Left behind in the economic crisis : poverty among the elderly in Costa Rica

The economic crisis at the beginning of the eighties impacted 20th-century Costa Rica in many different ways. Government programs were successful in reducing the proportion of poor people from 35% in 1985 to 23% in 2000. This article utilizes official Household Surveys corresponding to the period 1981-2002 and Population Censuses to perform an estimation of age, cohort, and period effects, in order to show that poverty among the elderly can be understood as a cohort effect. Their poverty conditions are associated with their low schooling, mainly among men. The probability of having the right to a retirement pension and the fact that individuals with lower educational levels earned low income during their later working years, intervene in the relationship between schooling and poverty as a cohort effect. Soon after the end of the civil war in 1948, Costa Rica underwent political and economic changes that aided the expansion of the social benefits initialized in the 40’s, such as universalizing Social Security, promoting health and educational policy, and providing infrastructure and services to both rural and urban communities. Nevertheless, at the end of the 70’s, increasing oil prices had a strong negative impact on many countries around the world. Costa Rica was no exception, and during the 1980 – 1982 period it went through an economic crisis characterized by hyperinflation, increased unemployment and underemployment rates, and the declaration of a moratorium on foreign debt payments (Barahona Montero 1999a). The governments after 1982 were relatively successful in promoting economic recovery by changing the development model based on import substitution to one promoting non-traditional product exports and tourism (Barahona Montero 1999a, Gonzalez Mejia 1999). In spite of the recovery and public policies designed to combat poverty, since 1991, it has not been possible to reduce the proportion of poor households below 18%, maintaining an annual average of around 20%. 2 In addition, economists consider that within this one-fifth of the nation’s population, there is a group of “hard-core poor”, i.e., persons who systematically live on a minimal income, and who cannot easily climb out of their chronic condition (Proyecto Estado de la Nacion-PEN 2002). One group in which the proportion of poor is relatively high with regard to the rest of the population is that of the elderly: 31% of individuals 65 or more years of age live in households with incomes below the poverty line, according to the 2002 Encuesta de Hogares (National Household Survey). The objective of this paper is to show that if poverty among the elderly is associated with structural characteristics within this group of the population, its incidence can be represented as a cohort effect. In other words, a large percentage of the Costa Rican elderly would be living in poverty, not because old age leads to poverty, but because the characteristics that they acquired throughout their lives – given the historical moments they lived – make them more susceptible to being poor, in comparison with other groups born more recently. In order to provide separate estimates of the cohort, age, and period effects, we consolidated the Encuestas de Hogares from 1980 to 2002, whose basic dependent variable is the proportion of persons living in poor households. The paper presents variations of these effects produced by the inclusion of certain independent variables in the model, in particular the level of education of the cohorts. It also emphasizes the importance of the economic crisis at the beginning of the 80’s on the incidence of poverty among the elderly, and at the end of the paper, we relate this phenomenon to educational levels among these generations and their access to Social Security.