Salaried Labor Costs in Latin America and the Caribbean: A Ten - Year Update

The tension between productivity and labor costs in Latin America and the Caribbean remains one of the greatest challenges to creating formal employment. This note estimates the cost of salaried formal labor in 19 Latin American and Caribbean countries for 2023, updating two key indicators previously calculated by the IDBthe average non-wage cost of salaried labor (NWC) and the minimum cost of salaried labor (MCSL)and introducing a new measure: the cost of formalizing informal labor (CFIL). Results show that labor costs have risen since 2013, with increasing divergence across countries. In 2023, the regional average NWC reached 51.1% of formal wages, while the MCSL represented 43.1% of GDP per worker. The CFIL indicates that formalizing a worker costs, on average, 88% more than the informal wage. The note includes projections for 2025 to incorporate recent reforms in 6 countries.