While Costa Rica has shown obvious advancements in macroeconomic performance and free trade zones over the past decade, the gap of income inequality has, nonetheless, widened. Unlike other Latin American countries, so far Costa Rica has failed to mitigate inequality. According to the OECD estimate based on Gini coefficient, the major driver of inequality in Costa Rica is labor income. Over 2010-2014, the inequality gap was heated by public sector wages, especially the wages of qualified workers. The wages of workers employed in public agencies besides central government have widened inequality. Further, rising inequality is caused by the incomes in private sector due to the increasing skills premium. The wages of Costa Ricans who hold tertiary degrees overwhelm the income of their counterparts with primary education by almost fourfold.

The root of increasing segmentation of the labor market and subsequently rising inequality in Costa Rica is mainly in the divergence in educational opportunities. Young people who lack sufficient educational background cannot pretend for the highly-paid jobs. They cannot keep up with booming technological changes that require advanced knowledge and skills. Being geographically and socially marginalized from the economic benefits of the large cities, they will constitute the undermined 20% of the poorest population. Only highly qualified workers are in the demand in highly productive sectors of the domestic economy. Obviously, nonqualified workers remain marginalized. Consequently, low high school graduation rates and the lack of proper labor policies widen the gap between the innovative export-oriented economy, on the one hand, and the economy emphasized on domestic production and agriculture.

The increase in inequality in Costa Rica coincides with the implementation of structural adjustments during the 1980s, since before the growth has been quite inclusive. Another type of inequality is horizontal (across ethnic or indigenous groups) and spatial (across regions and increasing spatial segregation within the city) – it is also needed to explore the causes of these. Maybe if the word limit is tight just focus on a couple of causes.

The factor of increasing poverty undermines socio-economic stability. The nation poverty rate makes up about 20 percent. The high poverty rate indicator is predominantly explained by income inequality. There is a close interdependence between income inequality and subsequently increasing levels of poverty on a nationwide scale. According to (OECD), there is a growing segmentation of labour market, which assumes dire ramifications. The resulting income inequality disables poorer Costa Ricans to find better paid jobs and, therefore, slows the national economy down. The income diversity is more than evident if one correlates urban and rural income rates across the country. Top 20 percent earn about $4,500 a month, whereas the bottom 20 percent of the Costa Ricans make up mere $350. This indicates a staggering income disparity The most affected populations by the growing income gap include minorities and indigenous people.

Consequently, the most affluent sectors of the labor market are unfairly divided. The marginalized populations and poor people in Costa Rica simply cannot access lucrative job opportunities. The evident disparity between the qualified workers and unqualified workforce in incomes urges setting the minimum wage standard. Assumingly, this measure will reduce the current poverty rate by 4.4 percent. De facto, major socio-economic diversification starts on the stage of school years while the level of education further determines one’s income rate.

Unfortunately, indigenous areas of Costa Rica are featured by low literacy rate exceeding 10 percent. Thus, systematic investment in educational programs is vital to make every person properly educated to meet the job market demand

While the government tries to narrow the inequality gap by implementing non-contributory pensions as well as other social programmes, their share in households’ overall income is rather small. Only when the wages of low qualified workers in the private sector increase, the country’s economy will mitigate marginalization and eliminate inequality. If the wages of qualified workforce in both public and private sector continue to increase, further rise of inequality is inevitable.