental structure governing both in the country, the EY partner says that a ‘Good Practices Club’ could increase equality for pensions.

Thirdly, in terms of labor guarantees, Colombia has been struggling to meet international standards for some years now. A collective of Colombia’s labor unions and representatives filed a complaint in 2016 with the US Labor Department in regards to kidnappings, death threats, and murders to workers who attempted to exercise their labor rights. According to Mario Sandoval, in order to improve these conditions, the Colombian Government must actively promote the right to trade union associations.

Lastly, there must be a reduction in employing methods of collective agreements in Colombia, to reach the OECD labor standards. The OECD has expressed concern for the prevalence of collective agreement barriers in Colombia, restricting the ability for Colombians to join a trade union association or apply collective bargaining.

OECD Secretary-General, Angel Gurría said in relation to Colombia joining the OECD: “We are very pleased to welcome Colombia as a member of the OECD. Accession to our Organisation was set as a priority by President Santos when he assumed office and we are glad that the process could be completed during his mandate. It has been a journey in which we have always appreciated the strong commitment and leadership of President Santos and his team.”

“The accession of Colombia will contribute to our efforts to transform the OECD into a more diverse and inclusive institution, which will ensure our relevance in the years and decades ahead. The global challenges we are facing today can only be addressed if we have emerging, developing, and advanced economies working together,” he concluded.