2026/02/13 | Vittorio Peretti, Carolina Monzón, Juan Robayo & Angela Gonzalez
The State Council temporarily suspended the minimum wage increase, requesting the government issue a new transitional decree within eight days. This decree must comply with the technical criteria required by law, including variables such as inflation (5.1% in 2025), productivity (0.91 in 2025%), and overall economic performance, which should have been considered by the tripartite commission of employers, labor unions, and the government. The measure underscores that wage increases cannot be based solely on a political determination. The effects of the suspension will only take effect once the new transitional decree is published. Until that happens, the 23% minimum wage amount set out in Decree 1469 of 2025 will remain in force.
There is a relevant precedent, in 2017, the State Council annulled the decree setting the minimum wage for 2016 after it had already exhausted its effects; therefore, the ruling operated solely as a precedent. No new decree was ordered at that time, but strict technical standards were established that were to be mandatorily applied to future wage increases. By contrast, the State Council is now acting preventively and has ordered an immediate correction, given that the decree in question is currently in force.
Following the publication of the new decree, if it essentially reproduces the suspended decree or fails to comply with the criteria, the judge may also suspend the new act, modify the precautionary measure, or initiate contempt proceedings. In this context, we do not rule out that, in the absence of a clear technical justification, the nominal annual minimum wage increase of 23% may need to be revised, as it is well above the 5.1% inflation rate at the end of 2025 and the 0.9% productivity level.
With the 23% minimum wage announcement at the end of 2025, the Central Bank updated its forecasts, raising its CPI estimate from 3.6% to 6.3%, amid a positive output gap and a tight labour market. This resulted in an interest rate increase of 1 pp to 10.25% in January, in order to contain inflation expectations, which jumped to 6.37% this year and 4.8% in 2027. The new CPI outlook will depend heavily on the new minimum wage definition. It is worth mentioning that CPI elasticity is estimated to be between 8 and 16 basis points of headline inflation for every 1 pp increase in the minimum wage above the level of CPI and productivity.