The State is Distorting the Labor Market

In Costa Rica civil servants earn on average 150% more than workers in the private sector, which contributes decisively to the growth of inequality and lowers the overall competitiveness of human resources.

Thursday, April 23, 2015


An article in reveals the wide gap between the hiring procedures and salaries between private companies and the State.

While the norm in the private sector is to take into consideration of the practical skills each employee possesses for the fulfillment of their duties, the State prioritizes academic achievements, both when recruiting and when setting compensation levels.

One example of this is that someone with a postgraduate degree " up to 62% more profitable working for the State than in the private sector."

In the private sector the responsibility for correctly assessing the suitability of a candidate for the post, is carried out by an evaluator paid by the company-internally or contracted out- in which academic achievements are only part of what is looked at. In the state the responsibility for efficienct recruitment is delegated to third parties - not responsbile to those who contract them- such as universities and other educational institutions which issue certificates that can often only certify the approval of an academic examination, and not some adequacy for performing the job.

"... State policies explicitly reward investment in education in the public sector, which are atypical in the private sector, where wages are related to supply and demand." See Post Graduates are up to 62% more profitable in the State

Regarding the impact of this on society, the article reports that "... In fact, the enrichment of public officials at a faster rate than private sector employees is the second largest contributor to Costa Rica being a more unequal country, with the Gini coefficient increasing from 2004 to 2013 by 40% ; and the Theil index by 22%, according to research by Andrés Fernández based on Enigh 2013. "

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