Society

The largest increase of minimum wage in 29 years in Chile enacted by the president

The minimum wage in Chile will have its largest increase in 29 years. The law also includes subsidies for small companies and allowances to the most vulnerable households.

Gabriel Boric, president of Chile, during the promulgation of the law on Readjustment of the Minimum Wage
Gabriel Boric, president of Chile, during the promulgation of the law on Readjustment of the Minimum Wage | Presidencia Chile

The president of Chile Gabriel Boric on May 23 promulgated the Readjustment Law on the minimum wage which enacts the largest nominal salary increase in 29 years.

The Chilean Chamber of Deputies unanimously voted the bill last Wednesday, a day after the Senate approved it as well.

With the law, the minimum wage is set at 380,000 Chilean pesos (US$ 454) a month for May, and will reach 400,000 pesos starting in August. The minimum income right now is set at 350,000 pesos (419 dollars), accounting for a 14.3% increase for the year.

Moreover, minimum salaries will also increase to 410,000 pesos per month on January 2023, if the annual inflation in December is above 7%. Inflation rate in Chile increased sharply in past months and reached 10.5% in April 2022 compared to last year. Prices grew 7.2% in 2021, the highest level since 2007.

For workers who are under 18 years old or over 65, the minimum wage will be 283,471 pesos (339 dollars) from May.

The minimum wage increase results from an agreement between the government, the largest trade union of Chile, the Central Unitaria de Trabajadores, and representative organizations of small and medium-sized enterprises. The initiative will benefit to the 800,000 people who receive the minimum salary, according to the ministry of Finance. Seventy percent of them work in SMEs.

It is really satisfying to be able to demonstrate that the government and social organizations can move together towards common objectives,” the president whose popularity quickly declined after his election said. “We want to be the government of the workers,” he added. Mr Boric also stressed out that the increase of the minimum wage would not have been possible without the efforts made in the country under the previous administrations.

The 180,000 small and medium-sized enterprises of the country will also receive subsidies in order to compensate pay raises of their employees. Businesses will receive 22,000 pesos per month between May and July for each employee, then 26,000 pesos from August to December. And if the third wage increase takes place in 2023, SMEs will receive 32,000 pesos until April 2023.

The law also adjusted family allowances for households with low revenue as of August to the same proportion of the minimum wage increase. Moreover, a monthly allowance until April 2023 will also be adjusted to offset the higher prices of the basic food basket. These household subsidies should benefit to 3.3 million people, according to the ministry of Finance.

The text also anticipates a raise of the Universal Guaranteed Pension from July to June.

The whole initiative is expected to cost 329,161 million pesos (394 million dollars) to Chilean taxpayers in 2022.

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