Moderate Employment Recovery Generates Optimism

Tax collections related to labor contracts grew in Mexico by 2.5 percent in September and reached MX$261 billion (US$12.2 billion), according to data published by the Mexican Social Security Institute (IMSS). According to Norma Gabriela López Castañeda, Collections Director of IMSS, the increase is due to two factors. “On one hand, we have a number of people who are insured by IMSS. On the other hand, there is the base salary, which has increased by 6.4 percent in this administration,” said López Castañeda in a press conference. In addition, she added that “fiscal and supervision actions” have intensified in relation to salaries.

The data is considered positive in the current economic situation, which makes up for the loss of jobs that Mexico has suffered since the beginning of the pandemic. According to Moody’s, payroll taxes represent 70 percent of all state tax revenues in the country. “It is unlikely that employment levels will return to pre-crisis levels,” Moody's reported in August. For that reason, López Castañeda recalls that the current administration implemented different measures to protect as much as possible formal employment, one which is very sensitive in this crisis. According to López Castañeda, measures, such as payment facilities for those employers who kept their staff despite the crisis, have allowed “700,000 jobs” to be saved.

In this context, the goal of the current administration should be, according to the Center of Studies for Formal Employment (CEEF), “to reduce working poverty and the precariousness of salaries and to provide opportunities and equality for retirement.” According to INEGI, employment showed signs of recovery in August, when it remained at 5.2 percent compared to 5.4 percent in July. “We have begun to see a recovery but these are not new jobs. They are jobs that are being rehired, mostly temporary, and it will take time to rescue them. Although there is recovery, this will not be the trend, jobs will be adjusting a few more months or a few months less,” said Armando Leñero, President of the CEEF. “Public spending must be redirected to support formal employment,” he continued.