Friday 22 September 2023

State payroll increased by 100,000 people in 15 years

Hand in hand with the increase in the payroll, the cost of salaries grew 100%, but not only due to the number of people, but also due to the amount of salaries

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22 September 2023 - At The Banks - Source: BCCR

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QCOSTARICA – The State payroll in Costa Rica grew by almost 100,000 between 2005 and 2021, going from 223,880 people to 323,230. In percentage terms, the growth was 44%. However, there is a great difference between autonomous institutions and the Central Government.

In the case of the autonomous, such as the Instituto Costarricense de Electricidad (ICE), the Instituto Nacional de Seguros (INS), the Refinadora Costarricense de Petroleo (RECOPE) and others, the sector with the most state employees, the growth was 50% as the vacancies increased from 118,350 to 177,400.

The highest growth in the public payroll occurred during the second administration of Óscar Arias (2006-2010)

Meanwhile, in the Central Government, the increase in the payroll was 38%; the number of jobs went from 105,530 to 145,840.

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The growth rate of the state payroll doubled the rate of increase of the country’s population during the last 15 years. While the number of inhabitants grew by less than 22% in that period, the public sector payroll rose by 44%.

The data are derived from the Centralized Collection System of the Caja Costarricense de Seguro Social (CCSS)), which carries the constant pulse of insured wage earners.

Strong growth in the government of Arias

The highest growth in the public payroll occurred during the second administration of Óscar Arias (2006-2010).

At the end of the four years of that administration, the payroll had increased by 23.6%, especially in the case of autonomous institutions. In these institutions, vacancies grew by 28.7% and, in the Central Government, 17.8%. In the former, the payroll increased by 33,750 positions during the Arias administration.

Only in the CCSS, the decentralized institution with the most staff in the country, there was a growth of 11,000 between 2005 and 2010, without this transforming into an improvement in medical care, as had been diagnosed by the Pan American Health Organization (PAHO).

In addition, salaries in the Caja grew 17.6%, well above inflation.

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Regarding growth percentages of the state payroll, the second Arias administration is followed by the mandates of Laura Chinchilla (9.7%) and Luis Guillermo Solís (5%). For its part, in the government of Carlos Alvarado, which has five months to go, growth has been 2%.

Economist José Luis Arce, director of the firm FCS Capital, explained that the country registered a strong growth of the public payroll in the period between 2005 and 2013, but in particular during the years 2008 and 2009, with an increase of more than 15%.

“Those two years coincide with the government of Óscar Arias, in which there was a strong increase in hiring at ICE and CCSS and at the Central Government level in education and security.

“In fact, this increase, together with the even higher growth of salaries in those same years, is what explains the current fiscal problem, since there was a strong growth in spending on salaries,” said Arce.

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Hand in hand with the increase in the payroll, evidently the cost of salaries in the State grew, but not only due to the number of people, but also due to the amount of salaries driven by bonuses (“pluses” in Spanish).

Consequently, the widening was bigger: the monthly expenditure of the State in salaries rising from ¢171.8 billion to ¢351.8 billion colones, according to Centralized Collection System (SICERE). In simple words, it grew 104% between 2005 and 2021.

All these data are deflated, that is, the figures for previous years were updated with inflation to express them in today’s colones.

Again, the greatest growth occurred in the second term of Óscar Arias. Although in that administration the self-employed payroll grew much more than that of the Government, the increase in salary spending was very similar in both sectors: 53.7% in the self-employed and 56% in the Central Government. This means that ministry officials received much higher salary increases.

Then, in the Chinchilla administration, the growth of salary spending was 27% and, in the Solís administration, 7%. On the other hand, in Alvarado’s period, rather the salary expense was reduced by -3.5%.

Between 2008 and 2010, the Arias government decided to apply staggered increases to the base salaries of ministry officials, after diagnosing that their salaries were well below those paid by other state entities.

They were in the 25th percentile and management decided to bring them to the 50th percentile.

However, “multiple institutions” decided to imitate the measure, which led to sharp increases in state wage spending.

Arce indicated that salary spending widened both due to the growth of the payroll and due to salary increases granted in the CCSS, (ICE) and the education sector, in addition to the effect of the salary hitch. of professionals in the health sector.

“Low salary increases, like those of policemen, were reflected in high salaries like those of doctors; that is obviously corrected with the public employment bill (currently under discussion in Congress) and that is why it is as important as law.

“The other reason is that, in that period (Arias administration), it was used as a way to face the international financial crisis, yes, in a very irresponsible way, that public employment was a countercyclical element. The problem is that, by doing it with employment and being inflexible to lower the payroll, lead to the fiscal problem that we currently have,” he added.

In 2020, the Organization for Economic Cooperation and Development (OECD) designated Costa Rica as the country that spends the highest percentage of its income on public employee salaries, among the 38 nations that make up that bloc.

According to the OECD, the remuneration of government officials represents more than 50% of total income. This organization also criticized the existence of 260 salary bonuses in the public sector and differences in the same position of up to 600%.


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