Chile recently raised its minimum wage to $535, making it the second-highest in South America after Uruguay. This increase aligns with President Gabriel Boric’s goal to improve wages and reduce inequalities since taking office in March 2022.
Prior to Boric’s tenure, the minimum wage stood at $374, indicating a steady rise over the past two years. Despite this hike, economists argue that the new wage still falls short of covering the cost of living.
Economist Fernando Cabrales highlights that the current minimum wage is below the poverty line of 600,000 pesos, which amounts to $642. This disparity means that many workers still face financial challenges even with the wage increase, especially impacting small and medium-sized enterprises.
To assist these businesses, the government introduced a subsidy for micro, small, and medium enterprises until 2025, benefiting around 180,000 entities and easing their financial burden.
However, the strain on public finances is substantial, with the government already spending $250 million on subsidies since May 2022. Rising electricity costs further heighten the need for additional subsidies, posing sustainability concerns in the long term.
Chile’s slow recovery from pre-pandemic labor market conditions adds to the economic challenges, making the path to recovery more arduous.