After a brief period of economic success, skyrocketing prices and food shortages emphasize growing inequality. Street demonstrations grow more frequent and more violent. Militant workers, politically empowered by industrialization but living in poor social conditions, form committees for accelerated social change.
Pinochet's military regime slashes welfare programs, reducing the role of the central government in social security, health care, and education. Despite economic growth, income distribution is regressive. Unemployment reaches into the double digits. The underemployed informal sector grows larger. A 1979 Labor Plan places limits on collective bargaining, strikes, and union activities.
The standard of living for workers and the poor declines. The number of Chileans living in poverty doubles. Cuts in social spending cause deterioration of basic public services. The 1982-83 recession sends unemployment soaring. Large-scale protests against Pinochet and his regime spread from urban shantytowns to organized labor to the middle class.
A return to democracy allows workers to exercise their rights. Wages and income levels increase to their 1970s levels, while unemployment falls. President Aylwin's government directs social and labor policies at the poorest sectors. Tax reforms underwrite social policy programs. The rate of poverty falls from 44 to 25 percent.
Budget constraints limit President Frei's ability to maintain redistributive policies. Public resources dry up as a result of public debt contracted to rescue the financial system and the end of the revenue stream from privatization. Social spending decreases; income inequality widens. At the same time, business owners' associations and right-wing parties begin to oppose government social reforms.
Unemployment once again reaches the double digits. President Lagos announces that job creation is his top priority and sets up an employment contingency fund. His plans also include a comprehensive unemployment insurance system.
back to top