The Chilean labor market is grappling with an absorption crisis that has transformed hiring from an opportunity for growth into a "necessary evil" for businesses. This warning comes from economist Pavel Castillo, who has analyzed the decline in employment indicators over recent years.
The data supports this diagnosis. Average unemployment rose from 7.1% in the 2016–2020 period to 8.6% in 2023–2026, representing a 21% structural increase. Labor pressure—which measures those seeking work or wishing to extend their hours—has risen by 1.7 percentage points, reaching 15.2%.
The Impact of Over-Regulation
Castillo’s analysis identifies the primary cause as the rising cost and risk associated with hiring. Measures such as the reduction of the workweek to 40 hours, the increase in social security contributions to 18.5%, and new regulations like the 'Karin Law' have significantly driven up the effective cost of labor.
"Over-regulation has ultimately pushed hiring to the point where it is no longer seen as an opportunity, but rather a necessary evil," the economist noted. According to Castillo, termination has become an uncertain, expensive, and legally risky process, particularly for small and medium-sized enterprises.
Adding to this scenario is the rise of artificial intelligence. While the cost of labor is increasing due to regulatory burdens, the cost of automation is falling. This intersection of variables directly incentivizes the replacement of workers with technology.
Current data shows that finding a job now takes an average of seven months. Furthermore, more than one in four employed individuals works in the informal sector, confirming that the system is failing to channel labor demand efficiently.
To reverse this trend, Castillo proposes reducing current rigidities and risks. The economist argues that facilitating labor mobility and lowering hiring uncertainty are necessary steps to stimulate the market, though he warns that such moves might be perceived as a loss of individual benefits. The goal, he asserts, must be a more dynamic market capable of absorbing existing demand.