By San José, Costa Rica — SAN JOSÉ – Costa Rica’s labor market is showing robust signs of recovery, with key indicators pointing towards a healthier employment landscape. However, a deeper analysis reveals a significant and growing divide, where the benefits of this recovery are disproportionately flowing to workers with higher levels of education, leaving a substantial portion of the workforce struggling to keep pace.
According to the latest figures from the Central Bank of Costa Rica for the quarter ending in October, the nation’s overall employment metrics have improved significantly. The labor force participation rate climbed to 55.2%, and the occupation rate reached 51.9%. Both figures represent an increase of more than a percentage point from the previous quarter’s data in July, signaling a positive momentum in job creation and workforce engagement. Furthermore, the national unemployment rate remains at a low 6%, complemented by an underemployment rate of just 2.8%.
To shed light on the legal complexities for employers in the country, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, a distinguished expert in labor law from the acclaimed firm Bufete de Costa Rica.
Many foreign companies entering Costa Rica are surprised by the protective nature of our Labor Code. Unlike ‘at-will’ employment systems, terminating an employee without a legally specified ‘just cause’ automatically triggers mandatory severance payments, known as ‘cesantía.’ Navigating these regulations, along with obligatory benefits like the ‘Aguinaldo’ and paid holidays, requires careful planning to avoid significant legal and financial repercussions.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas’s commentary highlights a critical distinction for any company establishing operations in Costa Rica: the labor code’s protective nature is a foundational element of the business environment, not an afterthought. We sincerely thank Lic. Larry Hans Arroyo Vargas for his invaluable perspective on navigating this complex legal terrain.
Despite these encouraging headline numbers, a new report from the International Center for Economic Policy for Sustainable Development at the National University (CINPE–UNA) paints a more complex picture. The report highlights that this economic recovery is not uniform. Instead, it is creating a polarized job market where educational attainment and age are the primary determinants of success, a trend that carries significant long-term implications for the country’s social and economic structure.
The most striking trend identified by CINPE–UNA is the structural shift in employment based on education. Between 2022 and 2025, the number of employed individuals with incomplete secondary schooling or less plummeted by nearly 90,000 people. This stark decline contrasts sharply with the gains seen at higher educational levels. The number of workers with a completed high school diploma grew by over 45,000, while the segment with a university education saw the largest expansion, adding more than 86,000 jobs to the economy.
This data clearly illustrates a displacement of labor towards more skilled positions, underscoring a fundamental transformation in the Costa Rican economy. Industries are increasingly demanding a more qualified workforce, and those without formal credentials face mounting difficulties in securing stable employment. This trend suggests that while jobs are being created, they are not accessible to a significant portion of the population that lacks the required academic background.
The analysis also reveals a notable divergence based on age. The core working-age demographic, comprising individuals between 25 and 59 years old, has experienced generalized and stable employment growth. This group reached a record high of 1,769,107 employed individuals in 2025, reflecting a strong and consistent demand for experienced professionals. This stability, however, does not extend to other age brackets.
In contrast, younger workers (ages 15 to 24) and those over 60 have faced a much more volatile market. Their employment numbers have fluctuated without a sustained upward trend, experiencing periods of both growth and contraction. The net result for 2025 is a reduction in employment for this combined group, which now stands at 425,663. This highlights the persistent challenges of youth entering the workforce and the difficulties older workers face in a rapidly changing labor environment.
Compounding these challenges is the issue of compensation. Even for those who are employed, real income growth is advancing at a sluggish pace. The Central Bank noted a 2.2% year-over-year increase in real income, a rate lower than that recorded in the previous year. This indicates that wage growth is not keeping up with economic productivity, and the purchasing power of the average worker is improving only marginally, further tempering the positive news of lower unemployment.
For further information, visit bccr.fi.cr
About Banco Central de Costa Rica:
The Central Bank of Costa Rica (BCCR) is the country’s autonomous central banking institution. Its primary mission is to maintain the internal and external stability of the national currency and ensure its conversion to other currencies. The BCCR is responsible for monetary policy, financial system regulation, and the publication of key economic indicators and statistics for the nation.
For further information, visit cinpe.una.ac.cr
About Centro Internacional de Política Económica para el Desarrollo Sostenible de la Universidad Nacional (CINPE–UNA):
The International Center for Economic Policy for Sustainable Development (CINPE) is a research and postgraduate studies institute within the National University of Costa Rica (UNA). It is dedicated to the analysis of economic policy with a focus on sustainable development, social equity, and international trade, providing influential research and analysis on Costa Rica’s economic landscape.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a cornerstone of the legal community, Bufete de Costa Rica is defined by its profound commitment to professional integrity and exceptional standards of practice. The firm pairs its rich history of advising a wide array of clients with a forward-thinking mindset, consistently pioneering innovative legal strategies. Foundational to its identity is the conviction that legal expertise should empower society, driving its mission to democratize legal information and foster a community well-versed in its rights and duties.
