Informal employment in Colombia fell to 55% in the May-to-July 2025 mobile quarter, down from 55.9% in the same quarter a year earlier, according to a recent report by the National Administrative Department of Statistics (DANE). Even with this decline, more than half of working Colombians remain outside formal employment, without guaranteed legal or social protections.
In urban areas — specifically the 13 major cities and metropolitan zones — the informal share sits at 42%, nearly identical to the 41.9% recorded a year before. For the larger group of 23 principal cities and metro areas, the rate is slightly higher, about 43.3%. Meanwhile, rural and sparsely populated areas tell a much bleaker story: 83.1% of employed individuals are in informal work, lacking formal arrangements.
Gender, location, and enterprise size reveal stark disparities in informal workforce
DANE data make clear that informal work is not evenly distributed. Women, for instance, experience somewhat lower informal employment rates in urban areas than men: in the cities and metro regions, 40.9% of women are informal versus 42.9% of men. But across the national workforce the divergence is stark: while 58.4% of working men are informal, only 41.6% of women fall into that category.
Moreover, enterprise size matters. In microenterprise settings, the informal employment rate remains extremely high — 84.6% — showing a tiny drop from 84.8% in the same period a year ago. In small businesses, the rate dropped more noticeably: 19.9% compared to 22.5% previously. These differences reflect how firm structure, legal compliance costs, and oversight interact to shape formal versus informal work.
Geographically, the gap between rural and urban is massive. Rurality imposes serious disadvantages not only in terms of access to formal contracts, but also in terms of labor protections, social security, and steady income. With over four-fifths of rural workers informal, those regions lag far behind in working conditions and in access to national safety nets.
The dynamics between slight decline in informal employment in Colombia
Although a drop of 0.9 percentage points in national informality might seem small, it signals that policy interventions, economic shifts, or labor market dynamics may be nudging parts of the workforce toward more formal employment. For context, informal employment in Colombia remains among the highest in comparable economies in Latin America. The gains are modest, but their importance lies in the fact that informal employment imposes costs: limited access to pensions, health security, regulated working hours, and legal protections.
Yet, the pervasiveness of informal work — especially in rural zones — signals deep structural issues. Rural areas lack infrastructure, access to formal markets, or institutions that enforce labor standards. Women often face barriers owing to caregiving roles, discrimination, or unequal access to education and skills training. Enterprise size, too, dampens formality: microfirms often lack the resources to comply with regulations or to offer formal contracts to employees.
Another challenge involves improving the quality of jobs, not just their formality. Even when employment shifts from informal to formal in accounting, the nature of formal employment in some sectors still offers relatively low compensation, limited career advancement, or insecure contracts. For many Colombians, the boundary between informal and formal work is porous: occasional contracts, part-time work, or roles that blend formal and informal elements.
DANE also reports in its employment and unemployment statistics that Colombia’s overall unemployment rate for July 2025 was 8.8%, a decrease of 1.1 percentage points compared with July 2024. The labor force participation rate moved up slightly to 64.6% from 64.2%, and the employment rate also edged upward. These trends provide a more positive setting for formalization, as more people are working and active in the labor market.
Policies and pitfalls on the path to greater work formality in Colombia
Reducing informality in Colombia will demand coordinated policy effort. Some obvious levers include strengthening enforcement of labor laws, incentivizing small and microenterprises to formalize through tax reliefs or simplified regulatory requirements, expanding access to social security for non-standard workers, and investing in rural development — roads, connectivity, social infrastructure — so that rural workers can access formal‐sector opportunities.
Furthermore, addressing gender gaps will be critical. Policies that support childcare, flexible scheduling, equal pay, and job training accessible to women could shift the balance. Public sector or NGO-led outreach programs may help women in informal roles transition toward more stable employment.
However, caution is needed: blanket policy changes can carry unintended effects. For example, raising the costs of compliance too high could push more microenterprises into informal operations, or disincentivize hiring. Additionally, macroeconomic factors — economic growth rates, inflation, stability — play a key role in creating conditions in which formal employment can expand.
In sum, the latest DANE report reveals a small but tangible shift: informal labor in Colombia is slowly decreasing, yet more than half the workforce still operates outside formal structures. The disparities by gender, geography, and size of employer remain large. For Colombia, the road to formal employment is long, and crossing it will require deliberate, inclusive, and sustained policy action as well as economic stability and investment in both human and institutional infrastructure.