How much will the minimum wage increase this year? Labor Minister Jeannette Jara answers this and other questions

Minister Jara, what does the minimum wage agreement consist of and how long has it been since we had an increase of this magnitude?

The agreement signed between the Central Unitaria de Trabajadores (CUT) and the Government, represented by the Labor and Social Security Ministry and the Treasury Ministry, will raise the Monthly Minimum Wage from the current 350,000 Chilean pesos (US$420) to 400,000 pesos (US$480) this year. This increase, the highest in almost 30 years, will take place in two instalments. The first, of 30,000 pesos (US$36), will come into force in May, and the second, of 20,000 pesos (US$24), in August. 

Now, looking beyond the amount, it’s necessary to highlight the willingness to enter into dialogue, which was really what allowed us to reach this agreement between the Government and the CUT. After several years in which there were no talks, conversations or agreements, this took on a high level of importance. 

What will happen to the minimum wage if inflation increases?  

Given the inflationary scenario we are facing, which has both external and internal causes, the agreement considers that, if the cumulative Consumer Price Index in the 12 months to December 2022 exceeds 7%, the minimum wage will increase to 410,000 pesos (US$492) from January 2023.

How many people will benefit from this increase?

Around 830,000 people earn the minimum wage in Chile, which we can estimate from the tax records that are made for unemployment insurance purposes.

Furthermore, the agreement reached with the CUT provides a compensatory benefit for the rise in the price of the basic food basket. It will be received by beneficiaries of the Single Family Subsidy and the Family Allowance, which number more than three million people.

When can we expect the minimum wage to reach 500,000 pesos (US$600)?

We’ve already taken the first step to fulfil the commitments of President Boric’s government program. With the agreement signed with the CUT, we are taking responsibility and taking on the wishes and will of the people to improve the wage levels of Chile’s workers. The product of this is that the minimum wage will be 400,000 pesos in August. Now, this is the first step, because one of our program pledges is that nobody who works full-time should have their family living below the poverty line. We therefore hope that by the end of our period in office the minimum wage will have increased to 500,000 pesos. 

There are doubts about how micro-, small- and medium-sized enterprises will pay for this increase. How will the Government help them?

This is very important. This has also been the subject of dialogue, which is one of the fundamental characteristics of our government. The Economy Ministry, headed by Nicolás Grau, has reached an agreement with Chile’s micro-, small- and medium-sized enterprises (MSME), to help them face the increase in the minimum wage. It consists of a 22,000-peso (US$26.40) subsidy for each worker who was receiving the minimum wage in the months prior to May 2022. This amount will apply between May and December 2022. Between January and April 2023, the same amount will be maintained, as long as the minimum wage remains at 400,000 pesos. If the minimum wage is readjusted to 410,000 pesos, the subsidy per worker will rise to 32,000 pesos (US$38.40). 

But that’s not all. As part of the agreement, a work agenda has been designed to seek solutions to structural problems affecting smaller companies, which generate around 60% of the jobs in Chile. This implies a commitment to enter into dialogue to consensually generate public policies that affect MSMEs, such as those related to designing the reform to reduce the working week from 45 to 40 hours and modifying the 30-day payment law. It also includes the measures announced in Plan Chile Apoya (Chile Supports Plan), in particular subsidized loans from the Chilean Economic Development Agency (CORFO) and the Technical Cooperation Service (SERCOTEC). 

Another of the measures included in the agreement with the CUT is support for families in the face of inflation. What does it consist of?

Effectively, to safeguard purchasing power regarding the Basic Food Basket, the agreement considers the creation of an observatory of the value to the public of the Basic Food Basket, which will be implemented by the Consumer Protection Agency (SERNAC), who will report to the Higher Labor Council. If the observatory detects anomalies in the behavior of these prices, it will inform the National Economic Prosecutor’s Office (FNE) or the relevant body.

Meanwhile, a compensatory benefit has been established for the increase in value of the Basic Food Basket, which will be calculated monthly according to the 12-month Consumer Price Index (CPI). This benefit will be given to the beneficiaries of the Family Allowance or the Single Family Subsidy and paid alongside these benefits between May and December 2022. The first payment will include a one-off additional month per worker with dependents. 

The Government has implemented measures related to “decent work”. What is this program about, broadly speaking? 

The first thing is that we will send a bill to Congress that makes the requirements for accessing unemployment insurance more flexible and increases the amount of the benefit. Secondly, we’ve created a working group that includes all the stakeholders involved in reducing the working week to 40 hours, in order to consider its design and gradual implementation. Thirdly, in 2023, we will send a bill to Congress to modify the regulations relating to collective labor law, particularly with regard to the scope and level of collective bargaining. Lastly, to move forward in creating spaces free from harassment and gender violence, including in the world of work, we will propose that Congress ratifies ILO Convention 190, which provides a common framework to prevent, remedy and eliminate violence and harassment in the world of work, including gender-based violence and harassment.

The 40-hour working week is a long-held dream of millions of workers. How close are we to meeting this challenge set by the Government of President Boric?

We’ve already announced the formation of a technical working group, and workers and small- and medium-sized enterprises will be invited to take part. We’re sure that reducing the working week to 40 hours will allow us to make progress on improving quality of life and giving a better life to families. Our commitment is to foster the idea of decent work in Chile and we are aware that it’s already a reality in many countries.