Currently, Peru stands out for the excess of so-called non-wage labor costs, which positions it as the most expensive country to hire in Latin America: formalizing a worker can cost a company up to an additional 71.7% on their salary, compared to 37.9% in Chile, one of the lowest percentages in the region, according to estimates by the Inter-American Development Bank.
Currently, Peru stands out for the excess of so-called non-wage labor costs, which positions it as the most expensive country to hire in Latin America: formalizing a worker can cost a company up to an additional 71.7% on their salary, compared to 37.9% in Chile, one of the lowest percentages in the region, according to estimates by the Inter-American Development Bank.
Peruvian legislation obliges the employer to assume bonuses, CTS, paid vacations, contributions to Essalud, life insurance, family allowance and, in certain cases, severance pay. These benefits protect the worker, but make hiring more expensive, especially for micro and small businesses, which represent more than 95% of the country’s companies. In a context of low productivity and informality greater than 70%, this cost discourages the creation of formal employment and deepens informality.
Now, it is important to emphasize the labor cost per good produced, which relates the cost of employment to the quantity of goods or services that the worker produces. In that sense, a viable solution is to increase productivity. In this way, although a worker not only costs what he earns, but also everything that legislation requires him to pay in addition to his salary, reducing labor benefits without increasing productivity would be an incomplete solution that would transfer the cost of the problem to the workers themselves.
The message is evident: in the short term, the goal must be to reduce non-wage labor costs without prejudice to social protection, in a context of informality greater than 70%; In the medium and long term, the answer would be to increase productivity through technical training linked to productive chains and greater access to credit and technology for MSEs. It is no coincidence that developed countries, with higher labor costs per worker, are more competitive: their high productivity allows them to have lower unit labor costs
*El Comercio opens its pages to the exchange of ideas and reflections. In this plural framework, the Diario does not necessarily agree with the opinions of the columnists who sign them, although it always respects them.
