Employment and Unemployment

Employment and Unemployment

According to the 1992 census, the Chilean population totaled 13,348,401 million in that year. The average annual rate of population growth in the 1982-92 period was 1.6 percent, a relatively low rate in the context of Latin America. Chile and Argentina are the two countries with the lowest rates of population growth in South America.

Chile is a highly urbanized country. According to estimates for 1991, about 85 percent of the population resides in urban areas. A large fraction of the population is in the metropolitan area, which includes the capital city, Santiago. The population share of this region was estimated at slightly more than 39 percent in 1992, which is one percentage point higher than the 1982 share. These figures indicate that the relative growth of the metropolitan area has slowed down compared with the 1970-80 decade, when the ratio climbed to 38.1 percent in 1982 from 35.4 percent in 1970.

With a lower rate of population growth, Chile's "working-age" population, which includes all those individuals above fifteen and below sixty-five years of age, represented 64 percent of the total population in 1992. The labor force participation rate, or the ratio of those in the labor force over the "working-age" population, was 52.6 percent in March 1992. Thus, 36.8 percent of the total population was working or seeking a job. The rate of unemployment has declined steadily throughout the period. The overall rate of growth in employment for the 1987-91 period was about 3 percent per year. The rate was substantially higher from 1987 to 1989 (5 percent), the period of fast recovery after the debt crisis. It is possible that the uncertainty regarding the final reforms on the labor legislation might have delayed employment creation, but there were other important factors, such as an increase in the interest rate. The most dynamic sectors during the 1987-89 period were construction and industry, with average rates of employment growth of 20 percent and 11 percent per year, respectively.

After years of high unemployment, in the 1990s the trend began to change. By late 1993 the rate of unemployment had plunged to 4.9 percent, a rate significantly lower that that of the rest of Latin America, and one of the lowest in Chile's modern history. Interestingly, this drastic reduction in unemployment has taken place at the same time as real wages have increased significantly. The United Nations Economic Commission for Latin America has estimated that average real wages increased by 13.7 percent between 1990 and 1993. This change in employment conditions has been the direct result of the emphasis that Chile's economic model has placed on the development of employment-intensive industries. The increase in employment has been so impressive that a number of analysts have argued that Chile may be running into a period of labor shortages.


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