Labor informality in Latin America has become entrenched in 2025 as a drag that slows improvements in living conditions across most countries in the region, a reality felt particularly strongly in Colombia. Despite the fact that some economies have achieved levels of economic growth and reduced unemployment following the global crisis of the past decade, job quality remains fragile.
In many cases, job creation does not translate into access to social security, stability, or legal protection, and half or more of the workforce remains outside formal employment. This trend deepens the vulnerability of millions of households and limits states’ ability to finance social welfare systems.
Among the most recent data from 2025, informality continues to stand out as a structural feature of the Latin American labor market. According to international estimates, around 51,1% of workers in the region are in informal conditions — four points lower than in Colombia — a share that, while slightly lower than in previous years, still points to a persistent and widespread problem.
The phenomenon is cross-cutting, affecting both emerging economies and countries with higher levels of development, and is particularly acute in sectors such as agriculture, retail trade, and low-skilled services. This pattern not only undermines workers’ ability to achieve a decent standard of living but also erodes overall economic productivity and limits the potential for sustainable growth.
Informal employment rates in Latin America and Colombia in 2025
In Colombia, informality remained the main weak point behind otherwise strong economic figures, with levels noticeably higher than those of its regional peers throughout 2025. Official data place the informality rate at around 55.4% at year-end, meaning that more than half of workers do not have a formal job that includes a contract, social security contributions, or labor benefits.
Although some data suggest there was a slight reduction during certain periods of the year, the prevalence of informal jobs remained very high, even as the country reported a record in job creation, with unemployment rates at lows not seen in two decades. Nevertheless, more than six out of every 10 new jobs created during that period corresponded to informal activities, exposing the weakness of labor formalization in the face of quantitative employment growth.
The impact of this situation directly affects citizens’ lives. Informality erodes the social protection of millions of people and conditions their access to health services, pensions, and other safety nets. In rural areas, the situation worsens: In the most isolated parts of the countryside, labor informality exceeds 80%, leaving workers without minimum guarantees in the face of economic or health contingencies.
The profile of informal employment in Colombia is heterogeneous, but two major groups predominate: Self-employed workers and those employed in microenterprises. The former represents a significant share of the workforce and, while it may offer flexibility, often lacks stability and social protection. Microenterprises, for their part, face significant barriers to formalization due to the costs associated with formal hiring, reinforcing a vicious cycle of labor precarity.
This combination of structural factors fuels the persistence of informality and limits the impact of initiatives aimed at promoting quality jobs.
¿Qué está pasando en el empleo en América Latina y el Caribe?
📈 +4,4 millones de empleos (2024–2025)
⚠️ 51,1% del empleo sigue siendo informal
👥 Desempleo juvenil: 11,9% (vs. 4,3% en adultos)Datos del informe Tendencias Sociales y del Empleo 2026 👉https://t.co/53Of2S6axB pic.twitter.com/LBJBv4sTzS
— OIT Américas (@OITAmericas) January 16, 2026
Regional comparison: timid advances and deep inequalities
At the regional level, informality has also remained a central problem in Latin America’s labor market. Although eight points below Colombia’s reality, the average rate of approximately 51% in Latin America reveals that nearly one in two workers operates outside the formal employment framework.
While this figure reflects — as in Colombia — a slight improvement compared with previous years, the scale of the problem remains enormous and points to structural obstacles that transcend national borders. Informality is higher in Andean and Central American countries, where it can approach or exceed 70%, while in nations such as Chile or Uruguay, levels are considerably lower, close to 25%.
These differences illustrate how public policies, the level of development of labor institutions, and economic conditions directly influence countries’ ability to integrate workers into formal employment.
The persistent weight of informality in Latin America also reflects the weakness of social protection policies and the limited capacity of states to offer viable alternatives to workers excluded from the formal market.
The lack of effective incentives for micro- and small-sized enterprises to hire formally, combined with administrative barriers and high formalization costs, reinforces labor precarity. In addition, gender gaps and inequalities between urban and rural areas intensify the problem, making certain groups, such as women and young people, more vulnerable to remaining in informal jobs with low incomes and without full labor rights.
The stagnation of labor informality constitutes one of the main obstacles to improving living conditions in Colombia and across Latin America. The persistence of high levels of informal employment limits workers’ ability to access social benefits, reduces state tax revenues, and perpetuates the economic vulnerability of broad segments of the population.
Against this backdrop, experts and international organizations insist on the need for structural reforms that promote formalization, reduce administrative burdens for businesses, and strengthen social protection systems, to transform economic growth into decent and sustainable employment opportunities.