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2018 OECD Economic Surveys: Chile 2018

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The quality of life of Chileans improved significantly over the last decades, supported by a stable macroeconomic framework, bold structural reforms, such as trade and investment liberalisation, and buoyant natural-resource sectors. A solid macroeconomic policy framework has also smoothed adjustment to the end of the commodity boom, contributing to low unemployment, resilient household consumption and a stable financial sector. Still, progress has recently slowed and Chile’s catch-up in living standards is challenged by low and stagnant productivity and a still high level of inequality. Raising incomes and well-being further will depend on strengthening skills and greater inclusion of women and low-skilled workers in the labour force. Increasing the quality of education, reforms to ensure the training system benefits the unemployed and inactive and measures to reduce the segmentation of the labour market would enhance productivity and inclusiveness. Promising firms also still lack opportunities to grow, export and innovate, despite recent reforms to ease business entry costs and export procedures. Further simplification of trade and regulatory procedures, and reforms in the transport sector, would strengthen productivity and investment.

SPECIAL FEATURES: BOOSTING EXPORT PERFORMANCE; POLICIES FOR MORE AND BETTER JOBS

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Policies for More and Better Jobs in Chile

Employment growth has been strong in the last decade. However, many jobs are of relatively low quality, affecting well-being and productivity. The segmentation of the labour market, with some benefiting from strong protection and others having precarious jobs without social security benefits or employment protection, has led to significant labour market inequalities. The employment rate is low for vulnerable groups, mainly youth and women. And when in employment, these groups tend to hold precarious jobs. A high share of the population lacks the basic skills and the mismatch between the supply and demand of skills is widespread. Overcoming these challenges will require policies to promote more permanent and formal jobs, such as better targeted training programmes and labour intermediation, and reducing the relatively high severance payments in permanent contracts while increasing coverage of unemployment benefits. The ongoing educational reform will improve skills outcomes, but greater efforts are needed to make the education and training system more responsive to labour market needs by improving relevance. In particular, developing an apprenticeship system linked to formal education and encouraging more work-based learning would improve quality of employment opportunities. Better skills assessment and anticipation information as well as greater efforts to involve employers in the education and training system would also help. Policies to boost female employment, such as expanding opening hours of childcare centres and continue with the efforts towards a universal early education, are also needed to reduce gender gaps. All these policies can create a virtuous cycle between labour productivity and equity, increasing access to higher quality jobs, higher wages, and coverage of pensions, training and unemployment benefits.

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