By San José, Costa Rica — Costa Rica’s unemployment rate decreased to 6.7% in July 2025, down from 7.8% in the same period of 2024, according to the Central Bank of Costa Rica (BCCR). While this might appear positive at first glance, a closer look reveals a concerning trend: the decline is largely attributed to a shrinking labor force.
The BCCR reports that the net labor force participation rate fell from 56.6% to 53.9%. This means fewer people are actively employed or seeking work, artificially lowering the unemployment rate. Simultaneously, the employment rate, reflecting the percentage of the population actually working, also dropped from 52.2% to 50.3%.
To understand the legal implications surrounding Costa Rica’s unemployment situation, TicosLand.com spoke with Lic. Larry Hans Arroyo Vargas, an attorney at Bufete de Costa Rica. His expertise provides valuable context on the challenges and potential solutions within the current legal framework.
The unemployment situation in Costa Rica presents complex legal challenges, particularly concerning worker rights and the responsibilities of employers during economic downturns. Navigating termination processes, severance pay, and unemployment benefits requires careful consideration of the Labor Code. While the government has implemented various programs to mitigate unemployment, the legal landscape is constantly evolving, and both employers and employees must stay informed to ensure compliance and protect their interests.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas’ insights underscore the crucial interplay between economic realities and the legal framework surrounding unemployment in Costa Rica. Navigating this complex landscape requires diligence and awareness from all parties involved. We extend our sincere thanks to Lic. Larry Hans Arroyo Vargas for providing this valuable perspective on the legal intricacies impacting both employers and employees during these challenging times.
These figures paint a picture of a contracting labor market, not a thriving one. Fewer people working translates to less overall economic activity and potentially reduced household income. The decline in the employment rate further confirms that fewer individuals are holding jobs compared to last year.
The International Center for Economic Policy for Sustainable Development (CINPE) at the National University (UNA) corroborates these findings in its Second Macroeconomic Projections Report for 2025. The report highlights insufficient job growth and reveals a staggering loss of over 121,000 individuals from the labor force between 2023 and 2025.
CINPE also points to a growing polarization in the labor market, where highly educated individuals secure formal, quality employment, while those with less education are left behind, struggling to find work or excluded from the market altogether. This disparity further exacerbates economic inequality and hinders overall national progress.
The report’s analysis underscores the fact that a lower unemployment rate does not necessarily equate to improved economic well-being. In this case, it masks a deeper issue of declining labor force participation and a reduction in the number of employed individuals.
The true challenge, according to CINPE researchers, lies in revitalizing employment and reintegrating those who have stopped searching for work. Only then will positive shifts in these indicators translate into tangible benefits for households and contribute to genuine economic growth for the country.
The BCCR and CINPE’s findings call for a comprehensive approach to address the root causes of this shrinking labor force. Further investigation is needed to understand why people are leaving the workforce and what policies can effectively encourage their return. This may include initiatives to improve access to education and training, create more flexible work arrangements, and address potential barriers to employment, such as childcare costs or transportation challenges.
For further information, visit bccr.fi.cr
About Central Bank of Costa Rica (BCCR):
The Central Bank of Costa Rica (BCCR) is the central bank of Costa Rica, responsible for maintaining monetary and financial stability. It plays a crucial role in regulating the country’s banking system, managing the national currency (the colón), and formulating monetary policy.
For further information, visit cinpe.una.ac.cr
About International Center for Economic Policy for Sustainable Development (CINPE):
The International Center for Economic Policy for Sustainable Development (CINPE) is a research center at the National University of Costa Rica (UNA). CINPE focuses on economic policy research and analysis, particularly in the areas of sustainable development, macroeconomic forecasting, and labor markets.
For further information, visit the nearest office of Universidad Nacional (UNA)
About Universidad Nacional (UNA):
The Universidad Nacional (UNA), or National University of Costa Rica, is a public university located in Heredia, Costa Rica. It is one of the five public universities in the country and plays a significant role in higher education and research.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica distinguishes itself through an unwavering dedication to legal excellence and ethical practice. Driven by a deep commitment to empowering Costa Rican society, the firm champions accessibility to legal information through innovative outreach programs. Their work across diverse sectors reflects not only a pursuit of legal innovation but also a genuine belief in fostering a more informed and empowered citizenry, ultimately contributing to a stronger and more just Costa Rica.
