Costa Rica is known for its sunny seaside beaches and tourist attractions. It is arguably the most stable and most prosperous country out of all its Latin American neighbors. A large part of this is due to government spending. Nearly 20 percent of Costa Rica’s GDP goes toward social spending. Because of this, the Costa Rican economy has boomed. The infant mortality rate has decreased, while healthcare and sanitation have improved. But in recent years, Costa Rica’s poverty rate has stagnated at roughly 20 percent. This begs the question: what are the causes of poverty in Costa Rica? Why, despite all the government’s spending, does it still persist?

A large part of the answer is income inequality. There is extensive research showing that income inequality is correlated with higher levels of poverty. And without a doubt, income inequality is one of the main causes of poverty in Costa Rica.

Urban Costa Ricans are largely outpacing rural Costa Ricans when it comes to income. The top 20 percent of earners make an average of $4,650 per month, while the bottom twenty percent make only $360. In other words, wealthy Costa Ricans are making nearly 13 times as much money as poor Costa Ricans.

This can have dire consequences. The Organization for Economic Cooperation and Development (OECD) has found that income inequality can cause the economy to slow down. In addition, it prevents poorer people from finding high-paying jobs.

However, Costa Rica is not doomed to an eternity of inequality. The OECD shows that inequality can be reduced simply by encouraging women to join the workforce and providing better access to higher-quality jobs. Costa Rica’s government is already working hard to eradicate poverty, and the future looks bright. Income inequality may be one of the main causes of poverty in Costa Rica, but it does not have to stay that way.

– Adesuwa Agbonile

Photo: Flickr