Costa Rica’s unemployment rate could be over 18 percent, says university

August 8, 2013

The unemployment rate in Costa Rica could be twice as high as previously thought, reaching over 18 percent.

The National University (UNA) released an “amplified” unemployment rate of 18.4 percent, compared to the 9.6 percent previously reported by the National Statistics and Census Institute (INEC). The amplified rate attempts to capture unemployed Costa Ricans and those who want to find work but have stopped searching.

The troubling realization was one of several economists presented Thursday morning from a study on employment trends in Costa Rica during the last three years. 

Economists Henry Mora and Roxanna Morales noted that while the unemployment rate appeared to be falling since 2012, there has not been a proportional increase in the number of people employed. 

The economists observed that people who stop looking for work are no longer counted in unemployment statistics and therefore underrepresented.   

Mora said that the ideal unemployment rate for Costa Rica would be closer to 5 percent.

Despite reporting one of the strongest growing gross domestic products in Latin America during the last decade, according to Americas Quarterly, Costa Rica’s growth has not made sufficient progress combating unemployment.

Mora opined that growth would have to be greater than 6 percent to start chipping away at the staggering unemployment rate.

Costa Rica’s GDP grew 5 percent in 2012, according to United Nations Economic Commission on Latin America and the Caribbean. ECLAC estimates that Costa Rica’s GDP will grow 3 percent in 2013. 

The rising number of unemployed has also lead to an expanding “independent,” or informal sector of the economy, based mostly on services like domestic work or “pirate” taxis, for example. 

Many who do find work are underemployed and face diminished working conditions and labor rights, according to the study.

Lack of access to health insurance is one of the primary drawbacks to underemployment and the informal sector. The economists said that only half of those employed in the “independent” sector and 74 percent employed in the formal sector got insurance through their employer.

Lack of work

Mora observed a doubled-edged situation where many young Costa Ricans lack the education to move into and up the formal sector, while those with an education fight for fewer and fewer jobs.

Mora noted that there are fewer jobs for those with education in part because of the shrinking public employment sector, which once offered lots of jobs for engineers and other university graduates.

“It’s not just a question of educating people more, you have to transform the system so that when these people graduate they can find work that meets their skills, because if not, we’re going to end up with engineers driving taxis,” Mora told The Tico Times.

Gender gap

Under- and unemployment also show a growing gender gap in employment and wages in Costa Rica. 

Women are almost twice as likely as men to be underemployed and have an unemployment rate of 25.4 percent compared to 13.5 percent for men, according to the study’s expanded definition of unemployment.

“If they don’t have someone or an institution that takes care of their children during the day, what can they do?” Mora pondered. “They have to find part-time work cleaning a house, folding clothes, or in a small business.”

Women with jobs also make significantly less than their male co-workers. The study reports that women’s wages are 17 percent less than men’s. 

“The difficult and discriminatory conditions that women face in the workplace, especially if they’re working part-time and have little training or education, means the indicators are more extreme for them,” Mora said.

Recommendations

Mora and Morales recommended the government develop a national employment policy that tackles the ballooning number of workers in the informal sector.

Taking a step back, the economists recommended developing a policy in the midterm that reduces informality in the economy overall.

For those already participating in the informal sector, Mora and Morales suggested the government work to develop social alternatives that harness the entrepreneurial potential of these workers through cooperatives or other solidarity-minded programs. 

Finally, the UNA study said that the country should find ways to keep the ageing and retired population active in the economy to reduce the pressure on the Costa Rican Social Security System and other public services.

These findings echo recommendations earlier this summer from ECLAC suggesting that Costa Rica and others in the region focus on increasing the number of salaried, full-time positions

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