In 2015 persons of working-age made up approximately 68.9 per cent of the population of the Republic of Chile. Chile’s workforce participation among adult females and males was approximately 47 per cent and 74 per cent respectively in 2010 with an unemployment rate of 8.1 per cent in the same year. In order to safeguard income security for this large group, the Government of Chile launched an Unemployment Insurance (UI) scheme in 2002, which was designed to reduce the risks related to unemployment and support re-employment strategies. Chile’s UI is administered by the Ministry of Labour and Social Welfare, which administers the unemployment fund and supervises its implementation.
All employed working-age residents are eligible to contribute to the Chilean UI scheme, with the exception of domestic workers, apprentices and the self-employed. Those eligible for UI make contributions equivalent to 3 per cent of their earnings, covered entirely by the employer for fixed-term employees, or on a shared basis for others with 0.6 per cent contributed by the employee and the remaining 2.4 per cent covered by the employer. Contributions are allocated to Individual Unemployment Accounts and a Solidarity Fund, in which the Government of Chile also deposits USD 8.8 million annually in order to guarantee a minimum benefit for eligible individuals without sufficient savings for unemployment. Unemployed persons are entitled up to two withdrawals every five years from the Solidarity Fund, which is available to workers who made 12 contributions within a 24-month period prior to unemployment. Monthly benefits and length of payment from the Individual Unemployment Account are calculated on an individual basis according to savings, whereas the Solidarity Fund provides a benefit of CLP 17,338, or USD 35, per month for the first three months with diminishing returns over the year. By the end of 2007, after five years in operation, 5 million workers were contributing to Chile’s UI scheme.
After its launch in 2002, the UI scheme was restructured in 2010 in order to improve access to benefits and offer additional protection against economic instability. Chile’s UI scheme is designed to create incentives for re-employment as individual accounts are owned by the worker and thus provide a limited social security net meant to smooth income over the life-cycle. The UI scheme in Chile, thus, represents a move toward the creation of a national social protection floor guaranteeing income security to all working-age groups.
Further Reading:
- Claudia Robles Farías (2012). Social Protection Systems in Latin America and the Carribean: Chile. United Nations Economic Commission for Latin America and the Carribean, Santiago. Accessed from http://www.cepal.org/en/publications/4031-social-protection-systems-latin-america-and-caribbean-chile on December 2016.