Bringing all Chileans on board

The Chilean economy has had an extraordinary performance over the last decades with strong growth and declining poverty rates. However, the economy is now slowing at a time when inequality remains very high, making future social progress challenging. This paper discusses how to achieve greater social inclusiveness against the background of weaker medium-term growth. First, it argues that Chile needs to increase income redistribution through its tax and transfer system towards levels prevailing in other OECD increases. Although existing social transfers are effective in combatting poverty, their size remains small and many households at the bottom of the ladder are not reached by them. Second, the paper argues that labour earnings should be less disparate, as they explain around 70% of income inequality. This should be done by updating labour legislation, but also by empowering low-skill workers and enabling them to increase their productivity, through the acquisition of adequate skills. Finally, focus should be placed on closing wide gender gaps.This working paper relates to the 2015 OECD Economic Survey of Chile (http://www.oecd.org/eco/surveys/economic-survey-chile.htm).