ByJuan Martinez
July 6, 2024
Chile has raised its minimum wage to $535 (500,000 Chilean pesos), making it the second-highest in South America, only surpassed by Uruguay.
This increase fulfills President Gabriel Boric’s promise of better wages and reduced inequalities since taking office in March 2022.
Before Boric’s administration, the minimum wage was $374 (350,000 pesos), showing a gradual increase over the past two years.
Despite this raise, economists argue that the new wage still falls short of meeting the cost of living.
Economist Fernando Cabrales from the University of Tarapacá notes that the minimum wage is below the 600,000 pesos ($642) poverty line.
This discrepancy means the wage hike does not significantly ease financial pressure for many workers. The wage increase particularly affects small and medium-sized enterprises (SMEs).
Chile Raises Minimum Wage to $535, One of the Highest in South America.
(Photo Internet reproduction)
To mitigate this, the government introduced a subsidy for micro, small, and medium enterprises (mipymes) and cooperatives until 2025.
This subsidy benefits approximately 180,000 mipymes and eases the financial burden on these businesses.
Chile Raises Minimum Wage to $535, One of the Highest in South America
However, the strain on public finances is significant, as noted by Cabrales. The government has already spent around $250 million on subsidies since May 2022.
Rising electricity costs are further pressuring the government to provide additional subsidies, which may not be sustainable in the long term.
This challenge is compounded by Chile’s slow recovery from pre-pandemic labor market conditions, making economic recovery more difficult.
To mitigate this, the government introduced a subsidy for micro, small, and medium enterprises (mipymes) and cooperatives until 2025.
This subsidy benefits approximately 180,000 mipymes and eases the financial burden on these businesses.
Chile Raises Minimum Wage to $535, One of the Highest in South America
However, the strain on public finances is significant, as noted by Cabrales. The government has already spent around $250 million on subsidies since May 2022.
Rising electricity costs are further pressuring the government to provide additional subsidies, which may not be sustainable in the long term.
This challenge is compounded by Chile’s slow recovery from pre-pandemic labor market conditions, making economic recovery more difficult.
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