This paper explores the relationship between labour market institutions, social policy
and inequality in Chile from the early 1990s to the late 2000s. The paper analyses levels
and changes in poverty as well as wage and income inequality using household and
employment survey data and draws some preliminary conclusions about the role of key
labour market institutions and policies that have affected the distribution of primary and
secondary income over time. Although poverty has fallen consistently over the period
under study, wage and income inequality has risen. The countervailing forces that mitigate
wage and income inequality have been largely concentrated in social policy and not labour
market policy. We conclude that the profile of poverty and inequality has been consistently
altered through targeted social spending, taxes and transfers and not through distribution
secured in the labour market. Moreover, the returns to primary and secondary school
education appear to have declined for the majority of those in the labour market while the
returns to higher levels of education have risen—contributing to widening inequality in the
wage distribution.