In Costa Rica, and in most Latin American countries (Brazil, Argentina, Mexico, Colombia, etc.) the aguinaldo—a legally-mandated Christmas bonus—is an acquired labor right and is meant to provide workers with additional financial security. Unlike discretionary year-end bonuses in the United States, this one is an obligatory payment enforced by Costa Rican labor law.
Employers are required to pay an amount equivalent to one month’s salary at the end of each year, effectively making it a “thirteenth” month. For this reason—at the end of October—the bells start ringing, announcing the arrival of the much-acclaimed “extra salary,” which will be paid in December.
For the sake of precision, there’s no need to look far. The definition is found in our own legislation. For example, in the supplementary law of the Labor Code called On the Payment of the Christmas Bonus to Private Sector Employees:
Article 1. Every private employer is obliged to grant their workers, regardless of the type of work they perform or how they are paid, an annual economic benefit equivalent to one month’s salary.
My purpose here is to demystify the notion that the aguinaldo is an acquired labor right. By simply delving into a Socratic dialogue, we can question this perception of the highly-acclaimed bonus:
Socrates: What is the Christmas bonus?
Worker: It is an additional payment I receive at the end of the year, equivalent to an extra month’s salary.
Socrates: If this legal obligation did not exist, do you think your salary would change?
Worker: I probably wouldn’t receive that additional payment in December.
Socrates: Does that mean you would lose a month’s salary?
Worker: I suppose so.
Socrates: But knowing that you previously earned a bit more, wouldn’t you look for another job?
Worker: Yes, possibly.
Socrates: And when you find one that offers you your previous total salary, what would you do?
Worker: I would switch.
Socrates: So, was your real salary 12 months plus the Christmas bonus, or 13 months?
Worker: It seems your logic isn’t wrong.
Socrates: And where does the money used to pay the Christmas bonus come from?
Worker: My employer sets aside part of my monthly salary to pay me that bonus at the end of the year since it is an obligation, I suppose.
Socrates: So, is the Christmas bonus originally part of your regular salary?
Worker: Everything points to yes.
Socrates: What would happen if the Christmas bonus did not exist?
Worker: Now that we analyze it, I suppose that eventually the market would adjust my monthly salary, assuming 12 months, to grow because my employer would not have to reserve that part for December.
Socrates: In short, is the Christmas bonus not an acquired right?
Worker: Correct, you convinced me.
A salary is nothing more than the discounted value of each worker’s marginal productivity; consequently, it is not arbitrary and will always be directly linked to productive contribution, in the aggregate, of course. In a regulation-free market, the worker would receive their total salary monthly, without withholdings or extraordinary payments.
Therefore, the Christmas bonus—far from being an additional benefit—represents a part of the annual salary that is fragmented and deferred to December, which distorts the perception of real income. This state imposition—as all state impositions do—creates distortions for workers and inefficiencies for the labor market.
On the one hand, it generates a mistaken perception that they receive an “extra” paycheck when an income that belongs to them is being distributed inefficiently. The now-questionable extra income reinforces a false notion that the worker is receiving a gift. This creates an illusion of labor welfare in favor of social conquests that are simply not conquests. It is nothing more than the typical cultural and linguistic tricks used by the theorists of statism to present their god as benevolent, as Mises and Rothbard repeatedly clarified.
On the other hand, this inefficiency for the worker stems from the general principle of human action—given the value of two equal goods, one present and the other available in the future, the individual will always prefer the present good. Moreover, if one is skilled in personal finance, one would prefer the money now, even if he plans to save. (I ask you to keep this idea until the end). Even for employers, this obligation implies an additional accounting challenge: maintaining a fund to eventually cover this obligation.
In conclusion, the Christmas bonus is nothing more than an economic-legal fiction that, contrary to popular belief, does not benefit workers as a group. It simply distorts the natural relationship between salary and productivity, fragmenting the worker’s income and creating inefficiencies. In a market without the Christmas bonus, the monthly salary divided into 12 months would simply be higher. In the words of Huerta de Soto himself: “it is one of those social justices that are neither just nor social.”
If the legislator’s interest in establishing the aguinaldo as a labor obligation was to protect the “naive” workers from their own possible shortcomings, I recommend taking the painful, but highly-instructive route: allow society to make mistakes, for only then will it truly learn.
Originally Posted at https://mises.org/