Costa Rica is one of the happiest and healthiest countries in the world, but is one of few in Latin America that is seeing an increase in income inequality. Experts at the U.N. Development Program say the growing income gap disproportionately impacts the country’s indigenous populations and other minorities.
By some estimates, Costa Rica is something of a development success story. The Central American country ranks higher than neighboring countries in terms of health and social capita, and its poverty rate has dropped from more than 11 percent in the 1990s to just under 2 percent today, according to World Bank data.
Last year, the country even became the first in the world to sign a National Pact in which Costa Rican society committed to ending poverty and inequality, promote education and health for all.
But as the U.N. Development Program (UNDP)’s latest Human Development reporthighlighted last month, this progress has failed to reach the country’s poorest. Last year, the income of the richest 20 percent of Costa Rica’s population was 19 times higher than that of the poorest 20 percent, according to the report. Costa Rica is one of only three Latin American countries that has seen a rise in inequality since 2000.
Some experts blame this inequality on an economic model that favors certain sectors of the economy, such as exports and tourism, at the expense of the poor. Unsurprisingly, less lucrative work sectors are disproportionately represented by minorities and other marginalized groups, according to UNDP economist Gabriela Mata.
“Qualified workers are in high demand in the economy, they tend to be located in highly productive sectors and their salaries tend to rise much more than salaries of nonqualified workers,” Mata said in an interview with Humanosphere. “But [the UNDP]estimates that guaranteeing the minimum wage for all these workers would reduce the national poverty rate significantly, by about 4.4 percent.”
To close the growing income gap, Mata says policymakers should also place more focus on ensuring quality education across all income groups. Costa Rica’s Afro-descendant populations report fewer years of school (7.7 years, according to the UNDP report) compared to the national average (8.5 years), for example, while only 10 percent of adults with disabilities hold an educational degree.
The need for quality education is especially acute in Costa Rica’s indigenous territories, where the UNDP reports more than 10 percent of the population cannot read or write (the national average is 2.4 percent).
“Costa Rica has a history of prioritizing investments in education, and it really has tried to universalize these services … but we need an additional push to really reach everybody,” said Mata. “We also need to try to grow or at least strengthen technical education programs so that people can go into the labor market with skills that are in high demand.”
Mata said that political inaction has slowed any real policy changes that could improve the rate of inequality. Costa Rica has been discussing reforms of its tax system for more than a decade, for example, and Mata said she hopes it will be progressive.
“”The thing is that the country now faces very high fiscal deficits,” said Mata, “but the possibility of achieving progressive tax reform … would be one of the quickest measures to reverse these rising inequality trends.”
Published April 6, 2017 on Humanosphere