Unemployment Drives 20.38% Rise in AFORE Withdrawals in 2024

Amid the economic slowdown, a record number of Mexican workers are turning to their retirement savings for financial relief. In the first half of this year, 856,896 workers made unemployment withdrawals from their Retirement Fund Administrators (AFORES), averaging MX$17,405 per withdrawal. This marks a significant increase from the same period in 2023 when 791,254 workers withdrew an average of MX$15,042.

The total unemployment withdrawals from AFORES from January to June 2024 reached MX$14.9 billion, a 20.38% increase from the previous year. June alone saw withdrawals amounting to MX$2.5 billion, reflecting a 14.11% annual rise and a 16.54% increase from May 2024.

Economic experts attribute this spike in withdrawals to Mexico’s slowing economic growth, which has led to job losses and a rise in informal employment. “The country's economy is growing at a slower pace, leading more people to seek new sources of income, such as unemployment withdrawals from AFORES,” said Víctor Gómez Ayala, director of data analytics, Mexican Institute for Competitiveness (IMCO).

This economic deceleration has significantly impacted Mexico’s labor market. In the first half of 2024, formal job creation fell by 42.6%, with only 295,058 new jobs reported by the Mexican Social Security Institute (IMSS). Carlos Ramírez, former president of CONSAR, attributed the aggressive promotion by some agents to also contributing to the increase in withdrawals. He warned that while these withdrawals offer immediate financial relief, they reduce retirement savings and affect social security contributions.

The OECD’s employment outlook for May 2024 showed Mexico with a low unemployment rate of 2.6%, one of the lowest among OECD countries. However, Mexico also has one of the highest rates of labor informality, with over 50% of the workforce employed informally.

In contrast to the low unemployment rate, the informal employment rate in Mexico was 54.4% in May 2024, only marginally lower than the 56.9% recorded in the first quarter of 2019. Axel González, data coordinator, México ¿Cómo Vamos?, emphasized the importance of addressing structural issues in the labor market, particularly the persistence of informal employment, which leaves many workers without benefits and protections.

Despite these challenges, the OECD forecasts that Mexico's economy will expand by 2.2% in 2024, though growth is expected to slow to 2% in 2025. Inflation is projected to reach 4.5% in 2024 and decrease to 3.1% the following year. The OECD also highlighted the implications of climate change on employment, predicting significant job losses in certain industries due to the transition towards zero greenhouse gas emissions by 2050.