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 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.OECD 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.

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