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Military Government and Real Wages in Chile: A Note

Published online by Cambridge University Press:  24 October 2022

Ricardo Lagos  and
Oscar A. Rufatt
Ricardo Lagos
Affiliation:
University of North Carolina, Chapel Hill
Oscar A. Rufatt
Affiliation:
University of Pennsylvania
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Our purpose is to evaluate the impact of the economic and social policies of Chile's military junta on the well-being of the majority of chilenos, especially those of the lowest income level. The exercise consists of a simple comparison of income and expenditure levels between those of the last months of the Unidad Popular (UP) government and those of October 1974. We have chosen the 1968–69 average as a basis of comparison for two reasons. First, in practical terms, the Dirección de Estadística y Censos (DEC) conducted a survey on consumption expenditures for different income groups for that period, and it is the most recent one available. Second, in the days prior to the coup there was general agreement among economists, both in the government and in the opposition, that the average standards of living were equivalent to those of 1968–69. In effect, according to the Taller de Coyuntura, real wages during the first eight months of 1973 were 98.8 percent of their levels in January 1970. Since this index of real wages is based on January 1970, and our basis of comparison is 1968–69, we can assert that in the last months of the Unidad Popular government (January-August 1973) real wages were at least equal to, if not higher than, those of 1968–69. We should emphasize that the Taller de Coyuntura was a vocal stronghold of forces opposed to the government of Salvador Allende. In addition, a comparison of the Consumers' Price Index, published by the Banco Central de Chile, indicates that real wages increased between 1970 and July 1973. A somewhat more favorable picture would have come out of studies conducted at the now defunct Instituto de Economía Política y Planificación (Facultad de Economía Política, Universidad de Chile), which indicated that between July and August 1973, real wages were back to their September 1970 level. The gains of the first two years of the Unidad Popular—especially for the lowest income groups—had been lost due to government mistakes and as a result of the sabotage and destabilization campaigns that started 5 September 1970 and culminated with the bloody coup of 11 September 1973. Hence even though we are using 1968–69 as a proxy, we are actually comparing real income in October 1974 with that of the final months of the government of the Unidad Popular.

Type
Research Reports and Notes
Information
Latin American Research Review , Volume 10 , Issue 2 , Summer 1975 , pp. 139 - 146
Copyright
Copyright © 1975 by Latin American Research Review

Footnotes

*

Formerly with the Latin American Faculty of Social Sciences (FLACSO).

†

Formerly with the Institute of Economics, University of Chile.

References

Notes

1. See Taller de Coyuntura, Comentarios sobre la situación económica, 2do Semestre 1973 (Santiago:Departamento de Economía, Universidad de Chile, Publicación No. 11), p. 71, table 4.

2. From October 1970 to July 1973 the Consumers' Price Index increased from 134.07 to 929.07 (6.9 times) while Money Wages Index increased from 2,450.7 to 18,151.4 (7.4 times). The comparison cannot be extended to September 1973 because the wage index is calculated only four times a year (January, April, July, and October). Nevertheless, these figures are consistent with those given by the Taller de Coyuntura, already mentioned, showing that real wages by August 1973 were similar to those of 1970. See Banco Central de Chile, Boletín mensual No. 553 (March 1974), pp. 316 and 317; also Boletín No. 515 (January 1971), p. 139.

3. See V Exposición sobre la hacienda pública made by the Minister of Finance, Jorge Cauas, especially table 2 in El Mercurio, 23 October 1974, pp. 23–26.

4. The typical basket for the household in the 0–2 SV income bracket consists of the following goods per month: Bread, 119 lbs.; flour, 9.5 lbs.; noodles, 9 lbs.; rice, 10 lbs.; first-grade meat, 3.5 lbs.; low-quality meat, 15.4 lbs.; lamb, 1.4 lbs.; pork, 1.1 lbs.; lard, .6 lb.; poultry, 2.9 lbs.; fish, 11.2 lbs.; seafood, 2.2 lbs.; vegetable oil, .7 gls.; 23.8 eggs; fresh milk, 3.1 gls.; powdered milk, 1.3 small cans; cheese, .5 lb.; butter, 1.5 lbs.; oranges, 5.3 lbs.; seasonal fruits, 3.3 lbs.; tropical fruits (bananas), 7.7 lbs.; potatoes, 73.7 lbs.; onions, 34.8 lbs.; pulses (beans, lentils, etc.), 7.7 lbs.; lettuce, 46 units; sugar, 18.3 lbs.; coffee and tea, 1.3 small cans; sausages, 6.8 small cans; nonalchoholic beverages, 10 bottles (small); wine, 2 bottles; beer, 1.1 cans.

5. Related information has been taken from an article written by Michel Chossudovsky, University of Ottawa, who was at the time Visiting Professor at the Catholic University in Santiago, “Hacia el Nuevo Modelo Económico Chileno—Inflación y Redistribución del Ingreso (1973 -1974),” (mimeo).

6. The sueldo vital as such was E20,000 in October 1974. Nevertheless, we use the concept of salario mínimo—introduced by the military government—as the minimum salary for anybody actually employed.

7. The strike came to an end on 12 September 1973.