Giving incentives for hiring young people, training for work and creating emergency public positions are some ideas raised by economists and experts.
This week, Standard & Poor’s downgraded Colombia’s investment grade, lowering the country’s credit rating one notch (while maintaining a stable outlook for the Colombian economy).
This renewed the pressure for the country to pass a tax reform that, of course, confronts the country’s fiscal problems, but also responds to the social expectations that exploded with the national strike, a movement that started in opposition to the bill that was withdrawn by the Government, but which today is a melting pot of claims, aggravated by the pandemic.
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These days, tax reform is an issue that, by its nature, has been approached mainly from two perspectives: collection (that is, where the missing money will come from) and social spending (how to support the most vulnerable in the midst of the worst economic crisis in the history of the country).
One perspective that is rarely examined as much is how the tax statute can boost the generation of more and better jobs. This is a central issue in the country’s economic recovery, both in the short and long term.
Proposals have emerged from various sectors of how the next tax should be. The most recent of these, designed after the withdrawal of the so-called Sustainable Solidarity Law, was drawn up by the Red de Trabajo Fiscal, an alliance of various academic think tanks. The initiative, which includes an articulated model, aims to raise more than $ 20 billion without touching the pockets of Colombians who earn less than $ 6 million a month, but by deepening the taxation of citizens with high incomes, as well as eliminating exemptions and gabelas granted to the companies.
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One thing that worries some experts is that, at the sound of the economic crisis, the chorus usually responds with the words austerity and labor flexibility. Two terms that, analysts say, tend to have long-term negative impacts on job creation and quality, issues that in turn end up hitting productivity and growth in the economy in general.
“This is a formula that has already been tried, not in a crisis in 1700, but just ten years ago, in 2008. And we see its bad results in the economies of countries like Spain, Greece and Portugal, which have many similarities with us “, says Iván Daniel Jaramillo, director of the Labor Observatory of the Universidad del Rosario, who adds that the calls for austerity and labor flexibility are” almost emotional “responses, but that they end up” violating the standards of decent work and the generation of aggregate demand, which impedes economic growth ”.
Follow the news of El Espectador on Google NewsLuis Carlos Reyes, director of the Fiscal Observatory of the Javeriana University, also joins this call, saying that to create employment from the tax scenario “several things can be done, one of the most important would be to reduce hiring costs, without That is why the quality of life of the workers deteriorates ”.
In a similar sense, Luz Karime Abadía, director of postgraduate studies in Economics at the same university, points out that to regain employment, actions must be taken on the supply and demand side. Regarding the latter, he says that “temporary monetary incentives are necessary for companies that reduce labor costs of hiring, those that formally employ young people and women.
Among other reasons, one of the arguments used by analysts to defend job creation from the tax scenario is to boost purchasing power and consumption, two powerful factors in an economy that tends to revolve much more around the domestic market than the domestic market. production for export.
Jaramillo speaks of making a transition towards “formulas for adapting training systems for work, which today are more demanding because they require digital skills and complex problem solving, among other skills.”
Referring to the offer, Abadía assures that “those young people who do not work and do not have higher education must be identified and trained in education for high-quality work in areas or trades of high demand by the productive sector, for example, in skills digital. Likewise, increase the offer of scholarships and support subsidies for young people to access technical and technological careers in areas related to productive vocations in the regions, ”he says.
However, Colombia has tax incentives for the formation of human capital and the production of innovation and technology. And yet, these gavels do not seem to have necessarily translated into more or better job creation (which in turn boosts the competitiveness and productivity of companies and the economy). According to an analysis by Reyes himself, together with Camilo Gallego, “the tax system has tax incentives for some of the sectors that our analysis indicates are key to productive development, and yet it is difficult to argue that it is having a resounding success ”.
Since these incentives seem not to have had the desired effect on job creation, it is therefore proposed to focus on the formation of human capital. “What there should be are active and passive employment generation policies. The active ones include the strengthening of the employment service so that its structure allows leading growth towards formality at work. And in the passive it would be to have an income substitution for the time of unemployment to prevent people from going into underemployment. But this must be conditioned to the formation of human capital, for example. It has nothing to do with layoffs, which is the counterargument that some use. And, above all, the latter is a measure that can emerge from the tax environment, ”says Jaramillo.
Reyes assures that hiring costs, without injuring workers, could be lowered “by separating, once and for all, social security from work; that is to say, that the contributions to pensions and health do not come from a tax that is currently charged on work, but rather come from general taxes collected in a more progressive way. This would reduce hiring costs and generate more employment, higher wages and less informality ”.
Luis Fernando Mejía, director of Fedesarrollo, believes that the tax reform being discussed can provide relief for MSMEs, such as lower rates for income tax. This would have an impact, for example, on investment, important for reactivation. However, to influence job creation, Mejía says that tax measures that directly address the issue are more appropriate. Thus, he believes that the extension of the payroll subsidy for the second half of the year is “important to maintain formal employment.”
Another more recent proposal is to create emergency public jobs for young people (under 28 years of age), an idea already mentioned by economists such as Cecilia López Montaño and supported by Fedesarrollo. Mejía explains that they can be repair and maintenance of road infrastructure, tutoring services for children or care for the elderly, which could be carried out at the territorial level (mayors and governors) through NGOs and private foundations, among others. This, adds the director of Fedesarrollo, “has an important source of financing which is royalties.”
It is important to highlight that job alternatives would be offered in sectors with high female participation, such as education, care and culture, something essential considering that unemployment has affected women more. Youth unemployment is almost double for women than for men. For this reason, Mejía also highlights the recent announcement made by the Government to subsidize the payroll of companies that formally hire young people.
Luz Karime Abadía, on the other hand, while highlighting this measure as positive, adds that it is not enough. “At the same time, it is required to speed up vaccination, to stop protests and unemployment, and that no more quarantines are decreed, because if companies cannot open or produce, they will not hire more people, even if there are incentives; on the contrary, several would have to close ”.
