Deceptive Growth: Economic Inequality in Chile Pat Barthelemy

Kevin Smith

Mark Woodall

What's behind door #2 ?What's behind door #1 ?

The rich versus the poor

The Problem • Chile, a country that has experienced

impressive recent economic growth, is also experiencing massive income inequality.

• While an increasing number of organizations and indices continue to call Chile a “developed, modern country,” the majority of the population lives on an income that is far from the average income of a developed country.

False Indicators

• Chile experienced 8.4% growth in first half of 2011(Silvia Viñas, COHA)

o “75% of that went to the richest 10%. That growth is much lower for the average Chilean” (Gonzalo Durán).

• While all of the national growth statistics are accurate, most agree that the majority of Chileans are not represented in that growth.

Source: OECD 2012. Data represent the Gini coefficient (0-1) where higher values represent more inequality. A value of 0 indicates a country where all the wealth is shared equally; a value of 1 represents a country where a single individual owns all the wealth.http://upsidedownworld.org/main/chile-archives-34/4284-michelle-bachelet-inequality-in-chile

Income Inequality

● Gini-Coefficient: .50○ Annual Average Change: -.5%

● The average household net-adjusted disposable income is 11,039 (USD) a year○ Much less than the average of 23,047

(USD) a year○ Top 20% of the population earn 13x as

much as the bottom 20%

A Day in the Life of a Chilean Student

● Start day at 6:30am, eat light meal● Driven to the bus stop, 20 minute bus ride, 10

min walk to school● Class from 8:00am to lunch at 1:00pm● Finish school at 4:00pm● Tend to family’s crops or livestock until about

7:00pm● Dinner at 7:00 and after, they start their

homework

Wealth Doesn’t Buy Happiness

● Received a Happy Planet Index Score of 53.9

● Ranked 19 out of 151 countries analyzed● Experienced Well-being Score: 6.6/10● Life Expectancy: 79.1 yrs.● Ecological Footprint: 3.24 hectares per

capita

Chilean Government Response

In terms of education• Increased expenditures as percentage of GDP on

education from 2.6% in 1990 to 4.5% in 2012 (The World Bank)

• Standardized tests, extended school days, vouchers to poorest families, lowered student loan rate from 6% to 2% (Gibney)

Chilean Government Response

In terms of tax reform• Proposed new tax reform under President Bachellete:Includes over 30 changes to tax system, raises corporate

tax rate from 20-25%, eliminates the • Fondo de Utilidades Tributarias (FUT), a corporate tax

break which enables companies to defer income tax payments on profits that are reinvested. Will increase revenues by $8.2 billion/year

Chilean Government Response

In terms of social programs• Chile Solario-Social workers visit families and help them

address problems such as health care, employment, and domestic violence. Additionally, beneficiaries receive a CCT each month

• Chile Crece Contigo-provides nursery facilities and preschool care for the children of working mothers, job-seeking mothers, and mothers attending school.

Our Solutions• Focus on attracting better teachers in its public

education system, in order to improve the quality of education.

• Raise income taxes on the wealthiest citizens. o The current top level income rates are between 9-

17% and the country should consider raising its top rates to 25%.

• Chile should consider raising “sin taxes” on cigarettes, alcohol, and gambling in order to curb such activities and raise additional revenue to fund social programs.

Video Links

https://www.youtube.com/watch?v=hWHCPAShRtw

https://www.youtube.com/watch?v=-wYwDqhBfcM