Freedom for Costa Rica’s Workers

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In countries with stringent regulations on workers and businesses, the financial burden of compliance often falls on the poorest in society and forces swaths of citizens into informal work. By moving outside of legal work environments, marginalized individuals’ ability to achieve economic mobility and maintain property is jeopardized.

It is clear that government-imposed regulations had a similar effect on the structure of the workforce in Costa Rica. In 2019, Costa Rica’s labor market regulations were identified as some of the most burdensome in the world, and that same year, 46% of Costa Rican workers were working in the informal sector. IDEAS Labs—a Costa Rica-based Atlas Network partner—recognized that labor regulations were holding many citizens back from their economic potential.

Specifically, a policy of the Costa Rican Social Security Fund required workers to pay back taxes and interest on income from the past 14 years in order to register as formal workers. IDEAS Labs identified that this requirement kept an estimated 117,000 informal workers from accessing opportunities available in the formal sector. Accordingly, the organization set out to end this policy, among others that infringe on Costa Ricans’ freedom to enter the workforce, through its #LibertadParaTrabajar campaign. As stated by Luis Loria, president of IDEAS Labs, “Costa Rica is a natural paradise, but it is also a regulatory hell. Through our #LibertadParaTrabajar project we are fighting to eliminate all institutional and regulatory obstacles that make it difficult, costly, or impossible to work.”

The campaign and its policy proposals have caught on quickly among lawmakers and the general public. Just two years later, one of the first major reforms that IDEAS Labs promoted was unanimously approved in Costa Rica’s Congress in April 2022. Upon passage of the law, amnesty was granted for debts owed by informal workers to the Social Security Fund. This created a clean slate for tens of thousands of workers behind on their social security contributions, and, by eliminating this financial burden, allowed for more workers to register in the formal sector. Loria hopes this project will “unleash the creative and productive potential of every citizen, so that they can flourish.”

Furthermore, IDEAS Labs successfully advocated for a temporary suspension of labor contracts and temporary adjustments to monthly contributions to the Costa Rican Social Security Fund for workers who are collaborating under reduced work schedules due to COVID-19. This serves to keep vulnerable individuals from being forced out of legal work.

By bringing new flexibility to a labor market that has long been burdened by overregulation, the components of this campaign are already creating better conditions for Costa Rica’s working class. IDEAS Labs will continue to push for liberalization of the country’s regulatory state to unlock economic opportunity.