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4 April, 2024

Private sector presents 15 measures to confront labor informality in Chile

Labor informality is one of the most pressing challenges of our society, since it involves approximately a third of the employed in Chile – 2.5 million people – who work without any type of social protection and, therefore, in a situation of high vulnerability.

With this in mind, the Confederation of Production and Commerce (CPC), the Chilean Association of Pension Fund Administrators (AAFP) and the Association of Entrepreneurs of Chile (ASECH), formed the Labor Formality Table last November.

This body met periodically between September and February, was made up of 15 prominent specialists, and led by Susana Jiménez, vice president of the CPC, Paulina Yazigi, president of the AAFP, and Jorge Welch, president of the ASECH.

The final report proposes 15 short, medium and long-term measures, which aim to generate or expedite behavioral changes in Chileans, which aim to encourage social security contributions and labor formality.

To this end, different lines of action are addressed, related to the pension system, improvements in oversight, review of subsidies, strengthening of technical education, reduction of bureaucracy, immigration issues, among others.

In addition, the report highlights three proposals as the main ones on which public policies should begin to focus. The first is to promote the formal employment of young people, by making improvements to the Youth Employment Subsidy (Subsidio al Empleo Joven). The second seeks to address labor informality among independents or entrepreneurs, conditioning certain permits to operate on compliance with social security contributions. The third notable proposal aims to analyze a redesign of the Universal Guaranteed Pension (Pensión Garantizada Universal, PGU).

Each of these measures, which could be implemented in a short period of time, is supported by data that confirms its relevance: high informality among young people (36.7%), above the average; the fact that independent workers constitute approximately 25% of the workforce and that 90.4% of them do not contribute (that is, almost 2.2 million workers); and the evidence that shows that the current structure of the PGU does not generate incentives to reduce pension gaps and thereby increase labor formality.

Source: CPC

Date: 03/26/2024

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