Minimum Wage and Productivity

A Relationship Geared Toward Social Welfare

Abstract

Last July, Law No. 20,763 was enacted, establishing a schedule of adjustments to the minimum wage (MW) through January 2016, when it will reach Ch$250,000. The debate on the MW comprises an ethical dimension and an economic one. The first refers to the income that society considers adequate to support a family under minimum conditions of well-being. The second is the concern over whether that amount, when passed on to firms' costs rather than partially funded by the State through various targeted policies, could result in a disincentive to hiring and a reduction in employment. Continue reading...