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SAME JOB, DIFFERENT WAGE FOR MIGRANTS? Nicaraguan migrants and living wage in Costa Rica Anker Research Institute Working Paper Series Number 1 Authors Koen Voorend Richard Anker Martha Anker SAME JOB, DIFFERENT WAGE FOR MIGRANTS? Nicaraguan migrants and living wage in Costa Rica Koen Voorend Richard Anker Martha Anker ABSTRACT This paper investigates the argument that the basic but decent living standard is 2.5 times cost of a decent standard of living is lower for higher in the receiving country Costa Rica. We migrants than for nationals when the former find that the empirical foundation for justifying have family members left behind in a low-wage, a lower wage for migrants based on migrants low-cost country. The wage differential between having lower living costs because their family the host country and the country of origin is members left behind have lower living costs is not only a motivating factor behind migration, not confirmed. This unexpected result is due but also partly a reflection of differences in the to two main factors: (i) migrants have double cost of living. This paper therefore analyses costs for some expenditures (like housing) as whether, following this rationale, a lower wage well as considerable migration-related costs for migrant workers can be in a sense justified if such as fees, increased phone costs, and costs one ignores ethical concerns around the need for transfers, and (ii) the contribution to family for “equal pay for equal work” argument. We income of a spouse is considerably lower for analyze this argument for Nicaraguan migrants migrants because their spouse is earning in a in rural Costa Rica based on two existing living low wage country. wage studies which found that the cost of a KEYWORDS: Living wage, migration, immigrant workers, agricultural labor markets, discrimination, living costs JEL CODES: D1, D10, J3, J43, J6, J7, J8, O1, O15 Koen Voorend is a Professor and researcher at the Institute of Social Research (Instituto de Investigaciones Sociales), University of Costa Rica; and member of the Anker Research Institute. Richard Anker is an ILO retired economist and founding partner of Global Living Wage Coalition and Anker Research Network. Martha Anker is a WHO retired WHO retired statistician and founding partner of Global Living Wage Coalition and Anker Research Network. The Anker Research Institute was founded by Richard Anker and Martha Anker, the Global Living Wage Coalition, and Clif Bar & Company. Social Accountability International (SAI) is the institutional host WORKING PAPER 1: SAME JOB, DIFFERENT WAGE FOR MIGRANTS? 3 ACKNOWLEDGEMENTS The authors thank the Anker Research Network for the support for this research. Also, we are grateful to Marcelo Delajara (Centro de Estudios Espinosa Yglesias, México) and Lykke Andersen (Institute for Advanced Development Studies, Bolivia), both members of the Anker Research Network, for their valuable comments on a previous draft of the paper. Cover and design by Andrés Artavia. The Anker Research Institute was founded by Richard Anker and Martha Anker, the Global Living Wage Coalition, and Clif Bar & Company. Social Accountability International (SAI) is the institutional host WORKING PAPER 1: SAME JOB, DIFFERENT WAGE FOR MIGRANTS? 4 1. INTRODUCTION Employers often make the argument that migrants, (Voorend, Alvarado and Oviedo, forthcoming). This especially international migrants, do not need as implies indecent working conditions and wages for high a salary as nationals because their families left migrants in Costa Rica. behind have lower living expenses. This argument is supported by the fact that migration processes are Investigating living costs in Nicaragua and living predicated on differentials in wages between origin costs of Nicaragua migrants in Costa Rica is possible, and receiving countries and locations. because the Global Living Wage Coalition has published living wage benchmark studies for the same This paper investigates this argument empirically for year that indicate cost for a basic but decent living Nicaraguan migrants to Costa Rica using data on standard in rural Nicaragua and rural Costa Rica based living costs in rural Costa Rica and rural Nicaragua. on the same methodology (Anker and Anker, 2017). Nicaraguan migration to Costa Rica provides an The Costa Rica study (Voorend, Anker and Anker, ideal setting for this analysis. Migration flows from 2018) was done in May 2017 for the rural Guápiles, Nicaragua to Costa Rica constitute one of Latin Guácimo, Siquirres, and Matina regions of the Limón America’s most important and longstanding South- province and the Puerto Viejo de Sarapiquí region in South migration systems, and Costa Rica is the the Heredia Province. These regions are extremely country in the continent with the highest percentage important for Costa Rica’s banana production, where of immigrants in the total population (UN, 2019), with many Nicaraguan migrants find jobs. This study found three of four migrants coming from Nicaragua (INEC, that the cost for a basic but decent living standard for a 2011; Voorend, 2019). Nicaraguan migrants in Costa reference family of 4 members was CRC 585,085 (or Rica are mainly employed in agriculture, construction, US$ 1,045) and the net living wage was CRC 375,055 domestic work, and informal commercial activities (USD 670). In Nicaragua, the GLWC study (Andersen (INEC, 2020). and Hernani-Limarino, 2019) was done in October 2017 for the Northwest region, a region known for its Nicaraguan migrants in Costa Rica often work in high incidence of people migrating to other countries, secondary labor markets, with lower wages, higher mainly Costa Rica. It estimated the cost for a basic informality and therefore less protection. Voorend but decent standard of living for a reference family of (2019) shows that migrants have lower education 4 members was C$ 12,523 (or US$ 412) and the net levels, tend to work more hours per week than living wage was C$ 7,730 (USD 254). Therefore, the nationals, and have lower income. Average self- ratio of living costs for basic decent living for a family reported income was around USD 300 in his study, of 4 persons (2 adults and 2 children) in Costa Rica versus an unskilled worker’s minimum wage of is around 2.5 times that in Nicaragua. But does this around USD 550. Also, about 40%-50% of migrants large difference give substance to the argument that have no social security against only 15% for nationals the cost of a decent standard of living is much lower (Voorend, 2019), and while informal employment was for migrant workers than for national workers in Costa high in general in 2020, it was considerably higher Rica? This paper investigates this issue empirically. among migrants (almost 60%) than nationals (45%) The Anker Research Institute was founded by Richard Anker and Martha Anker, the Global Living Wage Coalition, and Clif Bar & Company. Social Accountability International (SAI) is the institutional host WORKING PAPER 1: SAME JOB, DIFFERENT WAGE FOR MIGRANTS? 5 2. DESCRIPTION OF ANKER METHODOLOGY Living wages and living costs for rural Nicaragua and household furnishings, communications, recreation rural Costa Rica were estimated in 2017 in a consistent and cultural activities and participation in social life, and comparable way based on the Anker Methodology and miscellaneous expenses such as personal care, (Anker and Anker, 2017) which is widely accepted and and a small margin as a buffer for emergencies and used. To estimate living wages, the costs of a basic but unexpected events. This is estimated for a typical size decent quality of life in a specific place is estimated family, which in both Nicaragua and Costa Rica was using a judicious mix of primary and secondary data. 4 people: 2 adults and 2 children. These costs are This basic but decent quality of life requires a nutritious divided by the number of full-time equivalent workers low-cost diet as regards calories, macro nutrients per reference family, resulting in the net living wage (proteins, fats, carbohydrates), fruits and vegetables, required. Then, mandatory payroll deductions and and sugar; healthy housing for a decent basic house income tax the workers must pay on the living wage and utilities; funds to cover other costs such as health in the specific location of interest are included to get care, education, transport, clothing and footwear, to the gross living wage needing to be received. Figure 1. Components of a net and gross living wage in the Anker methodology Food Housing Cost of Number of basic but full-time Mandatory Gross decent life equivalent Net living reductions Living workers in wage from pay Wage for reference reference Non-Food family Non- family housing Margin for unexpected events Source: Authors based on Anker and Anker (2017) To estimate costs for each component of needs, based on FAO and WHO nutritional guidelines and such as food, housing, and utilities, secondary local food preferences. The cost of this model diet is, statistical data from household expenditure surveys then, estimated using local food prices collected in are combined with primary data on food prices and local markets where workers typically shop. housing costs collected in several locations in both countries. For food expenses, usually the largest Housing costs are usually the second largest expense for a worker and his or her family in developing expense for a worker and family. One of the Anker countries, an appropriate model diet is constructed method’s novelties and strengths is that housing costs The Anker Research Institute was founded by Richard Anker and Martha Anker, the Global Living Wage Coalition, and Clif Bar & Company. Social Accountability International (SAI) is the institutional host WORKING PAPER 1: SAME JOB, DIFFERENT WAGE FOR MIGRANTS? 6 are estimated separately, and not considered along make sure that sufficient funds are provided for these, with other non-food expenses ala Engel’s Law.

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