Unemployment Down in Mexico, but Informal Economy Up

Street vendors in Mexico are considered part of the informal economy. Photo: Google


The good news: The unemployment rate in Mexico fell to 3 percent in the fourth quarter of 2022, which was at the lowest levels, at least since 2005, when the National Institute of Statistics and Geography (Inegi) started recording unemployment rates.

The bad news? At the end of last year, more than 32 million people joined the informal economy, still according to the Inegi, which is 548,000 more than in 2021.

The decrease in unemployment occurred after “1.7 million people were incorporated into productive activity at the end of the year,” according to the National Occupation and Employment Survey (ENOE).

Humberto Calzada, chief economist at Rankia Latin America, attributed the data to the performance of the Mexican economy, which was better than expected in 2022, with a growth of around 3 percent.

“This is good news despite the situation with high inflation and high interest rates,” said Calzada, talking to Mexican business-focused newspaper El Financiero. “There is strengthening of internal demand in Mexico, and it is seen in sectors such as commerce and services.”

However, according to Leticia Armenta, director of economic analysis at Tec de Monterrey University, although the unemployment rate fell, one of the pressing concerns for Mexico in the coming years is the high level of informal labor and those joining the informal economy.

The informal economy, according to the International Monetary Fund (IMF), consists of activities that have market value but are not formally registered.

“We are going to begin to feel the impact of the informal economy later on, in five or ten years when the population stops being active and has no resources to support itself,” said Armenta. “It is a big social problem that is coming up.”

Gabriela Siller, director of economic analysis at Banco Base, said that informality is one of the main structural problems of the Mexican economy. “It implies that there are people who are self-employed: they do not have legal benefits, and they do not pay taxes either,” she said.

Those who work in the informal sector are considered vulnerable due to the nature of their work or business. Examples of those who work in the informal economy include informal transport workers, street vendors, hawkers at stoplights and even some construction workers and domestic helpers.

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