Formal Jobs in Mexico
In this article, I explore the dynamics of formal jobs with data from the Mexican Institute of Social Security, IMSS. Being affiliated to IMSS has a deep meaning for most Mexicans. Besides labor income, social security affiliation allows workers to have the opportunity to buy a house, have access to health services, and the aspiration to enjoy retirement one day. It is far from being a synonym of a life without despairs, but it certainly takes workers closer to such a state. In this article, I will briefly present the long-term dynamics of formal employment across regions, then I explore women’s participation in formal employment.
Hodrick-Prescott filter
The tool I resort to belongs to time-series analytics: the Hodrick-Prescott filter (HP). I use this because of the clarity of the conclusions reached, and because the data conforms to its assumptions. I say nothing new here, but my intention is to provide a good departing point for students in humanities and the social sciences with an interest in the dynamics of Mexican labor markets. You bet my blog is far easier to read than peer-reviewed papers, and my (simple) approach to the problem is still powerful enough for my readers to draw a few conclusions of relevance.
The data
I work with data provided by IMSS at http://datos.imss.gob.mx/dataset, where they also provide a few visualizations powered by Tableau. All in all, it seems as though I went into extra work by downloading the datasets (not by hand, worry not, I automated the process), as the data I use could probably be fetched easily somewhere else — I remain oblivious to it. In an accompanying article, coming up next week (I will provide a “click here” button to it when it’s published), I go through the details of downloading and processing the data for the present analysis.
Trends don’t lie
If you have lived in Mexico, or are familiar with the Mexican economy, you sure have heard about the extraordinary growth experienced in the central and north-central regions. Everyone is talking about how Querétaro, León, San Luis Potosí, and other cities are experiencing economic booms. This growth has had a positive impact in the long-term trend of formal jobs. The image below gives you the percentage change in the long-term trend of formal jobs.
Fortunately, the long-term trend of formal jobs appears to be growing every month, albeit at rates that may not be enough to satisfy the needs and wants of Mexican workers. The vertical lines in the graph mark the change in federal administrations, from the succession of 2000 to Lopez Obrador’s assumption in 2018. Probably this is not the best explanation for the dynamics of formal jobs in Mexico. My guess is that Foreign Direct Investment could provide better insights. For instance, notice that by 2015 there is a deceleration in the long-term trend. It coincides with many international factors, such as Trump’s rise in electoral surveys prior to the 2016 election and all the noise that came with Brexit.
It can be seen that the central and north-central regions are the ones undergoing higher, consistent growth in formal jobs for the past two decades. What came as a surprise was the growth experienced in the south, not as strong as in the last years of the XX century, yet good enough to have many families enjoying a better life. On the other hand, formal jobs were hit the most in this region, and that is concerning. According to evidence from Colombia [1], there was an informality-led recovery in the region after the pandemic, where most jobs recovered went to the informal sector. Therefore, the focus of policy should be on the recovery of formal jobs. After all, formal jobs have higher productivity, thus offering higher wages. This is particularly important for the south, but the same is true for Mexico in general.
It is important that formal job growth becomes steadier in the south. Having a couple of years of spectacular growth may not be enough to offset half a year of contractions. As the chart above illustrates, the south’s left tail is too heavy, meaning that contractions occur systematically there.
Girl Power
I end this story with a powerful graph: women’s share of the labor force in the formal sector has grown significantly in the first decades of 2000. There are two periods when women’s participation in the labor force grew consistently: 2000–2010 and 2015–2020. Still, women’s share grew from 34% (around 2003) to 36% in 6 years. It took an extra 10 years to have another increase of 2 percentage points in formal labor force.
The deceleration that occurred between 2010 and 2015 coincides with the expansion of formal jobs that can be appreciated in the first chart of this article, implying this was a men-intensive expansion. It also coincides with the years of increased violence in Mexico, which may partially explain this contraction in women’s participation.
Conclusions
According to the National Survey of Occupation and Employment, less than 50% of Mexicans are registered in the social security system. Formal employment must outgrowth the informal sector for long enough, to revert that situation. However, as was presented above, overall growth is not enough. Policymakers should focus on its regional and gender distribution: the south needs steadier growth, avoiding reversals; and growth in formal employment should favor women. There is a vast literature covering formality in developing economies, but there is a long way ahead on both fronts.
References
- Alvarez, Jorge, and Carlo Pizzinelli. “Covid-19 and the Informality Driven Recovery: The Case of Colombia’s Labor Market.” IMF Working Papers 2021, no. 235 (September 17, 2021): https://doi.org/10.5089/9781513597805.001.
All opinions belong strictly to the author. It is not policy advice, nor my best attempt at studying labor markets.
