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Chilean Labor Market Measures in Crisis

Learn about Chile's proactive steps to tackle the economic crisis in 2009, including fiscal stimulus plans and employment support initiatives.

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Chilean Labor Market Measures in Crisis

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  1. Ministerio del Trabajo y Previsión Social Adopted Measures by the Ministry of Labor and Social Welfare of Chile facing the crisis Washington DC, May 20 , 2009

  2. Ministerio del Trabajo y Previsión Social Agenda • Chilean context • Summary of adopted measures until March 2009 • May 2009: National Agreement for the Employment, the Training and the Labor Protection

  3. Ministerio del Trabajo y Previsión Social Chilean context

  4. Ministerio del Trabajo y Previsión Social Context Chile has had an acknowledged economic performance in the past two decades. Annual Growth compared GNP. Fuente Informe OECD Chile 2009

  5. Ministerio del Trabajo y Previsión Social Context LABOR MARKET IN CHILE: Occupancy by Sector • Diagnóstico • Origen de la propuesta 3. Principales elementos del Proyecto de Ley

  6. Ministerio del Trabajo y Previsión Social Contexto LABOR MARKET IN CHILE: Distribution of enterprises by size

  7. Ministerio del Trabajo y Previsión Social Context LABOR MARKET IN CHILE: WORKFORCE (Jan-March 2009, Informe INE) Workforce 7.276.663 Unemployed 669.160 (9,2%) Employed 6.607.503 (90,8%) Unemployed by sex: Mujeres: 10,9% / Hombres: 8,2%

  8. Ministerio del Trabajo y Previsión Social Context LABOR MARKET IN CHILE: (Jan-March 2009, Informe INE)

  9. Ministerio del Trabajo y Previsión Social Summary of adopted measures until March 2009

  10. Ministerio del Trabajo y Previsión Social Summary of adopted measures until March 2009 4 packages of measures for $ 6.000 USD millions (around 4% of the GNP) - $ 850 USD millions in October 2008; Support smaller businesses and exporters, investment, labor’s capital, bank factoringand encouragement of the finantial market. - $ 1,150 USD millions in November 2008; Support to SMEs : housing subsidy; strengthens fund of guarantees for small entrepreuneurs, National Bank capitalization, improvement in taxes return

  11. Ministerio del Trabajo y Previsión Social Summary of adopted measures until March 2009 - $ 4.000 USD millions in January 2009; Emphasis in social expense, public investment, support to SMEs and to the purchasing power of the most vulnerable sectors. New credit line CORFO - Announces Pro Crédito in March 2009; Support the micro- undertaking, stimulate bank and not bank credit, promoting greater competence in the finantial system and encouraging more options of finantial assistance for persons and enterprises. These measures could generate $3.600 USD millions in additional private credit

  12. Ministerio del Trabajo y Previsión Social Fiscal StimulusPlan (January 2009) This plan is a fiscal contra-cyclical strategy to estimulate employment and growth that compromises resources for $4.000 USD millions equivalent to 2,8% of the GNP. - Stimulus to investment and consumption, some of these measures are: - Increase in $ 700 USD millions of public investment. This created 60 thousands new jobs. - Elimination of the postage tarifs - Extra-ordinary contribution of $41 USD millions to the Fondo Común Municipal, destined to support su tarea de servicio e inversión en las comunidades locales - Strengthening of the access to private funding - Transitorily reduction of PPM in 15% to small and medium sized enterprises, and in 7% for bigger ones. - Implementation of a line of CORFO with a capital of $ 50 USD millions to brindar guarantee en la reprogramación de créditos.

  13. Ministerio del Trabajo y Previsión Social Fiscal StimulusPlan (January 2009) - Support to Persons Payment of a special bonus of $70 USD per family load for vulnerable families. To March 2009, 740.000 payments (90% of the beneficiaries) for a total of $ 80 USD Milliones were completed. - Strenghtening Employment and Training (aprooved in March 2009) - Create a subsidy to work to encourage formal employment for under payed workers between 18 and 24 years. The beneficiaries will receive a subsudy equivalent to 20% of its salary, and the employer one equivalent to 10%. - Requirements: Belong to the poorest 40% of the population and have gross remunerations under $ 600 USD per month (like $466 USD cash) or $7.200 USD annually. - Effets: will benefit a universe between 250 and 300 thousands young men, and it will have a fiscal cost of $80 USD millions this year.

  14. Ministerio del Trabajo y Previsión Social Fiscal StimulusPlan (January 2009) • StrenghteningEmployment and Training - Re-adjustment of maximun value granted by the Tributary Franchise SENCE to carry out courses in the Tecnical Formation Center accredited from $335 USD to $880 USD. It is expected that this measure, that will be of gradual application, will mean an increase of 15% on the demand for curses CFT, only in the first semester of 2009 in respect to the observed in 2008.

  15. Ministerio del Trabajo y Previsión Social Extension of the Unemployment Insurance coverage It began operating in 2002. To this date, more than 5 million workerd have joined (it’s madatory). Recent Improvements to insurance (February 2009) - It incorporates workers in fixed terms as beneficiaries of FSC for two months with replacement rates of 35 and 30%. - It adjusts maximun values (in a 28%) and minumun (between 14 y 35%) of FSC - It stablishes replacement rates that start in 50% of the remuneration and reach 20% of it. - In high unemployment cases , an additional 2 wire transfer will be paid.

  16. Ministerio del Trabajo y Previsión Social Other permanent character measures - Fiscal usage Plans : Proempleo - They exist since 2001. They are oriented to reduce high unemployment rates, promoting labor re-insertion of unemployed workers, through training and participation in productive projects for the community. - They are activated through the fiscal accountability law (2006) which specifies that these may operate when the national trimestral unemployment rate exceeds the average of the last 5 years or when this rate on any given zone is equal or higher than 10%. - Today, the direct and indirect employment programs reach 51 thousand posts, which allows to cushion unemployment in 0,7 points. Is predictable that in the next months its coverage will increase due to the increase of unemployment. - National Program of Decent Work (Nov 2008) - 5 axes: Child labor eradication ; incorporation of gender in public policy design; Promotion of youth employment; disign of national policy of hygiene and security and implementation throughout tri-party mechanisms; and Diffussion of welfare reform (March 2008)

  17. Ministerio del Trabajo y Previsión Social National Agreement for Employment, Job-training and Labor Protection May 2009

  18. Ministerio del Trabajo y Previsión Social Origin of the proposal. Shared Diagnosis - Repercusions of the crisis in the latin american economies and in Chile • Contraction due to economic activity and unemployment growth (9.2% Jan-March 2009). • Workers need protection of their jobs before the economic contraction. • Employers need supporting toold to keep workers. • Need of anticipating to the most severe consecuences of the economic contraction. • The good management of macro-economic and of the public policies of Chile, alowed roominess for the design of new instruments. • These instruments should be temporary and answer the needs of labor protection, income and job training.

  19. Ministerio del Trabajo y Previsión Social Origin of the proposal. Actors - Social dialogue between the different, relevant actors relevantes of the labor market. - National agreement subscribed by the Governement, workers, Small , Medium and Big entrepreneurs. - Wide consensus among the main actors of the labor market.

  20. Ministerio del Trabajo y Previsión Social Objective of the agreement “Labor Protection and encouragement of the job training of Chileans to face the present contraction scenery of the world economies”. Workers, entrepreneurs and governement are engaged to spread and apply these measures to achieve its success.

  21. Ministerio del Trabajo y Previsión Social The measures • Retention of workers and Job training • Permit Job training • Pre-Contract of Job training • Scholarships program MYPE for working/employed women • Program for the recognition of previous learning • Expand access to the Cesantía Solidario Fund (FCS) to workers with a fixed rate (PF) and Obra o Faena (OF). Measures 1, 2, 3 and 6 are within the framework of the Draft Law send to the National Congress on May 7, 2008

  22. Ministerio del Trabajo y Previsión Social • Retention to Workers and Job training • Measure: • Authorize enterprises to imput against its PPM an additional amount of discount equivalent up to 2.5 times the monthly job training expense. • - This will apply only to the job training expense of dependent workers with taxable incomes less than U$600 per month, encouraging the employability of less qualified workers.

  23. Ministerio del Trabajo y Previsión Social • Retention to workers and Job training • Requirements: • Entrepreneurs must maintain the same number of workers in their monthly list, in respect to the one they had in April 2009 • - For this, as a requirement it will be stablished that the average of the last three months prior to the declaration of the PPM must be equal or greater to the number of workers in April 2009.

  24. Ministerio del Trabajo y Previsión Social 2. Job training Permit Measure: - Workers that are members of the SC, will be able to pact a permit for job training without the benefits of income (as an alternative to despido) - Workers and employers will sign a t of job training agreement before a minister of faith. - The permit has a maximun extension of 5 months, continued or not, in a 12-month period. • The job training classes will have a minimun duration of 60 hours per month, and they will be given in institutions with a recognized path and quality. Requirements: - To access: The worker must be a member to the SC, with a undefined-term contract and have 6 welfare contributions that must have been continued and with the same employer. - To obtain benefit: Keep attendance to the job training classes that will be given ,and not be receiving another remuneration.

  25. Ministerio del Trabajo y Previsión Social 2. Job training Permit Benefits for the Worker: - He receives a monthly payment equivalent to 50% of the average of his taxable remunerations of the last 6 months. - The maximun benefit is U$300. - The employer pays an additional benefit fee from the second month to the fifth equivalent to 10%, 20%, 30% y 40% of the individual account, respectively, plus the law of labor and professional accidents - Welfare contributions to pensions system are paid by the FCS. - Access to health through FONASA. - Those who posses a balance in his individual account greater than the benefit’s limit, will receive as payment that same balance divided by 5. - If workers are fired and meet requirements to access the FCS, they will have access to the Unemployment Insurance.

  26. Ministerio del Trabajo y Previsión Social 2. Job training Permit - Example of the benfit (remuneration $240.000): - Funding: • Tri-party: employer, individual unemployment account of and solidarity fund. • Job training is funded in the first hand with the surpluses of OTIC and later with charge to the FCS.

  27. Ministerio del Trabajo y Previsión Social 2. Job training Permit - Job training courses: • Job training modularized courses, based in labor competences, which may lead in some cases to the certification of competences, technical formation and tasks. - Extent between 60-90 hours monthly, without counting number of months. - The courses are modularized each month, and an certificate is given to the participant that certifies that such module is part of an offer that may continue a long term training trajectory. - OTEC and other accredited entities (universities, CFT, IP, Leveling of studies) will teach the courses. • The enterprise will nominate its workers in a web enabled in the SENCE. All job training offer will be in it. - The worker will be able to access each month to these courses; the permit is individual and must be negotiated between worker and employer (the agreement is signed once and renewed monthly).

  28. Ministerio del Trabajo y Previsión Social 3. Pre-contact of Job Training - Measure: - Enables to assign FT resources to train potential workers. - In 2008, 25.803 were trained through this program (big, medium, micro and small entreprise) - The maximun amount of the FT, destined to this type of training, is amplified (from 1% to 1,25% of the remunerations). - The extent of the training of the funded by FT wides to 6 meses. - A nourishment and tranportation bonus may be given to the beneficiaries. - It covers work accidents during the training period.

  29. Ministerio del Trabajo y Previsión Social 6. Expand acces tothe FCS for workers PF y OF - Measure: - Expand workers to PF and OF in their access to FCS. - Recognize as already paid to the FCS teh contributions, continued or discontinued, executed to the individual accounts of these workers during the 24 months prior to May 1of 2009. - Requirements: - Have contributions in the individual account. Meet with the condition of having 12 contributions in 24 months.

  30. Ministerio del Trabajo y Previsión Social Monthly benefits of the measures

  31. Ministerio del Trabajo y Previsión Social Measures 4 and 5 - Measure 4, The Scholarships program MYPE for working women, seeks to expand the current program by duplicating its budget, so that it may open 20 thousand new places for working women heads of household. - Measure 5, The Program for the recognition of previous learning, seeks to validate knowledge that hasn’t been learned in the formal system for 1000 workers, certifying them throughout an evaluation system in certified academic institutions. This, to recognize articulately such learning

  32. Ministerio del Trabajo y Previsión Social Thank you

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