Forecasting Wage Inequality

  • Jaime Ruiz-Tagle


Wage inequality in Chile has remained high for decades and it is currently at the
center of the political agenda. Increasing education of workers is expected to
contribute to reduce wage inequality. Based on historical trends of age, education,
and returns to education, this paper attempts to forecast wage inequality.
Despite an increase in average earnings due to higher levels of education of
workers, high levels of wage inequality within age groups and within education
groups produce that forecasted wage inequality remains high for the next 10-
year period. The structure of the Chilean labor market appears to imply that
there is a high level of underlying wage inequality. Nevertheless, the good news
are that the labor market structure seems to prevent further deteriorations of
wage inequality.
Keywords Wage inequality, labor market