minimum wages (in 1999 colons) among private sector workers who report positive earnings in
1988 (at the beginning of the simplification process and the first year of data we use), 1993 (the
middle year in our data set) and 1999 (at the end of the simplification process and the last year in
our data set). Spikes in the distribution of minimum wages represent legal minimum wages that
apply to a large proportion of workers. Starting from the left (the lowest minimum wage) in the
1988 graphs, the first spike is at the minimum wage for domestic servants, who represent
approximately 7% of all workers and to whom applies a legal minimum wage of 123 colones
(1999 prices), or $0.43 (1999 U.S. dollars), per hour. There are no minimum wages over a large
range of possible wages between the minimum wage for domestic servants and the next
minimum wage, which is around the minimum wage for unskilled workers (peones and other
production workers) in most industries. The second spike (at 231 1999 colones or $0.81 per
hour) represents over 20% of all workers in 1988. Following this spike at the minimum wage for
unskilled workers there is a cluster of many minimum wages that surround two smaller spikes at
the minimum wages for operators of machinery (skilled workers) and specialized workers
(supervisors) in most industries. The applicable minimum wage for most Costa Rican workers is
in this cluster. Finally, at the very right of the distribution of minimum wages (after numerous
very small spikes) is a spike at the minimum wage for licenciados, who represent approximately
2% of all workers with a legal minimum wage at 578 colones or $2.00 per hour.
A comparison of the graphs for 1988, 1993 and 1999 illustrates the changes in the
structure of legal minimum wages. The gradual simplification of minimum wages is shown
clearly by the reduction in the number of minimum wages from 1988 to 1993, and then again
from 1993 to 1999. We can describe this simplification in more detail by focusing on comparing
the last year for in our data set, 1999, with the first year, 1988. As in 1988, the spike at the far
left of the 1999 distribution of wages is at the minimum wage for domestic servants, which
represent approximately 7% of workers. As in 1988, the second spike occurs at the minimum
wage for unskilled workers. The simplification and consolidation process between 1988 and
1999 compressed the distribution of minimum wages around the unskilled wage. While in 1988
the spike at the unskilled minimum wage represented 20% of workers, in 1999 the minimum
wage for unskilled workers (at 279 colones or 0.96 dollars per hour) applies to 45% of workers.
In addition, the number of minimum wages applicable to workers in Costa Rica has clearly been
reduced. At the same time that legal minimum wages for workers without higher education were
14 Although we use a 3-digit occupational classification, we present in appendix Table A.2 the two-digit
occupational classification in the Household Survey.
12