Tuesday 31 January 2023

Costa Rica government spends more on wages than the average of any region in the world

Average spending in the country is three times higher than in OECD nations

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28 January 2023 - At The Banks - BCCR

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QCOSTARICA – It has been said over and over that Costa Rica is the Switzerland of Central America. But when the two are compaired, the difference between them is abysmal.

Between 1973 to 2018, both countries have seen highs and lows in their budgets for salaries of public employees.

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During that period, Switerland’s high was in 1973 when it spent 7.9% of its budget to pay salaries. In the last decade, it remained around 7%.

At the other extreme, Costa Rica. In the same period, it was 1986 when the country was able to allocate the least in salaries, managing to lower it from around 50% in the beginning of the 1970’s to 32%.

But in the past two decades, that effort fell apart, and spending regained ground. For 2018, expenditures in public salaries has represented, on average, 41.3% of the budget.

The figures are derived from a statistical compendium compiled by the World Bank that takes into account at least 119 countries and where comparisons are also made by groups of nations, geographic or demographic areas.

Of that total of 119 countries, Costa Rica is in the top 20 nations – specifically in position 18 – that spend the most on salaries for their employees.

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Its position is comparable to nations such as Gabon, Botswana, Central African Republic, Cambodia, Namibia, Somalia, Vanuatu, and Samoa, among others.

Even when compared to regions, Costa Rica surpasses all.

The country’s spending on public salaries is three times higher than the average for nations of the Organization for Economic Cooperation and Development (OECD), it is four times higher than the average for North American nations, 2.5 times higher tha the European Union average and 1.4 times higher than the Latin American countries.

High spending on salaries is one of the main burdens of the country and that ties up a large part of the state budget. The other major items are the payment of interest on debt and pensions.

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In 2018, the countyr’s legislators took a small step to curb spending growth, by approving within the fiscal plan the nominalization of bonuses such as annuities.

This movement managed to slow down the rising curve, but not stop it.

Despite this, the issue of the growing state apparatus was noticeably absent in the agreements of the dialogue tables convened by the government, not wanting to eliminate duplication and improve state efficiency.

Hope for the moment is centered on a public employment bill; However, the text that is being discussed in the Legislative Assembly has had an extended discussion in which no agreement has been reached.

The idea is to be able to include current employees within a global salary scheme, to address a problem that has become an unsustainable situation, according to several legislators, including Pablo Heriberto Abarca.

According to World Bank figures, spending on public remuneration has grown steadily over time.

Compensation of employees (current LCU) – Costa Rica
International Monetary Fund, Government Finance Statistics Yearbook and data files

The Executive Branch confirmed that it be a week before calling the bill to negotiate the motions between political party fractions, as well as to dialogue and receive comments from the public sector unions, a sector that has shown strong opposition to making any change in the bonus and privilege scheme that benefits them.

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