Mexico Must Unite to Fight Labor Informality

Q: Over 2 million people remain outside the labor market. What are the main factors behind this?

A: The total economically active population was 55 million by December 2020 and currently we have 58.7 million. This means that 3.5 million people become of working age; however, only 1 million jobs were generated formally. Analyzing INEGI’s figures, it is clear that the other 2.5 million people ended up in labor informality, which has risen lately. Informality is growing twice as fast as formality, with two informal jobs per every formal job generated.

The issue does not only have to do with available job openings. In fact, many formal employers are unable to cover all their vacant posts. The problem lies in wages. Low salaries are a cancer for labor in Mexico.

Q: What was the impact of the pandemic on labor informality and what are the potential future repercussions for Mexico?

A: Informality and unemployment carry consequences for both individuals and the entire country. People living in this situation do not have access to social security, which is our right as Mexicans. Dignified, formal jobs have an impact on individuals and on Mexico. The first characteristic of labor informality is that the person does not pay taxes. If only 21 million people pay taxes, then the other 100 million people do not, and the country will not have access to hospitals and other necessary services as a result.

Q: What challenges do companies face in their hiring processes?

A: Labor informality continues to cause problems. Labor experience has become crucial for companies when hiring employees, and informality does not allow people to gain the necessary experience. A greater gap is being created between what is sought and what is found regarding talent.

Still, although employers are facing these challenges, they are usually still behind in terms of salaries and the reality we are all living in. Fourteen million people earn the minimum wage in Mexico, according to INEGI. We need companies to make an effort to at least double the minimum wages they pay.

Q: How much progress has been made, and what still can be done, in increasing the participation of women in the labor market?

A: The economically active female population totals 23 million. This figure increased in 2021, roughly by 1.7 million. The unemployment rate among women is 3.8 percent. Although men continue to have the greater share of participation in the country’s economy, 23 million women is a significant number.

While the unemployment rate in Mexico is similar between men and women, unfortunately, the average salaries continue to be unequal. The average monthly salary for women is MX$12,063 (US$600), while the average for men is MX$13,800 (US$690), a MX$1,800 (US$90) difference, which makes it more difficult for women to join the formal job market.

The recommendation for women would be to focus on gaining experience. The earlier you start working, the better. As an intern, companies usually pay very low wages; however, young people could benefit from learning and gaining experience to increase their chances of obtaining a better job in the future.

Q: What role do SMEs play in the jobs recovery?

A: Mexico has a total of 1,050,000 employers, according to IMSS, and triple that, according to INEGI. IMSS classifies companies by the number of employees they have. There are 300,000 companies with one employee, 400,000 with two to five employees and 300,000 with six to 50 employees. Micro and small companies concentrate most of the job opportunities in Mexico.

Q: How did the outsourcing reform impact the employment figures amid the COVID-19 pandemic?

A: It was the “perfect storm.” With the health issues resulting from the pandemic, many companies reduced personnel or even closed, mainly in the services sector, such as restaurants, bars and hotels. We saw a great recovery in 2021; however, more formal jobs should have been generated.

The outsourcing reform had good intentions, to achieve dignified, formal jobs in the country, but the deadline to implement it made the situation difficult. Labor issues are not easy to understand and there were 5.2 million people under a subcontracting scheme. That is 25 percent of the working population. More than 900,000 people lost their social security. Twenty percent of these workers went to informality or became unemployed.

Q: What role should the private sector play in 2022 to ensure a greater employment recovery in Mexico?

A: We all need to contribute from our fields. The Labor Reform should generate more dignified, formal jobs in the country. We must work hand in hand with the authorities for the labor market to continue growing and generating greater formal than informal labor.