The Chilean Labor Market

Sonia lives in a low-income neighborhood of Santiago called Pedro Aguirre Cerda. She and her husband, Germán, have one daughter. They live in an area where most of the people I interviewed complained that at least one member of their family was unemployed. Sonia had lost her previous job with a cleaning subcontractor two months prior to our interview when they realized that she was pregnant. She shrugged her shoulders and said: “They would have thrown me out anyway. It’s not as though I can take the baby to work with me. Also, the shifts were too long. We sometimes did three or four jobs in a day … plus the travel time. You can’t do that with a baby.”¹

Analyzing a labor market based on the development of its unemployment rate is as simplistic as assessing a country’s level of development based solely on its GDP per capita figures. Yet, this is precisely what many labor market analysts do, especially when examining labor market developments in relation to economic growth.

In every survey in which they have participated, Chileans have voiced their concern about employment. Job insecurity, low incomes, and unemployment routinely rank among their biggest worries.¹ Before every election, politicians of every color have responded by promising labor reforms that will generate more jobs and lead to growth with equity and social justice. In 1990, labor market reforms ranked second in the priorities of the electorate after controlling inflation rates.² However, while recent governments have done a remarkable job of reducing official poverty rates from record levels in 1990, it has been much less successful in addressing the justified concerns of the electorate about their jobs.³

All is not well in the world of work in Latin America. The 1980s have long been referred to as the lost decade in terms of economic growth and improvements in social indicators as a result of the profound effects of the debt crisis and the subsequent structural adjustment that was undertaken. But the 1990s were disappointing in most countries. To say the very least, the benefits of structural adjustment, liberalization, and deregulation have been slow in coming, especially in terms of labor market indicators. On average, unemployment in the region increased, the proportion of formal employment that contributes to social security decreased, poverty and inequality worsened, while wages increased moderately.

The previous chapter gave us an impression of the characteristics of the labor force and the differences that arise from different types of contracts. In particular, it showed how many jobs in the Chilean labor market had no contracts, health, or pension insurance, paid low wages, and were of short duration. This prompts the question whether the Chilean labor market has always had a large proportion of precarious employment of this kind, or whether we are observing a new phenomenon.

During his election campaign in 1999, Ricardo Lagos promised Chile an unemployment insurance scheme, and it was with great pride that he introduced a proposal for legislation as soon as his new administration was inaugurated in March 2000. This legislation has since then been approved and implemented and the first workers have been able to participate in the scheme since October 2002. All those who signed new contracts after this date have to contribute to the scheme.¹

This chapter brings up some familiar themes: The Concertación inherited a system of vocational training that was instituted under the military government in 1976 as part of its structural adjustment program. Since 1990, it has undertaken several legislative reforms to remedy some of the inequalities inherent in the system and has significantly increased the resources devoted to training. And while these efforts have brought about important improvements, especially in terms of the expansion of vocational training in Chile, they have not been enough to change the fundamental problems that vocational training presents: employers still complain about a lack of appropriately trained, technically skilled workers, and workers still lack basic skills as well as the opportunities to improve their functionings and capabilities. And the legislative changes that the Concertación introduced to the system have been half-hearted, paying lip-service to issues of equity and the agency of workers in training decisions rather than making any fundamental changes. This chapter will show how the Concertación is missing an important opportunity for truly taking on the country’s inequitable income distribution and the fundamental inequalities that shape its labor market.

In 1999 Mahbub ul Haq, the originator of the Human Development Index (HDI), wrote: “We need a measure of the same level of vulgarity as GNP—only a number—but a measure which is not as blind to the social aspects of human life as is GNP.”¹

The introductory chapter to this book suggested that if the Chilean labor market after years of high and stable economic growth combined with targeted social policies could not generate good jobs, then it was unlikely that other Latin American countries with much less favorable economic circumstances and or fewer resources could do so. The empirical evidence presented in the preceding chapters demonstrated that in effect Chile has not generated quality employment. So this of course leads us to the question, what could Chile have done differently or what could it now do to improve the employment situation of its workforce? And what can other developing countries do to improve the quality of their labor market?