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Deceptive Growth: Economic Inequality in Chile

Deceptive Growth: Economic Inequality in Chile. Pat Barthelemy. Kevin Smith. Mark Woodall. The rich versus the poor. What's behind door #1 ?. What's behind door #2 ?. The Problem.

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Deceptive Growth: Economic Inequality in Chile

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  1. Deceptive Growth: Economic Inequality in Chile Pat Barthelemy Kevin Smith Mark Woodall

  2. The rich versus the poor What's behind door #1 ? What's behind door #2 ?

  3. 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.

  4. False Indicators • Chile experienced 8.4% growth in first half of 2011(Silvia Viñas, COHA) • “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.

  5. 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

  6. 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%

  7. 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

  8. 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

  9. 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)

  10. 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

  11. 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.

  12. 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. • 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.

  13. Video Links https://www.youtube.com/watch?v=hWHCPAShRtw https://www.youtube.com/watch?v=-wYwDqhBfcM

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