Thursday, April 3, 2008

Christmas Bonus

Continuing the work theme, an important work vocab word for Costa Rica is the aguinaldo. Hold on to your hats, folks. In Costa Rica the state actually enforces an obligatory wage in the month of December for all employees, whether employed by the state or not, equivalent to a full month's salary (the average monthly salary for the year) on top of that month's salary. This aguinaldo has become a huge part of Costa Rican culture, as Ticos await this bookoo cash for holiday purchases.

Personally, I think the concept is a bit strange, especially since it's mandatory, but I must admit that it has its virtues. For example, it's nice to receive something at the end of the year. It's like Christmas, but for adults. Also, it does leave something to spend at the end of the year, whereas many people would otherwise spend their extra wages if they were evenly dispersed in their yearly paychecks.

One perceived virtue of the aguinaldo that, in my mind, is not a virtue at all is the idea of "free money" or "extra money." Costa Ricans often tell me, "it's so bad that there's no aguinaldo in the United States--the extra money at the end of the year helps us out." Now, as I stated before, the aguinaldo does help people save for the end of the year, but not everyone is best off with this "big brother" approach. If you ask me, I'd rather have that money dispersed in all of my paychecks, which is what my employer would use to calculate average monthly costs anyway! That's right, it's not free money. Employers know how much they'll need to spend on aguinaldos, so they'll pay you less than they otherwise would on a monthly basis to make up for it. Even more, they'll pocket that money they would have otherwise paid you each month until the very end of the year. So, they have your money for a whole year, leaving you to pay the opportunity cost of that cash, effectively decreasing--not increasing--your average monthly pay in real terms.

Ticos like their aguinaldo and I'm glad for it. I, however, would like my money now.


Erin said...

I think that the aguinaldo concept works well here because on the whole, we're talking about a population that mostly lives paycheck-to-paycheck. When you don't make much, you don't save much, and the difference between $400/month and $433/month isn't that much, even if you live in Costa Rica.

Most workers would not save that extra $33 because they could honestly find better ways to spend it, ways that are important, if not an emergency. It's easier to budget $400/month and count on their December bonus to get them through Christmas spending or, as many families do, an end-of-the-year beach vacation.

In the U.S. or almost anywhere, wealthy people want their money right now because they're going to invest it, earn interest on it. If you never plan to invest it, and it's not that much money anyway, I completely understand why it's much, much better to get it all in one lump sum.

Thomas Carmona said...

Your points are well taken. Even though I addressed some of them very briefly, I understand that my own personal bias rang truer than anything else.

Anyway, I don't disagree with anything you say. I'll actually agree with you and say, yes, Costa Ricans sometimes do need money for emergencies. The problem is that sometimes these emergencies come up in June, July, or August. Of course, sometimes the greatest need comes at the end of the year, but is it the state's responsibility to tell people when their greatest need is? (I'm not even sure that the underlying reason behind the aguinaldo is to protect people from themselves, but rather to have a predictable consumption pattern to protect certain sectors of the economy from variance in holiday spending.)

If we do want to get in the business of managing people's expenses (which I don't), then maybe encouraging people to spend such a large part of their money at the end of the year (which is the effect I see of the aguinaldo) actually prevents people from having money when they need it during other parts of the year.

With that said, I think it's just a personal preference that I have to get my money now, just as it's a cultural issue with the Ticos who seem to like the aguinaldo system.

Thanks for your thoughtful comments. I enjoy the engagement.

J.C.Couch said...

The alguinaldo in Costa Rica seems exactly like the year-end bonus paid to workers in Japan. I am not sure it is mandatory in Japan, but it is certainly the policy of government agencies and companies of any stature.

While living in Japan I remember having conversations with Japansese friends who acknowledged that it is a withholding during the course of the year for which they are paid no interest. You can imagine for huge companies such as Toyota, Sony, and so many others, this monthly deduction from each employees' salary amounts to billions of yen; all retained in their coffers interest-free. And while Japanese wages are generally comparable with those in the U.S., a year-end bonus of US$2,000 to $3,000 would not be uncommon, most Japanese accept the practice and rely on getting it as Costa Ricans do. Some do confide it would be nice to receive either their full month's salary or be paid interest on the withholding, but in Japan no employee respectful of their company or government is going to make an issue out of the practice.

Thomas, I am so glad I found your blog and related websites on Costa Rica. I have a project I am working on, en la zona del sur, cerca de Golfito.

Buscaré una oportunidad de hacer comentarios más específicos a Costa Rica la próxima vez. Agradezco mucho toda su información sobre costarricense español, porque ahora estoy tratando de aprenderlo.

Un cordial saludo, J.C.Couch

Thomas Carmona said...


Thanks for your comments about the holiday bonus in Japan. I would be interested to know whether it is 1) mandatory or 2) performance-based to any extent.

I would agree that anyone who is otherwise a satisfied employee would not make a stink about this issue alone. However, if a Japanese company chooses to pay a large sum to its employees at the end of the year, that is a lot different from the government--for better or for worse--obligating such a practice.

With that said, what motivates Japanese workers is certainly outside of my wheelhouse because I'm not Japanese and have never lived in Japan.

However, one thing I have noticed in Costa Rica is a strong culture of entitlement that stifles productivity and--more importantly--creativity, the result of which is a bloated government bureaucracy that consumes resources excessively while neglecting to provide the services that are truly essential. To be more specific, my many experiences working with bureaucrats and teachers in the Education Ministry have shown me that most of them, at least those who serve the rural areas I was concerned with, thought of the system as something that offers them a career first and foremost.

Now, what does this have to do with the aguinaldo? It's not not that the aguinaldo has created this culture, and neither is the aguinaldo a symptom of this aspect of the culture. Rather, the intense passion for the aguinaldo is evidence of the strong preference for guaranteed money and job security rather than pay based on performance.

Anyway, this little rant was not a direct response to anything you actually said, but rather something that just came to mind.

I'm glad you could find some useful things in the blog and on my other sites. I welcome any other comments, whether on this or more language-oriented topics.

Pura Birra,


J.C.Couch said...

The point I wanted to make about the practice of year-end bonuses in Japan is that Japanese companies wouldn't want it any other way. It provides a huge amount of money interest free, and it figures into their schemes of profitability at the expense of the employees. Whether it is mandated by law or not, it's safe to say the monthly withholdings are a condition of employment. There is no opting out.

In Costa Rica the size of the economy and sums of money are so much smaller, the Christmas bonus wouldn't seem to be so much of an institutionalized way for a company to be more profitable, as is most definitely the case in Japan.