Government Proposes Minimum Wage Freeze

Government Proposes Minimum Wage Freeze

SANTIAGO — After minimum wage negotiations with Chile’s primary workers’ union failed, the government sent its proposed bill to Congress. The bill calls for a minimum wage freeze from Sept. 2020 to Sept. 2021. The Minister of Finance cited the economic crisis in support.

Minimum wage negotiations between the Piñera administration and Chile’s  main workers’ union, La Central Unitaria de Trabajadores de Chile (CUT), have been ongoing for weeks now, but the two sides have thus far failed to reach an agreement.

The current monthly minimum wage is set at CLP$320,500 (about US$415). Every year, a readjustment is debated and later approved by Congress. This year, however, Minister of Finance Ignacio Briones announced that the current economic crisis does not allow for an increase.

On Aug. 31, the government therefore sent its bill to Congress with a proposal to leave the minimum wage where it stands. If approved, the minimum wage would only increase by CLP$1,500 (about USD$2) due to inflation between March and August.  In his announcement, Briones said that the financial crisis has left the current economic activity in Chile as it was three years ago, “when the minimum wage was set at CLP$291.426,” Diario Financiero reported.

During negotiations, on Aug. 21, the CUT proposed a minimum wage of CLP$400,000 (about US$518). According to T13, the president of the CUT, Bárbara Figueroa, said that the minimum wage should be similar to the Emergency Family Income that the government has provided during the pandemic and that reaches CLP$400,000 for families of four.

The government’s response was a resounding no. The government argued that an increase like that would imply a raise of 25% in the middle of the biggest economic crisis the country has seen in decades. In a press conference, Briones argued that the administration’s proposal seeks to protect small and medium businesses. “The readjustment we are proposing is one that allows maintaining the purchasing power over the minimum wage.

Figueroa told Biobío that “we can understand the executive’s argument about protecting pymes [small businesses], but we believe that the ones who are benefiting from all of this are the business owners who, on top of everything, are the only ones that have made profits in this time.”

She also told CNN Chile the CUT was sorry about not reaching an agreement with the government, but “[w]e could not move forward in the real readjustment – which is when employers and business owners put money from their own pockets – because the amount that the executive was trying to negotiate was far from what we could accept.”

Reactions To The Minimum Wage Proposal

In response to the government’s proposal, others have entered the fray. Revolution Democratic party Representative Giorgio Jackson, from the Revolution Democratic party, tweeted that the proposal was surreal. “What kind of ‘offer’ of a new minimum wage implies a readjustment of $ 0?”

Communist party Representative Lautaro Carmona blamed capitalism. He told Cooperativa that “faced with a humanitarian issue, the government has preferred to protect capitalism.” Dr. Mario Matus, who has a Ph.D. in economic history and teaches at the University of Chile, told Radio Usach that the country can no longer sustain the level of inequality that exists, “[w]hich is the same inequality that we had in 1969.”

Independent Democratic Union party Representative Patricio Melero, a member of the Finance Committee of the House of Representatives, had a different take. He supported the government’s decision and told T13 that “the minimum wage should be realistic with the country’s situation and promote new jobs while maintaining those that exist.”

Also read:

This is How Unequal Chile Is

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