Employment and Unemployment in Mexico

Ana Revenga and Michelle Riboud undertook
a special analysis of spells of unemployment in
Mexico based upon the 1990 and 1991 Urban
Employment Surveys.5! They constructed a data
set consisting of cohorts that were followed over
the course of three to four quarters. They found
that the typical spell of unemptoyment in Mexico
lasted 5.7 months for men and 7.2 months for
women. This helps to explain the higher average
unemployment rate for women.

The mean duration of unemployment was
longer for workers over the age of 30 than for
younger workers, but it did not vary substantially
according to educational attainment. Heads of
households and individuals with household re-
sponsibilities tended to leave the ranks of the
unemployed faster than others. Fifteen to 20 per-
cent of Mexicans experienced at least one spell
of unemployment over the year. About one-quar-
ter of the spells of males and half of those of
females ended in withdrawal from the labor
force, but a large fraction of those who withdrew
reentered the work force within 3 months. Al-
though Mexico does not have unemployment
insurance, severance payments may help subsi-
dize part of a spell of unemployment. Of course,
these benefits apply only to workers in the for-
mal sector.

Ten complementary measures

Because of the inadequacy of the open unem-
ployment rate to realistically reflect the degree
of underutilization of labor and the demand for
jobs in Mexico, the Mexican Statistical Institute
decided to analyze underutilization using a vari-
ety of complementary rates of unemployment,
underemployment, and employment to income.
These rates are based on a combination of infor-
mation on job searches, hours worked, and in-
come from employment. Only one of the rates is
truly an alternative rate of open unemployment;
the others include different groups of the em-

ployed labor force whose work could be regarded
as unsatisfactory in terms of hours or earnings.
Mexican authorities use these rates to identify
the number of potential beneficiaries of employ-
ment policies developed by the Federal Govern-
ment.°? The rates are available from 1987 on-
ward, and they have been published by the
Mexican Statistical Institute since 1991.

Table 9 shows the annual figures for each of
the 10 complementary rates, as weil as the offi-
cial open unemployment rate, from 1987 through
the second quarter of 1994, Averages for 16 ur-
ban areas are shown for 1987 through 1993; in
addition, 1992 data covering 32-34 cities are
shown. In 1993, the data cover 34 to 37 cities,
and in 1994, 37 cities are covered. Based on 1992
and 1993 data on both 16 cities and more than
30 cities, the increase in coverage makes only a
slight difference in the rates.

The definitions of the rates are shown in the
box on page 24. For ease of discussion, these
tates will be referred to as R—] through R-11.
R-1 is the official open unemployment rate.
R-2 adds persons waiting to begin new jobs (a
group added in the adjustment to U.S. concepts)
and the hidden unemployed, defined as persons
who are available for work, but are not seeking
it. R-3 through R-5 are underutilization rates that
use job search as a proxy to define the pressure
of labor supply on the job market. R-6 through
R-8 use the number of hours worked to deter-
mine different degrees of underutilization. R-9
and R-10 are employment-income indicators that
consider wages relative to the minimum wage,
along with hours worked. R~10 is the only one
of the rates that does not incorporate the open
unemployment rate into its calculation, and it is
also the only rate that uses employment rather
than the labor force as the denominator. R11 is
a composite rate. Note that all references to past
or future time in the following analysis, without
any mention of a specific period from which that
time is calculated, are from the reference week.

Table 8. Unemployment rates in Mexico, by age and sex, larger urban areas,’ second-
quarter 1988, 1991, and 1993
lin percent)
1988 1991 1993
Age, years Total Men | Women | Total Men | Women | Total Men | Women
1Sandolder....[ 3.7 3.0 54 24 24 28 34 3.0 34
12 and older .. a7 3.0 50 24 22 28 34 34 3.4
12to19 78 67 9.9 62 64 66 85 65 65
12to 1 23 22 25 47 56 29 32 32 31
15014 86 74 10.9 64 61 7.0 69 7.0 67
20 to 24 64 52 82 37 37 37 5.6 49 68
25 to 54 24 18 28 15 1.3 19 2.0 20 20
55 and ol 26 24 38 6 5 9 1.3 17 2

‘Areas with 100,000 or more inhabitants and State capitals.

Source: National Employment Survey, 1989, 1991, and 1993.

22 Monthly Labor Review November 1994



Employment and Unemployment in Mexico

ployment during the 1980’s was widespread
throughout Latin America. PREALC has made es-
timates of various measures pertaining to the in-
formal sector based on household surveys con-
ducted in Argentina, Brazil, Chile, Colombia,
Costa Rica, Mexico, and Venezuela, which to-
gether account for 80 percent of the labor force
in the region.*® These estimates define informal
employment as the sum of own-account work-
ers (the self-employed), family workers, and per-
sons engaged in domestic service. They indicate
that urban informal employment grew from 26
Percent to 31 percent of the working population
in the preceding group of countries between 1980
and 1990. In addition, small enterprises in the
private sector employed 22 percent of nonagri-
cultural workers in 1990, up from 15 percent in
1980.

Sectoral employment shifts

Coinciding with the growth of the informal sec-
tor, the industrial sector (mining, manufacturing,
and construction) declined as a percentage of
total employment, while the share of employment
in service industries grew. Within manufactur-
ing, the maquiladora exporting industries gained
in their share of both jobs and gross domestic
product, but this sector still comprises a small
portion of total urban employment, although it
is significant in certain states and regions of the
country.

The rise in informality was accompanied by,
and indicative of, the shift from industry to serv-
ices as a source of both national output and em-
ployment. Industry’s share of gross domestic
product fell in 1982 and 1983, and did not re-
gain its level of 1981 until 1990. The following
tabulation shows a drop in the share of employ-
ment in industry from 1979 to 1991 at the na-
tional level.? The trend continued in 1993, when
Mexico’s service sector attained a 50-percent
share of employment. (The United States moved
over the 50-percent mark in the 1950s, and other
developed countries followed in the 1960's and
1970’s.)4°

1979° 1991 1993
Agriculture 290 27.0271
27.7 23.2 22.2
433 498 50.6

The decline in the employment share of the
industrial sector during the 1980’s is a signifi-
cant break with the previous historical trend.
According to the 1950 and 1970 population cen-
suses and the 1979 National Employment Sur-
vey, industry's share of employment rose from
1950 through 1979, mainly at the expense of the
agricultural sector.*!

16 Monthly Labor Review November 1994

In manufacturing, wage-earning jobs predomi-
nate, while in activities connected with serv-
ices—especially retail trade—autonomous work
(work on one’s own account) has an important
relative weight. Thus, the decline in manufac-
turing jobs and the increase in service sector jobs
were trends behind the growth in nonpaid work
in Mexico during the 1980's.

The Monthly Industrial Survey of manufac-
turing establishments excludes the maquiladora
plants and most smaller enterprises. An indica-
tor of formal sector employment trends, this sur-
vey has shown a declining trend in employment
from 1982 through 1992 in every one of its nine
major economic divisions, except chemicals and
petroleum derivatives. By the latter year, the
number of employed workers was 12 percent
below the 1982 level. Losses were greatest in the
basic metals industry, followed by the textile in-
dustry, the apparel and leather industry, and the
metal products and equipment industry. Accord-
ing to Rendon and Salas,*? the most modern indus-
tries, as well as those most backward in technol-
ogy, had a diminished capacity to create jobs. The
more modern sectors lost jobs because of the intro-
duction of new technologies, which was acceler-
ated by international competition, while the remain-
ing sectors lost jobs because of their inability to
compete under conditions of crisis and open trade.

There were underlying forces at work in
Mexico that are generally common to the course
of economic development. Labor flows out of
the agricultural sector and into industry and serv-
ices, as workers move from rural to urban areas.
Eventually, at a much later stage, the industrial
sector begins to lose ground in its share of total
employment. The United States entered the lat-
ter stage some years ago, and the service sector
now employs about 70 percent of all workers.
Mexico’s development pattern appears to have
been interrupted in the 1980's, with a premature
fall in the industrial share of employment.

Maquiladoras

Mexico established the maquiladora program in
1965 to promote foreign investment and jobs in
the country. The program allows duty-free im-
ports of equipment and materials to Mexico for
assembly and reexport. The majority of firms
established under the maquiladora program are
subsidiaries of U.S. parent companies. Almost
all of the materials and components used in the
production process at maquiladoras are provided
by U.S. suppliers and are returned to the United
States as finished goods. Auto parts plants em-
ploy about one-fourth of all maquiladora work-
ers, and they constitute the fastest growing
maquiladora industry.



Employment and Unemployment in Mexico

openly unemployed, plus employed persons,
other than unpaid family workers, who earned
less than the monthly minimum wage in current
prices.>4 Income below the monthly minimum
wage (or a specific multiple thereof) is used as a
proxy for insufficient income in Mexican labor
policy. R-9 combines all full-time and part-time
workers who earned less than the monthly mini-
mum wage, even though a major reason that part-
time workers receive low monthly incomes is that
they worked reduced hours. Also, the rate ex-
cludes unpaid workers. R-9 has declined from
about 8 times the open unemployment rate in
1987 to about 4 times that rate in 1992 and
3-1/2 times the rate in 1993-94.

R-9 fell by more than half from 1987 to 1993.
However, part of the reason for the decline is that
the current (nominal) minimum wage is used in
the calculation, rather than an inflation-adjusted
(real) minimum wage, and minimum wages have
not kept pace with inflation. Further information
on this point, including an adjustment of R-9
for inflation, is given after the discussion of R-10,
which also uses a minimum-wage criterion.

R-10. The critical conditions of the employed
rate combines the measure of reduced hours for
economic reasons with a measure of economic
hardship in work. It uses total employment as
the denominator, whereas the previous indica-
tors used the labor force (except for R-2, which
added the hidden unemployed to the labor force).
Unlike the previous nine indicators, R-10 does
not include the open unemployment rate in the
numerator. The numerator comprises three
groups: (1) employed persons who worked 1, but
less than 35, hours a week for economic reasons;
(2) those who worked more than 48 hours a week
while earning between | and 2 times the mini-
mum wage; and (3) persons who worked more

than 35 hours a week while earning less than the
minimum wage. Unpaid workers are not included
in the calculations. This rate has decreased consid-
erably over the years, for the same reasons that R-
9 fell, but it remains much higher than the open
unemployment rate. R-10 dropped from almost 7
times the open unemployment rate in 1987 to be-
tween 3 and 4 times the open rate in 1992-94,

R-9 and R-10 define a relationship between
employment and income. Both rates are more like
measures of economic hardship than of job mar-
ket efficiency. They share one major problem:
the use of the current, rather than the inflation-
adjusted, minimum wage.

During the 1980's, inflation led Mexican la-
bor unions to call for increases in the minimum
wage to keep up with the rising cost of living.
The amount of pesos paid for the minimum wage
rose, but increases lagged well behind the infla-
tion rate, as labor demands were moderated by
“Solidarity Pacts.”55 When inflation is taken into
account, the minimum wage in 1993 was only
40 percent of the 1980 level and two-thirds of
the 1987 level. (See table 10.)

The minimum wage is not a consistent bench-
mark for a “sufficient” wage. Fewer people ev-
ery year are paid less than the current minimum
wage. Table 11 shows that the percent of em-
ployed persons earning less than the minimum
wage in early 1994 was about 30 percent of its
1987 level. This does not reflect the bettering of
a worker’s well-being, however. To keep up with
inflation, a person earning the minimum wage
in 1987 would have needed 1.5 times the mini-
mum wage in 1993.

In response to this problem, the Mexican Sta-
tistical Institute has furnished tabulations of
R-9 and R-10 adjusted for inflation—that is,
using an income cutoff based on what the mini-
mum wage would need to have been in 1988-94

Table 11. Percentage distribution of the employed population in Mexico, by multiple of
minimum wage earned in previous month, 1987-94, urban areas’

Un percent}
Betweent | Greater than
Year Received | inna than | | _and 2 times twice Unspecified
‘9° | minimum wage | minimum wage

49 28.1 48.0 174 18
54 19.0 51.1 22.2 26
49 158 48.1 286 26
46 12.2 455 34.8 29
45 94 43.6 387 39
49 83 39.3 447 29
53 a4 33.2 488 34

1994 (first quarter) 54 a2 33.3 49.2 39

2 Nonrenumerated family and nonfamily workers.

‘ Covers 16 urban areas in 1987-91, 32-34 in 1992, 34-37 in 1993, and 37 in 1994.

‘Sources: Mexican National Statistical Institute, Avance de informacién econémica, empleo, May 1992, December 1992,
and June 1993, table 9; Cuaderno de informacién oportuna, January 1991, November 1993, and May 1994, table 2.13.

26 Monthly Labor Review November 1994



ing less than 15 hours a week, who are now counted
as employed, were potentially unemployed in the
previous surveys; that is, they were counted as un-
employed if they were seeking work or waiting to
begin a new job. Thus, in comparison with the ear-
lier surveys, the current series of urban surveys, by
definition, undercounts unemployment.

Censuses of population. Decennial population
censuses are conducted in Mexico. Considerable
care must be taken in interpreting these data,
given different definitions and classifications of
individuals over time within different censuses.
No direct comparability exists between the cen-
suses and the labor force surveys.

Some data from the 1950, 1960, 1970, and
1990 censuses are used in this article. The popu-
lation census of 1980 experienced a major set-
back. The 1980 census questionnaire was de-
signed to yield rather detailed information, and
it was, consequently, much more complex than
in previous censuses. Difficulties arose in col-
lecting the information, as well as in coding and
processing it. A large number of inconsistencies
were found. For many of the labor force charac-
teristics at the national level, the proportion in
the “unspecified” category was almost a third of
the total labor force.

AUS. Census Bureau study of Mexican la-
bor force data recommends use of the 1979 Con-
tinuous Occupational Survey in place of the 1980
population census. In their detailed analysis of
the 1980 census, Teresa Rendén and Carlos
Salas'* point out the reasons for the overcount
of the economically active. Their critique ex-
plains the problems with the questionnaire that
produced many of the data irregularities.

The 1980 census results had been used ini-
tially as a baseline for the household surveys of
the 1980’s, Because of the problems with that
census, all data from household surveys con-
ducted during the 1980’s have been published as
percentages, rather than absolute levels. A project
by the Mexican Statistical Institute to recaleu-
late the levels is under way.'5

Problems also exist with the earlier Mexican
population censuses. All of them generally de-
fine the employed as persons 12 years of age and
older who, during the reference week, worked 1
or more hours in exchange for income or were
doing unpaid work of 15 or more hours in a fam-
ily firm or business. Those temporarily absent
from work were included as employed in the
1970 and later censuses, but were not counted as
employed in the earlier ones, unless they had a
paid job. Thus, there is some degree of under-
count in the 1950 and 1960 census-based labor
force figures, in comparison with those of later
censuses.

The population censuses define the unem-
ployed as all persons aged 12 and older who are
without work, but who are seeking it. However,
there are no tests of whether one is actively seek-
ing or available for work. The Urban Employment
Surveys since 1985 and the National Employment
Surveys, which began in 1988, provide a much
better basis for determining labor force status.

National surveys. In place of the 1980 popula-
tion census, the 1979 Continuous Occupational
Survey is used as the base-year source in this
article’s analysis of trends over the decade of the
1980's. That survey represented an expansion at
the national level of the ongoing metropolitan
employment surveys carried out since 1973. Al-
though the results lack the comprehensive cov-
erage of a census, they appear reasonable in light
of Mexico’s development pattern in the 1970’s
and the experience of similar countries, accord-
ing to the U.S. Census Bureau.'®

In the second quarters of 1988, 1991, and
1993, National Employment Surveys were con-
ducted in larger urban areas, as well as smaller
urban and rural areas. (Henceforth, these surveys
will be conducted biennially.) The urban com-
ponent of this survey uses the same question-
naire as the aforementioned quarterly Urban
Employment Survey, but it has a somewhat dif-
ferent geographic coverage, which is represent-
ative of all areas with 100,000 or more inhabit-
ants. (The Urban Employment Survey presently
covers some of the smaller urban areas, as well
as the larger areas.) A special questionnaire was
used in the less urbanized areas to capture infor-
mation about agricultural and related occupations.
This questionnaire uses slightly different definitions
from those of the regular survey, to take account of
conditions in such areas. For example, persons
waiting to return to work within a 7-week period
are classified as employed in the less urbanized
areas, whereas a 1-month cutoff is used for the larger
areas. The Mexican Statistical Institute notes that
the impact of this difference is insignificant.

The 1979 Continuous Occupational Survey is
not completely compatible with the later series
of national surveys. The following differences
should be noted:

© The first question in the 1979 survey is “What
did you do during most of last week?” Accord-
ing to the Mexican Statistical Institute, this
type of question presents the difficulty that re-
spondents may favor their state of “inactivity”
(for example, as a housewife or student) over
their state of activity. Thus, even though some
further questions were asked to determine
whether the person had also done some work
or looked for work in the reference period, the

Monthly Labor Review November 1994. 7



Table 9. Unemployment rates and underutilization rates In Mexico, urban areas, 1987-94
[In percent]
a4 R2 E*) R-4 RS RS RT Ro Re R10 Ao
Part-time Insut-
Parvtime| tor | Parttime | tictent | critical | General
Geographic | Open alternative! Real Real | General |<15 hours) 6 onomic |< Urs! income |conditions| rate of
coverage, year! unem- | unem- [economic |preference| pressure | and | "Toacong | and ‘and ‘ofthe | employ-
and quarter | ployment | ployment | pressure | pressure | rate |unemploy-| “44 loyment | Unem- | employed] ment
rate rate rate rate ment |unemploy-| PVE" | ployment | rate | needs
rate | ment rate rate
16 urban areas:
1987. .| 39 6.0 54 61 74 79 66 23.3 30.8 30.5 13.5
1988. 36 5.3 49 58 7A 75 61 23.1 21.8 22.9 127
1989. 30 44 44 48 58 68 5.3 21.0 18.3 20.1 11.0
1990 . 28 44 a6 42 54 61 49 20.5 14.6 16.8 10.0
1991. 26 42 35 40 48 61 48 208 41.7 14.3 99
1992 . 29 46 49 43 54 68 52 21.6 10.6 13.8 10.8
1993... 3.6 56 49 55 68 79 63 23.2 12.3 14.0 13.2
32-37 urban
areas:
1992! 28 48 40 44 55 65 5.3 216 10.9 14.4 112
1993? 34 56 48 5.3 66 77 63 23.0 12.4 14.2 134
Quarter
I. 35 58 47 53 65 76 63 23.5 13.0 14.8 129
We 32 53 45 48 6.1 74 61 23.5 12.4 14.3 124
me 37 6.0 53 57 72 78 66 214 123 44.1 13.6
WV. 33 5.4 47 54 67 8.0 62 23.7 11.8 13.7 13.5
199°
Quarters:
1 37 5.8 48 55 66 at 63 224 13.3 13.1
" 35 61 44 53 6.3 79 61 23.9 144 13.3
1 Average calculated from first two quarters covering 32 cities and last two quarters covering 34 cities.
2 Covers 34 cities in first quarter, 35 in second, 36 in third, and 37 in fourth.
2 Covers 37 cities,
Nore: See box on page 24 for full definitions of the rates.
Source: Mexican Statistical Institute, Encuesta Nacional de Empleo Urbano, indicadores complementarios, June 1994. The complementary indicators
are also published by the Statistical Institute in table 2.16 of the monthly Cuaderno de informacién oportuna,

R-1. The first of the 11 rates listed in table 9 is
the conventional unemployment rate, or open
unemployment rate. This rate includes only those
individuals who have actively searched for work
in the past 4 weeks (or in the past 2 months un-
der certain circumstances). As noted earlier, per-
sons beginning a new job or returning to a job
within 1 month are not counted as unemployed;
rather, they are included among the employed.
Also, persons on long-term layoff who have not
participated in any job search are not included
in the open unemployment rate. R-1 fell from
3.9 percent in 1987 to 2.6 percent in 1991. It then
rose to more than 3 percent in 1993 and early
1994,

R-2. R-2is the alternative unemployment rate,
comprising the sum of the openly unemployed,
individuals waiting to begin a new job or busi-
ness in the next month, and the hidden unem-
ployed, as a proportion of the total labor force
plus the hidden unemployed. The hidden unem-
ployed include two groups: (1) persons who
looked for work in the past 2 months, but did not
seek work in the past month because they thought

they could not find work; and (2) persons who
did not seek work in the past 2 months because
they thought they could not find work or because
they were waiting for (a) the end of a strike or
suspension of work, (b) the next season to be-
gin, (c) a response to a job application, or (d) a
call to work from an employer in the next 3
months. Thus, R-2 incorporates an element of
the adjustment to U.S. concepts presented ear-
lier, by including persons waiting to begin anew
job; however, it goes beyond the adjustment by
including the hidden unemployed, a group akin
to discouraged workers in the United States.53
In 1991, the hidden unemployed in Mexico ac-
counted for only about 1 percent of the labor
force, and their rates for other years were prob-
ably in the 1-percent to 2-percent range. In
Mexico, few people can afford to be “discouraged”
and neither work nor seek a job.

It should be noted that the category of “per-
sons waiting to begin a new job” does not in-
clude persons not at work and without pay, but
who are going to return to work in at most 4
weeks. Therefore, excluded from R-2 are per-
sons on temporary layoff (part of the earlier ad-

Monthly Labor Review November 1994 23



2® See the analysis of several Latin American countries in
Employment Outlook (Organization for Economic Coopera-
tion and Development, July 1994), pp. 33-48; and Ricardo
Infante and Emilio Klein, “The Latin American Labour
Market, 1950-1990,” in CEPAL Review, December 1991,
pp. 121-35. CEPAL Review is a publication of the United
Nations Economic Commission for Latin America and the
Caribbean based in Santiago, Chile.

21 Economically Active Population: Estimates and Pro-
jections, 1985-2025 (Geneva, Intemational Labor Organi-
zation, 1986), pp. 7, 67-69.

2 Bryan R. Roberts, “The Dynamics of Informal Employ-
ment in Mexico,” in Work without Protections, pp. 119-21.

2 Discussions of the various definitions of the informal
sector may be found in Clara Jusidman, The Informal Sec-
tor in Mexico, Occasional Paper Number 1, prepared for the
U.S. Department of Labor and Secretariat of Labor and So-
cial Welfare of Mexico, September 1992. A Spanish ver-
sion of this report was also published: El sector informal en
México (Mexico City, Secretaria del Trabajo y Previ
Social, Subsecretarfa “B,” 1993); Edgar Feige, “Defining
Underground and Informal Economies,” World Development,
July 1990, pp. 989-1002; The Dilemma of the Informal Sec-
tor, Report of the Director-General, Part | (Geneva, Inter-
national Labor Organization, 1991); Harold Lubell, The In-
formal Sector in the 1980's and 1990's (Paris, Organization
for Economic Cooperation and Development, 1991); and
Alejandro Portes, Manuel Castells, and Lauren A. Benton,
eds., The Informal Economy: Studies in Advanced and Less
Developed Countries (Baltimore, The Johns Hopkins Uni-
versity Press, 1989).

% For a discussion of the origins of the concept of the
informal sector, see Lisa Peat “An Idea in Good Cur-
rency and How It Grew: The Informal Sector,” World De-
velopment, Vol. 15, No. 7, 1987, pp. 851-60.

25 Roberts, “Informal Employment in Mexico,” p. 102.

26 For a description of Mexican labor law, see Nestor de
Buen Lozano and Carlos E. Buen Unna, A Primer on Mexi-
can Labor Law (Bureau of International Labor Affairs,
1991). This is an edited English version of a paper titled
“Régimen juridico de proteccién de los trabajadores en
México.” See also U.S. Department of Labor and Secretariat
of Labor and Social Welfare of Mexico, A Comparison of
Labor Law in the United States and Mexico: An Overview
(U.S. Department of Labor, 1992).

2 Mesa-Lago, “The case of Mexico,”p. 43.

8 Jusidman, Informal Sector in Mexico, p. 53.

% For a discussion of the concepts and results of these
earlier surveys, see Jusidman, informal Sector in Mexico,
pp. 14-20. See also the discussion of the 1992 survey in
Teresa Rendén and Carlos Salas, “Necesidades de
informacién sobre las actividades de pequefia escala en
México,” unpublished report for the joint project of the
Autonomous University of Mexico and the Secretariat of
Labor and Social Welfare of Mexico, 1991; and Mesa-Lago,
“The Case of Mexico," pp. 67-75.

3° Mexican National Statistical Institute and Secretariat
of Labor and Social Welfare, Encuesta nacional de
micronegocios 1992 (Aguascalientes, Mexico, Instituto
Nacional de Estadistica, Geografia e Informatica, 1994),

3 Jusidman, Informal Sector in Mexico, pp. 17-18.

32. Mertens and J. Richards, “Recession and Employ-
ment in Mexico,” International Labour Review, Vol. 126,
No. 2, March-April 1987, p. 237; Victor E. Tokman, “The
Employment Crisis in Latin America,” International Labour
Review, Vol. 123, No. 5, September—October 1984, p. 589.

23 Employment Outlook, p. 37.

+ Teresa Rendén and Carlos Salas, “El empleo en México
a partir de los ochenta: tendencias y cambios,” Comercio
exterior, Vol. 43, No. 8, August 1993, p. 729.

35 copcamaR is a decentralized agency created to provide
social protection (health, nutrition, housing, and education)
to people in marginal rural zones, Its actions are coordi-
nated with those of the Mexican Social Security Institute.
The copamar market basket estimates the essential needs for
a family of five comprising two adults and three children.

36 Rendén and Salas, “El empleo en México,” p. 730.

37 Based in Chile, reac is one of four regional 110 cen-
ters in Latin America that conduct technical cooperation
projects. The main objective of pREALC is to collaborate with
governments and employers’ and workers” organizations in
the development of policies and measures to help improve
employment and incomes and to reduce unemployment,
underemployment, and poverty.

38 International Labor Office, Report of the Director-Gen-
eral, 13th Conference of American States, Members of the
International Labor Organization, Caracas, September-
October 1992, pp. 12-14, See also Infante and Klein, “Latin
American Labour Market.”

2° Part of this drop may reflect better enumeration of more
marginal workers in commerce and other services in the later
surveys.

“ See Todd Godbout, “Employment change and sectoral
distribution in 10 countries, 1970-90." Monthly Labor Re-
view, October 1993, pp. 3-20, especially pp. 7-12; for an
analysis of trends from 1950 to 1970, see Constance
Sorrentino, “Comparing employment shifts in 10 industri-
alized countries,” Monthly Labor Review, October 1971, pp.
311.

4" Jusidman, Informal Sector in Mexico, p. 4b.

“2 Rendén and Salas, “El empleo en México,” p. 727.

43 Teresa Rendén, “El trabajo femenino en México en el
marco de la transformacién productiva con equidad,” un-
published paper prepared for the Economic Commission for
Latin America and the Caribbean, May 28, 1993,

“Rendén and Salas, “El empleo en México,” p. 727.

“5 The United States, in common with a number of other
countries, including Australia and Canada, treats persons
on layoff as unemployed. In most European countries and
Japan, however, persons on layoff are classified as employed
because they have a formal job attachment. These different
treatments of layoffs are in accord with current 1L0 guide-
lines, which allow for different classifications of layoffs,
depending on job attachment, with strong job attachment
leading to classification as employed.

“6 In the redesigned U.S. Current Population Survey in-
troduced in 1994, persons classified as unemployed because
they are on layoff must either have a specific date of recall
to work or expect to be recalled within the next 6 months.

*"It should be noted that, unlike Mexico's survey, there is
no question in the U.S. survey that directly asks whether
persons are waiting to begin a new job, The information
emerges from a question on the reason for having a job but
being absent from work, in both the new and the old Cur-
tent Population Survey. (See the appendix for a description
of the Mexican survey questionnaire procedure.)

#8 If all unpaid family members who worked less than 15
hours (including those who did not work at all) during the
teference week had also searched for work, their addition
to the count of the unemployed would raise the adjusted
1993 rate further, to 6.1 percent. By either measure, the
Mexican unemployment rate was below the U.S. rate of 6.8
percent that year,

9 Dilemma of the Informal Sector, p. 10.

Monthly Labor Review November 1994 29



employment, but it, too, fails to request the rea-
son why the respondent desires a new job. R-4
is higher than R-3 and tends to be 50 percent to 60
percent higher than the open unemployment rate.

R~5. The general pressure rate is the percent
of the labor force that is openly unemployed, plus
all employed persons who actively looked for
work in the past 2 months, for whatever motive.
Thus, R-5 combines R-3 and R-4. Like those
rates, it does not probe into the reasons why per-
sons are looking for a new job or second job.
R-5 tends to be almost double the open unem-
ployment rate.

R-6. R-6 is the part-time less than 15 hours
and unemployment rate. This is the percent of
the labor force that is openly unemployed, plus
those who are employed but who worked at least
1, but less than 15, hours in the reference week,
for whatever reason. Thus, it includes persons
working shorter hours due to vacation or illness,
as well as those working shorter hours for lack
of employment opportunities. The Mexican defi-
nitions of employment and unemployment in-
clude as employed all persons who worked at
least 1 hour in the reference week, even if they
were also looking for work. This is in accord with
ILO definitions, which incorporate all economic
activities within the employment concept, no
matter the length of time they are performed. This
definition results in the inclusion among the em-
ployed of persons working in very marginal jobs.

It should be noted that R-6 does not encom-
pass persons who did not work at all in the refer-
ence week. This point was made in the discus-
sion of R-2 with regard to unpaid persons who
were waiting to return to their jobs within 4 weeks.
Itseems that such persons should be included some-
where in the array of complementary indicators,
either in R-2 or in R-6, If R-6 included all persons
classified as employed who did no work at all in
the reference week, it would be increased substan-
tially in 1993, raising it from nearly 8 percent into
the | 1-percent to 12-percent range.

R-6 tends to be more than double the open
unemployment rate. It indicates that a substan-
tial number of Mexicans are working only a
marginal number of hours per week. (Adding in
all the persons who did not work at all during
the reference week would result in R-6 being
triple the open unemployment rate.) There is no
indication in R-6, however, as to whether these
persons want to work more hours or are looking
for another job. Such persons would be enumer-
ated under R-3 through R-5.

R-7. The part-time for economic reasons and
unemployment rate includes employed persons

who are working 1, but less than 35, hours a week
for economic reasons, plus the openly unem-
ployed, as a proportion of the labor force. Per-
sons working part time for economic reasons are
defined as those who work less than 35 hours a
week due to a reduction in production, lack of
materials, or breakdown of equipment. Not in-
cluded in R-7 are other groups that are encom-
passed in this definition in the United States—
that is, persons who could find only part-time
work and persons losing hours due to the start or
end of a job. These concepts of involuntary part-
time work are not developed in the Urban Em-
ployment Survey.

R-7 tends to be 70 percent to 90 percent higher
than the open unemployment rate. As with R-2
and R-6, R-7 excludes persons who did not work
any hours at all for economic reasons.

R-8. R-8, the last of the “hours worked” rates,
is the part-time less than 35 hours and unem-
ployment rate. It is the percent of the labor force
that is openly unemployed, plus all persons who
worked 1, but less than 35, hours, either volun-
tarily or involuntarily. R-8 includes all employed
persons who worked jess than 35 hours for eco-
nomic reasons, personal reasons, or the nature
of their job. Between one-quarter and one-fifth of
the Mexican labor force is in this group. R-8 is 5
times to 7 times the open unemployment rate, and
since 1988, it has been the highest rate in the array.

R-9. The insufficient income and unemploy-
ment rate is the portion of the labor force that is

Table 10. Official daily minimum wage in Mexico, in current and
constant terms, 1980-94
Average dally Average dally
Year minimum wage | National consumer | minimum wage
in current (1987 = 100) in constant
pesos’ 1987 pesos

1980 . 141 23 6,130
1981. 183 28 6,536
1982. 257 44 5,841
1983 432 89 4,854
1984 . 666 14.7 4,531
1985... 1,036 23.2 4,466
1986... 1,769 43.1 4,104
1987. 3,855 100.0 3,855
1988 . 7,218 214.2 3,370
1989 8,133 257.0 3,165
1990... 9,414 325.5 2,892
1991... 11,017 399.3 2,759
1992 .. 12,084 461.2 2,620
1993... 13,060 506.2 2,580
1994 .. 13,970 ® ®

* National average minimum wage for three geographic areas combined. The minimum
wage is for a day's work; however, workers are paid each week for 7 days (6 days of work
and 1 day of rest).

? Not available.

Source: Mexican National Statistical Institute, Cuaderno de informacién oportuna, vari-
ous issues,

Monthly Labor Review November 1994 25



Employment and Unemployment in Mexico

Table 6. Adjustment of Mexican unemployment rates to U.S. concepts, larger urban areas,’ second-quarter 1988,
1991, and 1993
1988 1991 1993
Category
Total Men Women | Total Men Women | Total Men Women
Reported unemployed........ | 494,316 | 266,862 | 227,454 | 352,114| 209,144 | 142,970 | 490,941 306,703 | 184,238
Plus:
Persons on temporary
layoff........ se | 121,553] 80,929} 40,624 | 142,141] 93,959} 48,782 | 190,986] 126,266 | 64,680
Persons waiting to start an
job in 30 days... 108,069] 65,379] 42,690 92,311] 58,347] 33,964] 94,197] 61,298} 32,959
Adjusted unemployed - 723,938 413,170 | 310,768 | 586,566] 360,850 | 225,716 | 776,104] 494,227| 281,877
Reported tabor force.......... 13,342,433 | 8,834,563 | 4,507,870 | 14,706,007 | 9,617,006 | 5,089,001 | 15,705,194 | 10,220,312 | 5,484,882
Minus unpaid family workers
working less than 15
hours per week? 161,092] 70,949] 90,143 | 140,708; 57,898 | 82,900 | 180,419| —77,940| 102,479
Adjusted labor force 13,181,341 | 8,763,614 | 4,417,727 | 14,565,209 | 9,559,108 | 5,006,101 | 15,524,775 | 10,142,372 | 5,382,403
Unemployment rat
37 3.0 5.0 24 22 28 34 3.0 34
5.5 a7 7.0 40 38 45 5.0 49 52
Ratio of adjusted to reported
unemployment rate . . 15 1.6 1.4 17 17 16 16 16 16
Areas with 100,000 or more inhabitants and State capitals,
2 Predominantly unpaid family workers; however, a few nonfamily workers are included.
‘Source: National Employment Surveys, 1988, 1991, and 1993.

and persons on temporary layoff who expect to
retum to work in 4 or less weeks and (2) omit-
ting from the labor force unpaid family mem-
bers working less than 15 hours or not at work
during the reference week. Because the former
category of unpaid family workers represents
only those who are potentially unemployed un-
der U.S. concepts, they have not been added to
the unemployment adjustment, but the effect of
including them can be calculated.**

In the second quarter of 1993, the reported
urban unemployment rate of 3.1 percent is raised
to 5.0 percent when adjusted to U.S. concepts.
This is still well below the U.S. rate of 6.8 per-
cent that year, In the 3 years for which adjust-
ments are shown, the Mexican rate is adjusted
upward by 50 percent to 70 percent when U.S.
concepts are applied.

It is impossible to say what the Mexican un-
employment rate would be using the current U.S.
definition, which requires a job search on the part
of persons waiting to start a new job. Persons in
this situation are not asked the question on job
search; therefore, there is no information on this
point. In the United States, most persons wait-
ing to start a new job have engaged in a job search
in the previous 4 weeks; hence, most are included
among the unemployed. It is likely that Mexi-
cans in the same situation also engaged in a job
search in the previous 4 weeks.

Concerning the difference in age limits be-
tween the Mexican and U.S. surveys, in Mexico,
persons 12 to 14 years had a higher than average

20 Monthly Labor Review November 1994

unemployment rate in 1991 (4.7 percent), but a
rate about the same as the overall rate in 1993.
Their numbers are small, so that their exclusion
from the ranks of the unemployed would not
change the adjusted unemployment rates.

Although the adjustment to U.S. concepts in-
creases the Mexican unemployment rate, it re-
mains low in comparison with the rates of most
developed countries, with the exception of Ja-
pan. However, concepts applicable to the devel-
oped countries are inadequate for measuring con-
ditions in a labor market like Mexico’s. The
complementary indicators discussed later are
more appropriate for measuring the under-
utilization of labor in Mexico.

Composition of open unemployment

The most common reason given for low unem-
ployment rates in Mexico is the lack of unem-
ployment insurance or any other Government
safety net for the unemployed.4? Labor law in
Mexico requires employers to pay dismissed
employees a lump sum equal to 3 months’ pay
plus 20 days’ pay for each year of service. But
this law is applicable only in the formal sector
of the economy. There is no national or state sys-
tem of unemployment insurance.5?

In the United States, typically about one-third
of unemployed persons are receiving unemploy-
ment benefits at any given time, although this
proportion rose in 1991-92 to one-half because
of the State and Federal extended benefit pro-



Employment and Unemployment in Mexico

sector stemmed unemployment in that sector. The
decline in wage employment was more than com-
pensated for by an expansion in other types of
employment. The industrial sector declined in
its capacity to create jobs, while the service sec-
tor expanded. These trends represented a break
with the past few decades, which had seen in-
creases in wage and salary work and in the em-
ployment share of the industrial sector.

Fueled by a relatively young population flow-
ing into working ages and the need for work by
more family members to sustain their families”
income, Mexico's labor force increased its num-
bers very rapidly during the 1980's. The country’s
economy absorbed the growing labor force
mostly into employment status, rather than open
unemployment status, during the recessionary
years of the 1980’s. Jobs were created mainly in
the informal sector of a dual labor market.

The dual labor market

The dual market concept of a formal and an in-
formal sector is not simple to define or measure.
A concept of the informal sector was first pro-
posed by experts from the International Labor
Organization (ILO) in the early 1970's, after com-
pleting several missions to evaluate the employ-
ment situation in developing countries.”* There
was general dissatisfaction with existing concepts
of unemployment and underemployment to ex-
plain the situation that characterized Third World
labor markets. The authors of the ILO study pro-
posed the use of the term informal to define those
activities carried out by the urban working poor.
There was no precise definition; rather, informal
activities were defined by the way things were
done and characterized by such elements as ease
of entry into the marketplace, small size, scar-
city of capital, and family ownership of busi-
nesses. Thus, the concept of the informal sector
is imprecise, and it involves overlapping catego-
ries, making it difficult to measure.

Although the term informal sector is useful in
describing conditions of establishments, it does
not describe employment conditions. Ambigu-
ities often occur between the use of the term in-
formal sector, as just described, and the use of
the term informal worker, describing those whose
conditions of employment are not covered by
labor laws. Informal workers experience condi-
tions of employment that are precarious and un-
stable. On the one hand, the business of a shoe-
maker who employs five or fewer workers would
be considered an informal sector business be-
cause of its small size and lack of technology.
However, if the shoemaker abides by labor laws
and pays payroll taxes and the minimum wage,
the workers would not be considered informal

12 Monthly Labor Review November 1994

workers. On the other hand, a large-scale formal
sector enterprise may hire pieceworkers to as-
semble goods—for example, toys, radio trans-
mitters, or batteries—in their homes. Such work-
ers are often hired “off the books,”?5 and when
they are, they should be categorized as informal
workers because they do not receive the employ-
ment protections characteristic of workers in the
formal sector.

Mexico has extensive labor Jegislation (laws
pertaining to minimum wages, limits on hours
worked, pay for overtime, and so on) that is ap-
plicable to all types of workers, including do-
mestic service workers, home workers, and part-
time workers. In addition, the local and central
governments place health and safety require-
ments on enterprises.?® However, a high propor-
tion of informal enterprises operate outside these
boundaries, and a significant amount of infor-
mal employment occurs in large-scale formal
enterprises. Trade unions and social security pro-
tection are rarely found in the informal sector.
Recent research shows that the bulk of informal
sector enterprises lie in an intermediate zone
between the extremes of complete legality and
illegality, selectively fulfilling some legal re-
quirements while avoiding others.?”

Size of the informal sector. There have been a
number of surveys in Mexico designed to meas-
ure aspects of the informal sector. Historical com-
parison of available estimates of informal employ-
ment is very difficult because of methodological
and definitional differences in the various sur-
veys, but indications are that the sector is large
and that it grew during the 1980's.

One study uses the results of the 1988 National
Employment Survey to illustrate a range of esti-
mates that can be made of the proportion of total
nonagricultural employment in the informal sec-
tor, depending on the definition of informality
chosen.”* The study cites the following figures:

© 26.1 percent: the sum of those employed in
domestic services, the self-employed, and un-
paid workers, but not those engaged in activi-
ties considered formal, such as professionals
who are self-employed, and not double count-
ing domestics who are also self-employed;
33.6 percent: based on those workers with no
reported earnings (unpaid workers) and those
with earnings under the legal minimum wage;
38.5 percent: based on those working in en-
terprises with five or fewer workers;

37.9 percent: based on a special definition that
combines size of establishment with catego-
ties of employment. This definition incorpo-
rates the following groups: all domestics; em-
Ployers, wage earners, and pieceworkers in

+


lation is under the age of 12, and 58 percent is
under the age of 25. By contrast, 36 percent of
the U.S. population is under 25. Less than 5 per-
cent of the Mexican population is 65 years or older,
in contrast to 13 percent of the U.S. population.

Participation rates. Mexico’s labor force sta-
tistics use age 12 as the lower age limit, even
though Mexican labor laws prohibit individuals
under 14 years of age from taking paid work and
establish restrictions on work for teenagers aged
14 to 16 years.!? The 1990 census found that
about 45 percent of Mexico’s child workers are
agricultural workers, generally assisting their
families. Many minors also work in the urban,
informal sector of the economy, which is unregu-
lated; the activities in which these children en-
gage generally are not reported to legal authori-
ties or are exempted from such reporting. Thus,
a significant number of 12- to 14-year-olds are
enumerated as employed in the Mexican labor
force surveys.

All other OECD countries use age 15 or 16 years
as the lower limit of the labor force. In what fol-
lows, Mexico’s participation rates will be pre-
sented using both the 12-year and 15-year lower
age limits. For international comparisons, the 15-
year-old limit is the preferred basis. However,
all other data presented in this article will retain
the lower age limit of 12. The following tabula-
tion compares national participation rates for the
United States and Mexico for various age groups
in 1993 (note that the U.S. statistics enumerate
the labor force 16 years and older):

United States Mexico

12 years and older . 55.2

12 to 14 years . 19.6
15 to 16 years* and

older .............. 66.2 59.4

15-16" to 64 years .. 76.7 61.3

15-16" to 19 years . 51.5 47.5

20 to 24 years..... THA 63.6

25 to 54 years . 83.5 66.8

55 to 64 years..... 56.4 54.5

65 years and older . . 11.3 35.5

“15 years for Mexico; 16 years for the United States.

In 1993, the overall labor force participation
tate in Mexico was 55 percent, based on a work-
ing population aged 12 years and older. The rate
was the same for the larger urban and smaller
areas. At 66 percent, the U.S. participation rate
(for those aged 16 years and older) was much
higher than Mexico’s. Because participation rates
for the 12- to 14-year-old age group were low
(about 20 percent) in 1993, Mexico’s participa-
tion rate recalculated to cover only the popula-
tion aged 15 years and older rises to 59 percent.
Participation rates for teenagers and young adults

were higher in the United States, but rates for
the elderly were higher in Mexico. The higher
rates for older Mexicans reflect the low cover-
age Mexicans have for social security pensions:
only about half of the Mexican population and about
40 percent of the labor force were insured by the
Mexican Social Security Institute in 1988.18

The population in the primary working ages
of 25 to 54 years had a much higher participa-
tion rate in the United States than in Mexico. This
was due to the much lower labor force participa-
tion rate of Mexican women in this age group;
virtually all primary-aged men in Mexico were
in the labor force.

The participation rate for men aged 15 years
and older was 85 percent in Mexico in 1993,
while the counterpart U.S. rate (for men aged 16
years and older) was 75 percent. By contrast, the
participation rate for women was much higher
in the United States (58 percent) than in Mexico
(36 percent). Mexican women’s participation
rates were higher in the more urbanized areas
than in the smaller areas, while the reverse was
true for Mexican men.

Employment status. n 1993, the distribution by
employment status differed greatly between
Mexico and the United States. Only 54 percent
of all Mexican workers received a wage or sal-
ary (or were engaged in piecework for wages)
that year, while more than 90 percent of U.S.
workers were on a paid status. Three out of ten
employed persons in Mexico were employers or
working on their own account (self-employed).
Such persons comprised only about 9 percent of
U.S. workers. The category of unpaid family
workers—which, as mentioned in footnote 12,
includes a small number of unpaid nonfamily
workers in Mexico—accounted for 14 percent
of all employed persons in Mexico, while they
were not even | percent of the U.S. work force.
If only those working 15 or more hours a week
(the U.S. concept) are counted in Mexico, the pro-
portion of unpaid workers declines to 12 percent.

Sectoral distribution. As with employment sta-
tus, there is a large contrast in the sectoral distri-
bution of employment between the two countries.
More than one-quarter of Mexico’s workers are
in agricultural pursuits, while such workers in
the United States make up less than 3 percent of
total employment. The proportion of workers in the
industrial sector (mining, manufacturing, and con-
struction) is about the same in both countries. The
service sector employs half of all Mexican work-
ers and more than 7 of every 10 U.S. workers, Less
than 1 percent of Mexican workers are recorded as
working in the United States and living in Mexico.
These workers are not allocated by sector.

Monthly Labor Review November 1994 9



Employment and Unemployment in Mexico

respondent might think that his or her “inac-
tive” condition was more important and would
not respond affirmatively to these questions.
In the later national surveys, the initial ques-
tion is more specific and direct: “Last week,
did you work to maintain the family or pay for
some of your personal expenses, for at least 1
hour or | day?” A considerable number of more
probing questions then follow. (See appendix.)
Unpaid family workers were treated differ-
ently in 1979, compared with their treatment

Table 1. Profile of the Mexican population and labor force, second-
quarter 1993
[Numbers in thousands]
Category Total Larger urban Smaller areas?
Population:

Total ...... 86,813 98,534 48,079
Men... 42,560 18,814 23,746
Women ... 44,054 19,721 24,333

Percent distribution by age
Under 12 years . 29.6 25.9 32.5
12 to 19 years . 19.1 18.0 20.0
20 to 24 years at 10.8 77
25 to 64 years 37.5 4nd 34.6
65 years and older 47 42 5.2

Labor force:
39,652 15,705 17,947
23,243 10,220 13,023
10,408 5,485 4,923

Percent distribution by age
12 to 19 years a. 18.0 12.9 22.5
20 to 24 years 149 16.9 13.1
25 to 64 years... 628 677 58.5
65 years and older .. 43 25 59

Participation rates:

12 years and older 55.2 55.0 55.3
15 years and older .... 59.4 59.5 59.3
Employment:

Total . 32,833 15,214 17,618
Men 22,748 9,914 12,834
Wom 10,085 5,301 4,784

Percent who were
Employers .......... 44 48 35
Own-account workers 26.8 16.7 35.4
Wage and salary worke 49.2 66.2 34.6
Pieceworkers : 60 72 5.0
Unpaid family 13.9 54 215

Percent employed in
Agriculture... 27.0 13 49.1
Industry . : 22.0 28.5 16.5
Services....... 50.4 698 33.6
The United States 8 4 8

Unemployment rates:

Both sexes 24 a4 1.8
Men... 24 3.0 1.4
Women. . 34 34 28

* Areas with 100,000 or more inhabitants and State capitals.

? Areas with fewer than 100,000 inhabitants.

$ Predominantly unpaid family workers; however, a few nonfamily workers are included.
Source: National Employment Survey, 1993, tables 1, 2, 3, 8, and 10.

Monthly Labor Review

November 1994

in the later surveys. In 1979, such workers
were required to work 15 or more hours per
week to be included as employed, The 15-hour
cutoff was not used in the later National Em-
ployment Surveys.

For these reasons, the 1979 survey is biased
toward undercounting the labor force and em-
ployment, in comparison with the national sur-
veys conducted in 1988, 1991, and 1993. As re-
gards unemployment, there are two biases at
work in different directions: toward undercount
due to the questioning procedure and toward
overcount due to the more inclusive definition
in 1979. If these biases are kept in mind, the 1979
Continuous Occupational Survey, in conjunction
with the later National Employment Surveys, are
the best available data sources for examining trends
in the labor force during the decade of the 1980's.

There are some significant inconsistencies be-
tween the 1988 and 1991 National Employment
Surveys relating to the sectoral distribution of
employment that are due to sample bias. That is,
somewhat different geographic areas were in-
cluded in these two surveys, and the areas in the
1988 survey had different industrial structures
from those subsequently surveyed in 1991. Accord-
ing to the Mexican Statistical Institute, the 1988
survey is completely comparable with the later na-
tional surveys only in its larger urban component.
The smaller area components are not comparable
due to changes in sample design, as well as changes
in the questionnaire used for these areas.

There is no sample bias problem in making
comparisons between the 1991 and 1993 Na-
tional Employment Surveys. The only need for
caution applies to the distinction between the
self-employed and employers. A change in defi-
nitions of these two categories in 1993 renders
them incomparable with their counterpart cat-
egories of previous years; however, the two
groups can be combined for purposes of analyz-
ing trends in the status of employment.

Profile and contrasts

The National Employment Survey of the second
quarter of 1993 is used in table 1 to profile the
Mexican population and work force. Data are
shown separately for larger urban areas and
smaller areas, The larger urban areas are defined
as urban areas with 100,000 or more inhabitants
or capitals of States in Mexico. The smaller areas
include smaller urbanized areas (2,500 or more in-
habitants), as well as truly rural areas. In 1993, 44
percent of the Mexican population and 47 percent
of the work force lived in the larger urban areas.

Age of population. The Mexican population is
relatively young. About 30 percent of the popu-



grams. An unemployed person may also have
savings to fall back on for a time. Thus, most
unemployed individuals in the United States are
not under as much immediate pressure as Mexi-
cans to obtain income from a job. Most persons
in Mexico literally cannot afford to be unem-
ployed for very long. As people attempt to sub-
sist, they are counted as employed in Mexico’s
labor force surveys. Many Mexicans enter the
vast informal economy, as vendors or repair-
persons in their homes, in market stalls, at street
corners, and in door-to-door sales; as unpaid
workers for their family’s business; or as poorly
paid workers for microenterprises.

Open unemployment in Mexico is a phenom-
enon that affects the more educated rather than
the less educated, youth more than adults, and
women more than men. The more educated may
well have resources to fall back on while they
are looking for work. Further, it is easier to be
unemployed when one is a child or wife in a
household, rather than the principal earner or
head of the household. (Widowed, divorced, and
separated women have lower unemployment
rates than married women have.) Because mar-
ried women and youth living in families are usu-
ally not primary wage eamers, they have more
flexibility in pursuing a job search and can more
easily “afford” to be unemployed. Unemployment
is also of relatively short duration in Mexico.

Educational attainment. In developed coun-
tries, more highly educated workers tend to have
lower unemployment rates than those with less
education. However, the same cannot be said for
Mexico. Table 7 indicates that almost 70 percent
of all unemployed persons have more than a pri-
mary school education. Unemployment was
highest and most prevalent among persons who
attended or completed high school, but had no
further education. These persons comprised 44
percent of the unemployed, but less than one-
third of the labor force. The second largest con-
centration of unemployment was among the group
with more than a high school education, which ex-
perienced the same unemployment rate as the gen-
eral population. This group accounted for about a
quarter of both the unemployed and the labor force.
The uneducated made up 5 percent of the labor
force, but only 3 percent of the unemployed.

Age. Similar to the situation in developed coun-
tries, unemployment in Mexico is relatively high
among young persons. Table 8 shows that Mexi-
cans under 25 years of age experienced higher
unemployment rates than the rest of the labor
force did.

Mexico’s practice of counting labor force par-
ticipation from age 12 slightly minimizes the

difference between youth and adult unemploy-
ment rates. In 1993, the 12- to 14-year-old group
experienced a lower unemployment rate than the
15- to 19-year-old group did. Even with the miti-
gating effect of the former group, however, the
teenage population experienced higher jobless
rates than did the older age groups.

Sex. In the English-speaking developed coun-
tries, women tend to have lower unemployment
rates than men; however, women’s rates tend to
be considerably higher than men’s in non-En-
glish-speaking Western European countries. The
situation in Mexico is similar to the Western
European pattern. All of the Mexican labor force
surveys indicate that women have higher unem-
ployment rates than men, both in rural and in
urban areas. However, the male-female differ-
ential has narrowed considerably since 1988, as
shown in table 8. In particular, the rate for teen-
age girls converged to that for teenage boys in
1993. That year, the higher overall rate for women
was attributable solely to their considerably higher
rate in the 20- to 24-year-old age group.

Duration. Unemployment tends to be of short
duration in Mexico. The quarterly Urban Unem-
ployment Surveys for 1993 reveal that 44 per-
cent of the unemployed were without work for 4
or less weeks; another 23 percent were unem-
ployed 4 weeks to 8 weeks, while the remaining
33 percent were unemployed more than 8 weeks.
These are very short durations, compared with
those of European countries, where typically
more than half of the unemployed are jobless for
6 months or longer. Even in the United States,
the duration of unemployment is higher than in
Mexico: in 1993, 36 percent of the U.S. unem-
ployed were jobless for 5 or less weeks , and 35
percent were unemployed for 15 weeks or longer.

Table 7. Unemployment in Mexico, by
education, larger urban areas,'
second-quarter 1988

{In percent]

Unem- Proportion
Education —_| ployment! in tabor | Unem-
rate | force | ployed

Total............. | 87 100 100

No education... | 2.1 5.0 x)
Incomplete primary | 2.4 15.2 10.0
Compiete primary | 2.9 23.2 18.1
Complete and

incomplete high

school......,. | 5.2 31.4 444
More than

school 37 25.2 25.1
' Areas with 100,000 or more inhabitants and State

capitals.
Source: National Employment Survey, 1988, table 21.
—

Monthly Labor Review November 1994 21



decades, these trends reversed, as population
growth decelerated due to rural-to-urban migra-
tion (fertility is higher in rural areas), while la-
bor force growth accelerated. By the 1980's,
population was rising at a considerably lower rate
of 2.5 percent annually, while the labor force was
increasing by 3.2 percent a year. Further slow-
ing of population growth to 2.1 percent annually
is forecast for the 1990’s; the work force is also
expected to slow somewhat, growing by 2.9 per-
cent a year during that decade.”!

High population and labor force growth ex-
erts a great deal of pressure on the Mexican la-
bor market, in contrast with patterns in most other
OECD countries, which, in the last decade, regis-
tered marked slowdowns in their rates of popu-
lation and labor force growth. For example, dur-
ing the 1980’s, the U.S. population grew by less
than 1 percent per year, and the labor force ad-
vanced at only a slightly higher pace, while West-
ern Europe’s population and labor force grew at
even slower rates.

Table 2 shows data on Mexico’s working-age
(12 years and older) population, labor force, and
labor force participation rates from the national
surveys of 1979, 1988, 1991, and 1993. The 1979
data are available only for the entire country,
while the later surveys permit a breakdown be-
tween the larger urban areas and the smaller ar-
eas, which include the smaller cities and rural
areas, Data on the labor force from the surveys
of 1988 onward have been adjusted to account
for the change in the treatment of unpaid family
workers; that is, unpaid family members working
Jess than 15 hours a week have been subtracted from
the labor force. Therefore, the adjusted data are on
the same basis as the 1979 survey in this regard.

The adjusted data show a slightly less rapid
advance in the work force and participation rates
than the unadjusted data would indicate. One
should bear in mind, however, that labor force
activity was generally better enumerated in the
later National Employment Surveys than in 1979.
Thus, the upward trends were somewhat less
rapid than the adjusted figures show.

The table indicates that from 1979 to 1988,
which encompasses the period preceding the
economic crisis to the year of initial recovery of
output, there was a substantial increase in the
size of the Mexican labor force and in participa-

tion rates, particularly for women. These trends
can be placed in a context of prior trends based
on population census data, as long as one keeps
in mind that the 1950 and 1960 censuses prob-
ably undercounted the working population, in
comparison with later censuses and surveys.
Between 1950 and 1970, a significant decline in
men’s participation in the work force occurred.
Men’s participation rates remained about the
same in 1979 as in the 1970 census. For women,
there was only a slight increase in participation
rates between 1950 and 1970, but a more sig-
nificant increase occurred from 1970 (17.6 per-
cent) to 1979 (21.5 percent.)

Participation rates for women tended to be
higher in larger urban areas than in the country-
side. Data from the employment surveys for the
three major cities combined—Mexico City,
Guadalajara, and Monterrey—can be used as
indicators of long-term trends in urban areas, as
the following tabulation shows:

Total Men Women
1973 . 52.7 74.6 33.1
1983 . 48.9 68.6 30.8
1990 . 52.1 721 34.6
1991 . 54.6 74.7 36.1
1992 . 55.5 75.1 37.7
1993 ... 56.3 75.5 38.4

Note that the figures for 1973 are understated
because they exclude unpaid family members
working less than [5 hours per week. The inclu-
sion of these workers would add about 1 per-
centage point to the participation rates, based on
data from later surveys. Thus, there was clearly
a drop in urban participation rates for both men
and women between 1973 and 1983. The economic
crisis in 1982-83 probably caused a falling off in
participation rates initially. By 1993, the rates in
the three largest cities were much higher.

Higher levels of education and a greater con-
centration of population in urban areas increased
employment opportunities, particularly for
women. Furthermore, the need for supplemen-
tary income to augment shrinking real wages
from 1983 through 1988 has propelled women
into the labor market in order to provide further
support for their families.” Even though real
wages have increased since 1989, they were still
well below their 1983 level in 1993.

Ii. Employment

The economic crisis and subsequent stabiliza-
tion period brought significant changes for the
Mexican work force. In the short run, overall

employment opportunities eroded, but then
quickly stabilized. Although paid employment
fell, a large decrease in real wages in the formal

Monthly Labor Review November 1994

——


to equal its purchasing power in 1987. Table 12
shows these adjusted rates, along with the unad-
justed rates. The fali in R-9 and R-10 is signifi-
cantly moderated by the adjustment. Instead of fall-
ing from about 31 percent in 1987 to 12 percent
and 14 percent, respectively, in 1993, these rates
decline to 22 percent and 23 percent, respectively.

R-I1. The general rate of employment needs
is a composite rate developed by the Mexican
Statistical Institute. It was recently added to the
framework of complementary rates. Combining
elements of R-1, R-2, R-5, and R-, it sums
the open unemployed, the hidden unemployed,
persons waiting to start a new job, persons look-
ing for a new job or a second job, and persons
working 1, but less than 15, hours a week. This
sum is then divided by the labor force plus the
hidden unemployed. Note that the same person
could be included in two or more of these com-
ponent groups. However, the Mexican Statisti-
cal Institute has made calculations which indi-
cate that double counting is insignificant.

R-11 has been 3 to 4 times higher than the
open unemployment rate in Mexico. It excludes
the R-7 component of persons working part time
for economic reasons. The Mexican Statistical
Institute calculates that if these individuals were
added in (without double counting), R—-11 for the
second quarter of 1991 would increase from 8.8
percent to 12.2 percent. (Without adjusting for
double counting, the rate would be 12.6 percent.)
Similarly, the annual average R-11 for 1993
would increase from 13.2 percent to between 15
percent and 16 percent, adjusted for duplication.
This most comprehensive non-income-related
measure is nearly 5 times the open unemploy-
ment rate for Mexico.

From 1987 through the second quarter of 1994,
the complementary unemployment rates re-
flected movements in the open unemployment
tate, but were consistently higher, because they
incorporated broader definitions of underemploy-
ment. After declining from 1987 through 1991,
all of the rates except R-9 and R-10, the two
income-related measures, rose in 1992 and 1993,
The increases in the complementary measures
may be signs of a continued adjustment to height-
ened international competition, as well as to the
lack of formal sector jobs for an increasingly
educated population. Dramatic drops in the
complementary rates associated with the mini-
mum wage were indicative of the fact that the
minimum wage did not keep pace with inflation.
Adjustment of these indicators for inflation mod-
erated these trends.

Limitations. R-1 through R-11 clearly consti-
tute a useful array of indicators that allows for a

Table 12. Income-related complementary indicators (R-9 and
R-10) for 16 urban areas in Mexico, adjusted for inflation,

1987-94
{In percent]
Insufficient income and | Critical conditions of the
Year unemployment rate (R-9) ‘employed rate (R—10)

Unadjusted | Adjusted’ | Unadjusted | Adjusted’

30.8 30.8 30.5 30.5

21.8 22.4 22.9 21.8

183 24.4 20.1 24.6

146 24.6 16.8 24.9

117 25.1 14.3 26.2

107 21.9 13.9 23.1

123 218 14.0 23.0

W4 20.0 12.8 20.6

1987 minimum wage.
Nore: See box on page 24 for full definitions of the rates.

Statistical Institute.

* Minimum wage component of indicator adjusted to equal the purchasing power of the

Source: Table 9 for unadjusted data. Adjusted data tabulated for sis by the Mexican

_
more complete analysis of underutilization of
labor in Mexico. However, there are some major
limitation$ to the measures, the most important
being R-9’s and R-10’s use of a minimum wage
unadjusted for inflation as a cutoff for “insuffi-
cient” income from employment. An inflation-
adjusted minimum wage should be used in these
indicators; otherwise, the trends they reflect will
be misleading. The Mexican Statistical Institute
is aware of the desirability of adjusting the two
indicators for inflation, and statisticians there
have provided the adjusted data shown in table
12, but they do not plan to publish these data as
part of the complementary indicator framework.

Another limitation is the failure to include
persons classified as employed who worked no
hours at all in the reference week due to tempo-
tary layoffs, lack of money, scarcity of materi-
als, or disrepair of a vehicle or machinery. (The
Mexican Statistical Institute does not include
these persons in any of its unemployment indi-
cators, because they have a job to return to within
4 weeks; thus, they are not regarded as needing
a job.) Logically, such persons could be encom-
passed by R-2, or R-6 through R-8, which use
the number of hours worked to determine degrees
of underutilization, but only consider persons
who worked at least | hour.

R-6 and R-8 include persons working shorter
hours without regard to the reason; those work-
ing such hours due to vacation ora holiday should
not be included in an underutilization measure.
Finally, although double counting is not large,
an adjustment for duplication in the composite
indicator R-11 would improve this measure.

MEXICO’S LOW OPEN UNEMPLOYMENT RATE par-
tially reflects the more restrictive concepts used
in the Mexican labor force surveys. Adjustment

Monthly Labor Review November 1994 27



Susan Fleck
and
Constance Sorrentino

Susan Fleck, a Ph.D.
candidate at American
University, Washington,
pc, worked on this article
while an intern in the
Division of Foreign Labor
Statistics, Bureau of Labor
Statistics. Constance
Sorrentino is an economist
in the same Division.

Employment and unemployment
in Mexico’s labor force

Mexico’s official unemployment rates are low,
even after upward adjustment to U.S. concepts;
ten complementary indicators measure more fully
the country’s underutilization of labor

‘ith the negotiation and passage of the
W North American Free Trade Agree-
ment, interest in the Mexican economy
has increased. Mexico is the world’s 13th larg-
est economy and a major participant in world
trade. The country is America’s third largest trad-
ing partner, after Japan and Canada, and bilat-
eral trade has grown rapidly since Mexico joined
the General Agreement on Tariffs and Trade in
1986, Furthermore, part of Mexico’s rapid labor
force growth has been absorbed by the United
States through migration. From the twin perspec-
tives of trade and immigration policies, it is im-
portant to analyze the extent to which Mexico
has been able to provide adequate employment
for its growing labor force.

Mexico became a member of the Organiza-
tion for Economic Cooperation and Development
(OECD) in May 1994.' The country’s per capita
income is in the range of that seen in the lower
income OECD countries such as Greece and Por-
tugal. Mexico’s labor market, however, differs
from that of other OECD member countries. The
variations reflect different demographic and eco-
nomic developments, as well as different labor
market institutions (or the lack thereof). One of
the most striking differences is in unemployment
rates. Over the 1980’s, when most OECD coun-

tries experienced persistently high unemploy-
ment despite a prolonged economic upswing,
Mexico managed to reduce its unemployment
rates to very low levels during a period of eco-
nomic restructuring and little growth.

The official urban unemployment rate for
Mexico fell continuously from 1983 to 1991,
reaching a low of 2.6 percent in 1991. In 1993
and early 1994, the rate rose somewhat, but re-
mained under 4 percent. Rural unemployment
rates are even lower. In highly developed coun-
tries, such low rates would be interpreted as a
sign of full employment, but the same cannot be
said for Mexico.

Basically, two factors help to explain the low
measured unemployment rates in Mexico. First,
the Mexican concept of unemployment excludes
some persons who would be counted as unem-
ployed under the U.S. concept. Adjustment to
the U.S. concept would raise the reported rate,
but would still leave it relatively low. Second,
and more important, Mexico's low unemploy-
ment rates mask a large number of persons in
unstable, marginal jobs. Thus, the rates reflect
the need for persons to subsist through any work
at all, rather than a situation of full employment.

In acountry without unemployment compensa-
tion,? persons without work are forced into mar-

Monthly Labor Review November 1994 3



Employment and Unemployment in Mexico

that those that survive are those that manage to
grow. About one-fourth of the businesses had
operated for more than 10 years, and only one in
10 existed for more than 20 years. One-fifth of
the enterprises existed for barely 1 year. Of those,
almost 90 percent consisted of an owner work-
ing alone or with only one employee. No enter-
prise operating for less than a year had more than
10 workers, while 70 percent of the enterprises with
more than 10 workers had existed at least 6 years.

The physical characteristics of the workplace,
the capitalization levels, and the amount of earn-
ings of the businesses reported in the survey are
clear indicators of the limited access to produc-
tive resources faced by most microentrepreneurs
in Mexican cities. Of the enterprises that had
earnings and a place of business, the average
value of their locale was 9 times the annualized
daily minimum wage for 1992, The average (per
business) value of other assets such as tools,
equipment, and machinery was the equivalent of
only 2-1/2 times the annualized daily minimum
wage. More than 80 percent of the microen-
terprises had not solicited credit for their ongo-
ing operations. Some said that they did not seek
credit because they did not know how or because
the interest rates were too high, but half said that
they did not need credit.

About 55 percent of the businesses had not
Tegistered with the Tax Bureau. The proportion
that was registered increased with the size of the
establishment. Two-thirds of the one-person en-
terprises were not registered, whereas only 5
percent of the firms with six or more workers
were unregistered, More than 80 percent of the
businesses with no fixed address were not regis-
tered, while only 14 percent of those with a fixed
location were unregistered.

The survey revealed the precarious conditions
under which those who were not owners worked
in microenterprises. Only one-fifth were covered
for social security, and only 18 percent of the
paid workers had a written labor contract. Aver-
age monthly pay was 65 percent of average
monthly direct pay of production workers in
Mexico, More than one-fifth of the paid workers
earned the minimum wage or less; this compares
with only 8 percent of the urban population who
were earning at this very low level of pay in 1992.

Trends. Table 3 shows data from the national
surveys on the trends by status in employment
from 1979 onward. The data on unpaid family
workers have been adjusted for continuity, as
discussed earlier. These data portray a trend away
from wage and salary work and toward self-em-
ployment and unpaid work during the 1980's.
The proportion of employed persons receiving a
wage or salary declined from 63 percent to 58

14 Monthly Labor Review November 1994

percent of total employment from 1979 to 1988.
A further decline to 56.7 percent occurred by
1991, and the proportion held at about that level
in 1993. Meanwhile, unpaid family workers in-
creased their share of total employment from 8.2
percent in 1979 to 11.9 percent in 1988, but de-
clined slightly in share by 1991.

The proportion of self-employed persons de-
clined between 1979 and 1988, while employers
doubled in share. Both groups increased their
share between 1988 and 1991. The definitions
of the self-employed and employers changed in
1993, so that some agricultural employers were
reclassified as self-employed. Thus, the two
groups should be added together to consider the
trend from 1991 to 1993. In 1993, their com-
bined share slipped slightly. Part of the decline
in wage and salary employment and the increase
in self-employed and unpaid workers reflects
better enumeration of the latter types of employ-
ment in the national surveys conducted from
1988 onward.

Other statistical sources also indicate that in-
formal employment increased during the 1980's
in Mexico. For example, the Economic Census
of private businesses conducted in 1986 and 1989
found that employment in enterprises with five
or fewer workers rose from 22 percent to 26 pes-
cent of those employed in urban areas.>! How-
ever, these censuses do not cover a substantial part
of the informal sector, as indicated by the 1992
Survey of Microenterprises discussed above.

Another indicator of the growth of the infor-
mal sector, based on the Urban Employment
Surveys, was that the share of persons who
worked in businesses of between 1 and 5 people
rose from 38.3 percent of total employment in
1987 to 40.3 percent in 1990, and further, to 43
percent in the first quarter of 1994. The shift of
employment from large firms to microenterprises
has been recorded not only in Mexico, but also
in the rest of Latin America.>?

The low unemployment rates in Mexico dur-
ing the 1980’s suggest relative flexibility in real
wages, A large, sustained fall in real wages oc-
curred in manufacturing during the 1980’s and
was also sharp in commerce, hotels, and restau-
rants—typically informal sector activities. The
real minimum wage fell relative to wages in
manufacturing during the latter part of the 1980's,
suggesting that the wage floor was retaxed. This
allowed many relatively less productive individu-
als to find jobs.°3

In a decade characterized by economic stag-
nation and the loss of purchasing power of wages,
the increase in non-wage-earning jobs and low-
paying jobs reflects a strategy of survival. The
results of Mexican income and expenditure sur-
veys provide evidence that the number of work-

-——_—_.———


establishments with five or fewer workers,
with the exception of certain branches defined
as formal; and self-employed and unpaid
workers, except professionals, as defined in
the Mexican classification of occupations.

Each of the last two groupings yields about
38 percent of total nonagricultural employment.
The reason for their similarity is that the third
method uses establishment size as the basis for
classification, while the fourth uses the same cri-
terion (in addition to some other factors) to de-
termine what portion of business owners, sala-
ried workers, and pieceworkers participate
informally. In absolute terms, the preceding four
estimates yield 7.3 million to 10.7 million per-
sons employed in informal activities.

Characteristics of the informal sector. Mex-
ico’s National Statistical Institute conducted sur-
veys of small businesses in 1976, 1988-89, and
1992. Many small businesses operate in the in-
formal sector, but some would not be classified
as informal, such as those operated by self-em-
ployed professionals. The surveys used differ-
ent definitions, methods, and questionnaires and
covered different geographic areas.”° Therefore,
they cannot be used for a trend analysis. The 1976
survey covered only the three major metropoli-
tan areas, while the 1988-89 survey expanded
coverage to seven cities. The 1992 National Sur-
vey of Microenterprises improved upon the ear-
lier surveys.* Covering 24 cities, it was much
more representative of Mexican small business
and captured more detail than the other surveys
did. Questions were refined to correct problems
encountered in the earlier surveys, and reinterviews
of 20 percent of the original respondents were con-
ducted to improve the quality of the data.

The sample for the 1992 survey was taken
from the list of employers and self-employed
reported in the Urban Employment Survey. By
identifying small enterprises through the house-
hold survey, data can be collected on small busi-
nesses and other economic pursuits that are over-
looked in the sample framework of establishment
surveys. The sample was defined as businesses
with a maximum of six workers, including the
owners and both paid and unpaid workers, oper-
ated by an employer or self-employed person in
construction, trade, transport, and the service
industries; in manufacturing, the size cutoff was
increased to 16 workers because such activities
generally require more workers for a reasonable
level of operations. The agricultural sector was
excluded from the survey. All of the businesses
surveyed were kept in the sample, without elimi-
nating those small enterprises registered as op-
erating in the formal sector.

About 2.8 million enterprises employing 4.8
million persons (including the owners) were in-
cluded in the sample. Persons working on their own
account (without paid employees) comprised al-
most half of the total reported employment. Em-
ployers amounted to another 10 percent, while wage
and salary workers were 20 percent of the total.
Unpaid family and nonfamily workers accounted
for about 20 percent of total employment in the
microenterprises. There were proportionally more.
own-account workers and unpaid workers and
fewer paid workers in the microenterprises, com-
pared with the overall distribution of employment
for larger urban areas shown in table 1.

Slightly more than one-fifth of the micro-
enterprises in the 1992 survey were included in
the 1989 Economic Census. Another one-third
of the businesses existed at the time of the Cen-
sus, but were not included in it. The remaining 44
percent did not exist at the time of the Census.

The survey sheds light on the characteristics
of informal businesses and the people who own
them and work for them. The vast majority (81
percent) of the units reported in the survey were
persons working on their own account. The av-
erage size of the business reported was between
one and two workers, much below the upper limit
fixed as the norm for inclusion in the survey. Only
3.5 percent of the manufacturing enterprises had
more than six workers.

The predominant line of business was retail
trade, accounting for about 40 percent of the
microenterprises. This work involved such things
as selling fruits and vegetables and selling new
and used clothing and shoes. Another 40 percent
were involved in providing services such as laun-
dering; tailoring; and furniture, home product,
and vehicle repair. Only 13 percent were engaged
in manufacturing, in which the main industries
represented were preparation of food and drink
products and textiles and apparel. The remain-
ing 7 percent of smail businesses were in con-
struction and transport services.

Information about the kind of business prem-
ises indicated that about 60 percent of the
microenterprises did not have a fixed place of
business outside the home. One-third of these
units consisted of persons working in their own
homes, while another third worked out of their
clients’ homes. About one-fifth of the enterprises
with no fixed place of business pursued their
activities on the street or door to door. When the
itinerant businesspersons were asked why they
did not have a fixed place of work, 45 percent said
that their lack of a fixed location was required by
their activity. One-fourth said that they were not
able to rent or buy a location for their enterprise.

Data on the longevity of microenterprises in-
dicate that they generally have a short life and

Monthly Labor Review November 1994

13



Employment and Unemployment in Mexico

Unemployment. The official national unem-
ployment rate in Mexico was 2.4 percent in the
second quarter of 1993; the rate was consider-
ably higher in the larger urban areas (3.1 per-
cent) than in the smaller areas (1.8 percent). The
unemployment rate for women was above that
for men, and both women and men had higher
rates in the larger urban areas than in the less
populated areas. These rates were much lower
than their counterparts for the United States and
most other major developed countries, with the
exception of Japan. Also, unlike the situation in
Mexico, U.S. men’s unemployment rates have
been higher than women’s over the past couple
of years, but have recently drawn closer; in part,
this reflects a typical cyclical pattern, although
the January 1994 change in the U.S. Current
Population Survey (CPs) may also be associated
with some of the recent convergence in the rates.!9

The differences noted above are typical of the
differences between developed and developing
countries (although many developing countries
have reported higher unemployment rates than

Mexico has).”° In particular, the demographic
background of Mexico contrasts with that in the
more developed countries, and this is considered
further in the next section.

Population and labor force

Mexico’s labor market should be viewed against
a backdrop of a rapidly rising population and
labor force. In 1950, Mexico was a rural and
agricultural country whose inhabitants were
mostly peasants and farmers. Thirty years later,
however, the average Mexican lived in an urban
setting and worked in the growing industrial or
service sector. Rapid population growth in
Mexico was fueled by a high birthrate, which
began to decline relatively late, even compared
with birthrates of other developing countries.
Population growth was particularly high be-
tween 1950 and 1970. The population rose at an
annual rate of 3.2 percent, outpacing the labor
force growth rate of 2.4 percent per year recorded
by the population censuses. In the ensuing two

Table 2.

1991, and 1993
[Numbers in thousands]

Population, labor force, and participation rates In Mexico, first-quarter 1979 and second-quarter 1988,

1979 1988 1991 1993
Category
Total_| Men _|Women| Total | Men |Women| Total | Men [Women| Total | Men [Women

Entire country:

Working-age population 43,639 | 20,996 | 22,643 | 54,243 26,301 | 27,942 | 58,317 | 27,825 | 30,492 | 61,000 | 29,465 | 31,535
Reported labor force .....- 19,839 | 14,976 | 4,863 | 28,852 19,817] 9,035 | 31,229 | 21.630 | 9.599 | aa.652 | 23.249 | 10,408
Unpaid family workers working less

than 15 hours per week’ ° 783} 382} 401! 693] 351| 341| 960) 455| 505
Adjusted labor force 19,839 | 14,976 | 4,863 | 28,069 19,435] 8,634 | 30,536 | 21,279 | 9,258 | 32,692 | 22,788 | 9,903
Participation rate:

Reported . 455{ 71.3] 215] 532! 75.3] 323] 536} 777] 31.5] 552] 789] 330

Adjusted - 455| 71.3] 215] 51.7! 739| 309] 524] 765| 304] 536] 77.3| 931.4
Larger urban areas:

Working-age population .......... - - 25,825 | 12,327 | 13,498 | 27,650 | 13,055 | 14,585 | 28,558 | 13,692 | 14,866
Reported labor force . - 13,342] 8,835 | 4,508 | 14,706 | 9,617 | 5,089 | 15,705 | 10,220 | 5,485,
Unpaid family workers working less

than 15 hours per week’ ...... - 161 1 90} 141 58 a3] 180 78} 102
Adjusted labor force ............ - 13,181 | 8,764] 4,418 | 14,565 | 9,559 | 5,006 | 15,525 | 10,142 | 5,383
Participation rate:

Reported - 517| 71.7/ 334] 532] 737] 349| 550| 746] 369

Adjusted - - 51.0/ 71.1] 327] 527] 732] 343| 544| 741] 362
Smaller areas:?

Working-age population . . . - = 28,418 | 13,974 | 14,444 | 30,677 | 14,771 | 15,906 | 32,442 | 15,773 | 16,669
Reported labor force . - - 15,509 | 10,982] 4,527 | 16,523 | 12,013 | 4,510 | 17,947 | 13.023 | 4.923
Unpaid family workers werking la less

than 15 hours per week’... - - 622} 3it| 311] 552] 293| 258] 780) a77| 402
Adjusted labor force . 14,887 | 10,671 4,216 | 15,971 | 11,720 | 4,252 | 17,167 | 12,646 | 4,521
Participation rate

Reported $46/ 786] 31.3] 539| 813/ 284] 553] 826] 295

Adjusted .. _ - 624] 76.4} 29.2] 521] 793] 267] 529] 802] 271

? Areas with 100,000 or more inhabitants and State capitals.
° Areas with fewer than 100,000 inhabitants.
Note: Dash indicates data are not available,

' Predominantly unpaid family workers; however, a few nonfamily workers are included.

Sources: Continuous Occupational Survey, 1979, and National Employment Surveys, 1988, 1991, and 1993.

10 Monthly Labor Review November 1994



Employment and Unemployment in Mexico

R-1 Open unemployment rate: Open unem-
ployed as a percent of the labor force.
Defined as persons 12 years of age and
older who in the reference week did not
work for 1 or more hours and were avail-
able for work, actively seeking work in
the past 4 weeks, or seeking work in the
past 1 to 2 months while on strike, while
awaiting the next season or reply to a job
application, or while awaiting job recall
within the next 3 months.

R-2 Alternative unemployment rate: Open
unemployed, plus persons waiting to
begin work in the next 4 weeks, plus
persons not in the labor force, but who
are available for work and who looked
for work at some time in the past (the
hidden unemployed), as a percent of the
labor force plus the hidden unemployed.

R-3 Real economic pressure rate: Open un-
employed and employed seeking a sec-
ond job, as a percent of the labor force.

R-4 Real preference pressure rate: Open un-
employed and employed seeking a new
job, as a percent of the labor force.

R-5 General pressure rate: Open unem-
ployed and employed seeking either a
new job or a second job, as a percent of
the labor force.

R-6 Part time less than 15 hours and unem-
ployment rate: Open unemployed and
persons working 1, but less than 15 hours
a week, as a percent of the labor force.

Complementary employment and unemployment indicators

R-7 Part time for economic reasons and un-
employment rate: Open unemployed
and persons working 1, but less than 35,
hours a week for economic reasons, as
a percent of the labor force.

R-8 Part time less than 35 hours and unem-
ployment rate: Open unemployed and
persons working 1, but less than 35,
hours a week, as a percent of the labor
force.

R-9 Insufficient income and unemployment
rate: Open unemployed and persons
who work, but who earn less than the
minimum wage, as a percent of the la-
bor force.

R-10 Critical conditions of the employed
rate: Persons working 1, but less than
35, hours a week for economic reasons,
working more than 35 hours a week
while earning less than the minimum
wage, and working more than 48 hours
a week while earning between | and 2
times the minimum wage, as a percent
of total employment.

R-11 General rate of employment needs: A
composite of the open unemployed, the
hidden unemployed (see R-2), persons
waiting to start a new job, persons look-
ing for a second job or a new job, and
persons working 1, but less than 15,
hours a week, as a percent of the labor
force plus the hidden unemployed.

justment to U.S. concepts), as well as persons
who responded that they were not working due
to lack of money, scarcity of materials, or disre-
pair of a vehicle or machinery. Their addition
would have raised the 1991 R-2 rate of 4.2 per-
cent by an estimated 1-1/2 percentage points.
R-2 was about 50 percent higher than the open
unemployment rate from 1987 to 1989, but the gap
has widened since then. R-2 has fluctuated between
4.2 percent and 6.0 percent in the past 7 years.

R-3. R-3is the real economic pressure rate. It
is composed of the openly unemployed, plus
employed persons looking for a second job, as a
percent of the labor force. All employed persons
are asked the question, “In the past 2 months,
have you tried to find another job as a worker, a
self-employed person, or something else?” Re-
spondents who answer in the affirmative are then
asked, “Did you look for other work to a) have
more than one job or b) change jobs?” Those who

24 Monthly Labor Review November 1994

respond that they want more than one job are
included in R-3. The reason for the job search is
not asked; therefore, it is not known whether the
person desires more money, wants more train-
ing, wishes to change jobs eventually, or some-
thing else. R-3 measures the availability of the
respondent to work more jobs, but no question
is asked concerning the number of extra‘hours
the respondent would be available for work.
Therefore, the number of people who are
underutilized is quantified, but the degree of under-
utilization is not. R-3 increases the open unem-
ployment rate by about 30 percent to 40 percent.

R-4. The real preference pressure rate is the
percent of the labor force that is openly unem-
ployed, plus those employed but looking for a
new job. This is different from R-3, which cap-
tures persons looking for a second job. Like
R-3, R- can measure the availability of that seg-
ment of the the work force which seeks new



Employment and Unemployment in Mexico

39 Although Mexico does not provide unemployment in-
surance, the social security system pays an “unemployment
benefit” of 75 percent to 95 percent of the old-age pension for
those between the ages of 60 and 64 who are unemployed.
Pensions become payable at age 65. The country also has a
National Employment Service, which was established under
the Federal Labor Law and is coordinated with the State gov-
‘ernments through State Labor Offices and centers in the Fed-
eral District of Mexico City. At present, there are 99 Employ-
ment Service offices located throughout the country, with a
total staff of about 1,000 workers. The basic function of the
Employment Service is to promote employment by facilitating
contact between jobseekers and employers and by carrying out
worker training programs. Between 1988 and 1993, 1.7 mil-
lion jobseekers applied for assistance, and 1.3 million appli-
cants were referred to employers. The annual average number
cof open unemployed in 1993 alone was more than 800,000.

5! Ana Revenga and Michelle Riboud, Unemployment in
Mexico: Its Characteristics and Determinants, The World
Bank, Policy Research Working Paper Number 1230, De-
cember 1993.

52 Ricardo Rodarte, “Un andlisis del desempleo en México
y otros indicadores complementarios,” paper prepared for
the Seminar on Analysis of Information on Employment and
Unemployment Gointly conducted by ats, the Mexican Secre-
tariat of Labor and Social Welfare, and the National Statistical
Institute), September 21~25, 1992, Aguascalientes, Mexico.

59 In the U.S. survey, prior to 1994, discouraged workers
were defined as persons who were without work and not
seeking work because they believed that no work was avail-
able for them, for personal reasons or for reasons related to
the status of the labor market. In January 1994, the defini-
tion was modified to include the requirement that a job search
had to have been undertaken during the past year. In addi-
tion, discouraged workers were asked directly whether they
were available for work,

5*'The minimum wage in Mexico is expressed as a daily
figure, and it varies by region and by occupation. In the
Mexican Urban Employment Survey, a monthly average
regional figure is calculated and used to express the rela-
tionship of monthly earnings to the minimum wage.
Respondents are asked how much they earned and are re-
‘quested to specify the term in which they earned it—daily,
weekly, monthly, and so on. If they do not know or refuse to
give the information, they are then asked to express their
income in terms of a monthly minimum wage. Respondents
are queried as follows: “At present, the monthly minimum
wage in this region is __ pesos, The amount that you earned
last month is [the enumerator reads the following answers
and fills in the appropriate category]: (1) Same as this
amount; (2) Less than this amount; (3) More than this
amount; (4) Don’t know.” The next question, asked of those
who respond with answer number 2 or 3, determines the
fraction or multiple of the minimum wage received, b:
quiring, “How much more or less is your income compared
to the minimum wage?” Eight possible answers are listed,
ranging from less than one-fourth of the minimum wage to
more than 10 times the minimum wage.

55 Beginning in late 1987, the Mexican Government made
agreements with labor unions and the business sector known
as “Solidarity Pacts” in order to control inflation. The ear-
lier pacts, in force between December 1987 and the end of
1988, emphasized solidarity between the social partners. The
later pacts gradually shifted their focus toward combating
inflation, encouraging economic recovery, and controlling
minimum wages through voluntary mechanisms established
by the National Commission for Minimum Wages, while
leaving the fixing of other wages to collective bargaining
processes. As a result of the pacts, increases in the mini-
mum wage have lagged well behind inflation. (See Roger
Plant, Labor Standards and Structural Adjustment (Geneva,
International Labor Organization, 1994), pp. 104-5.)

APPENDIX: The National Urban Employment Survey questionnaire

The National Urban Employment Survey is
Mexico’s official source of open unemployment
Tates, as well as of the complementary measures
discussed in this article. The survey gets its in-
formation from a lengthy questionnaire applied
through interviews in the homes of respondents
and conducted by professional, full-time inter-
viewers. The survey is conducted throughout the
52 weeks of each year. An aggregate sample of 4
weeks allows the generation of basic monthly
indicators, and the accumulation of 13 weeks of
data makes possible detailed quarterly statistics.
There are 15 tables generated monthly and 56
quarterly. In all cases, the questionnaire applies
to the week preceding the week of the interview.
The following discussion relates to the version
of the survey questionnaire instituted in 1985.!
The series of questions that determine employ-
ment and unemployment classification in
Mexico’s Urban Employment Survey are de-
signed to increase the likelihood of counting in-
formal sector work and nonremunerated work.
The first series of employment questions deter-
mines whether someone actually worked during
the reference week or will begin work in the next
4 weeks. A second set of questions investigates

30 Monthly Labor Review November 1994

those persons who did not work during the ref-
erence week, and a third set establishes active
job search conditions to define the unemployed.
These three series of questions determine em-
ployment status, after which numerous other
questions investigate both employment condi-
tions and characteristics of the workplace.

In the first series, an initial question asks, “Last
week, did you work to maintain the family or
pay for some of your personal expenses, for at
least 1 hour or 1 day?” A positive response re-
sults in classification of the individual as em-
ployed. The respondent who replies “no” to the
initial question is then asked, “Although you have
already told me that you did not work last week,
do you have any sort of work or business that is
your own from which you live?” A “yes” re-
sponse requires asking the second series of ques-
tions to determine whether the respondent is
employed. If the respondent says “no,” he or she
is then asked, “Will you begin new work or some
new business?” A “yes” response results in clas-
sification of the person as employed if the new
work begins within 4 weeks. A “no” response
will lead to the last of the four questions, “Last
week, did you help out without being paid in a



Employment and Unemployment in Mexico

from national household surveys. They help to
fill out the picture of the employment side of the
Mexican labor force.

Household surveys. Mexico has a lengthy his-
tory of household surveys. The first effort took
place in 1972 with the National Survey of House-
holds, which covered the metropolitan areas of
Mexico City, Guadalajara, and Monterrey. This
survey was based on the U.S. Bureau of the Cen-
sus Atldntida format, a system adopted by most
of Latin America.’ Over the years that followed,
the survey operated under various names and
changing geographic coverage. From 1973 to
1976, the survey was called the Continuous
Employment Survey; from 1977 through the end
of 1984, it became the Continuous Occupational
Survey. Despite the different names, the survey
always operated under the same concepts and
methods and with the same questionnaire.

The focus of the survey was initially on the
largest metropolitan areas, and in the first few
years of its operation, only the three major cities
listed above were covered. One quarter of the
Mexican population resides in these cities; they
include about half of the population in all locali-
ties of 100,000 or more residents, and one-third
of the population in all areas with 2,500 or more
residents. In 1979, the Continuous Occupational
Survey was expanded to national coverage, but
in 1980 through 1982, it covered only the three
major cities and some smaller cities. In 1983-
84, coverage reverted to the three original cities.

In 1983, the newly formed Mexican Statisti-
cal Institute® began a quarterly survey called the
National Urban Employment Survey (hereinaf-
ter, Urban Employment Survey), initially cover-
ing 12 metropolitan areas.? During 1983 and the
first three quarters of 1984, the Continuous Oc-
cupational Survey and the new Urban Employ-
ment Survey were both conducted. The Continu-
ous Occupational Survey was terminated at the
end of 1984, and since that time, the Urban Em-
ployment Survey has been the only quarterly la-
bor force survey conducted in Mexico.

In 1985, the Urban Employment Survey ques-
tionnaire was revised and expanded; questions
were changed to enhance the quality and reli-
ability of the results, and new topics of interest,
such as location of work (in the home, vending
on the street, and so on), size of employer's es-
tablishment, hours of work, fringe benefits, and
income, were added. These changes made it pos-
sible to form a more complete picture of the
Mexican labor market. The number of cities cov-
ered increased to 16, including 4 bordering the
United States and affected by the maguiladora
industries.'° Further extensions of urban cover-
age occurred in 1992, 1993, and 1994, and the

6 Monthly Labor Review November 1994

survey presently covers 37 cities with about 90
percent of the population in large urban areas
(100,000 or more residents) and about 60 per-
cent of the population in all urban areas (2,500
or more residents).!!

The survey data are therefore not completely
representative of the nation as a whole, although
coverage has improved in recent years. The fail-
ure of the survey to cover certain (mostly less
urbanized) geographic areas cannot explain the
fact that it yields an extremely low unemploy-
ment rate: less urbanized areas tend to have even
lower unemployment rates than large metropoli-
tan areas, as indicated by the population censuses
and periodic national surveys.

The survey questionnaire has remained with-
out important modifications from 1985 onward.
However, only for the period from 1987 through
December 1991 did the survey have a consistent
geographic coverage. Furthermore, the question-
naire initiated in 1985 uses narrower concepts
of unemployment and broader concepts of em-
ployment than the earlier surveys did. Therefore,
historical comparability is a concern.

Mexico incorporated a change in its treatment
of unpaid family workers'? with the beginning
of the Urban Employment Survey in 1983, fol-
lowing the recommendation of the International
Labor Organization’s Thirteenth Conference of
Labor Statisticians, In accordance with this rec-
ommendation, unpaid family members who
worked less than 15 hours a week were classi-
fied as employed. (In addition, the Mexican sur-
veys include as employed some unpaid family
members who did not work at all in the refer-
ence period.) In the Continuous Occupational
Survey and the earlier surveys, unpaid family
members who worked less than 15 hours a week
were classified as not in the labor force (unless
they were seeking work or waiting to start anew
job, in which case they were counted as unem-
ployed). The change caused an increase of a little
over | percentage point in the Mexican partici-
pation rate overall, with about the same magni-
tude of increase for men as for women. The
change to include ali unpaid family workers as
employed without regard to the number of hours
they worked was never made in the Continuous
Occupational Survey, which ended in late 1984.

Since 1985, the Urban Employment Survey
has treated as employed two groups that were
counted as unemployed in the previous house-
hold surveys: persons waiting to start a new job
in 30 days and persons who have a job to which
they expect to return in 30 days. The latter group
includes persons on temporary layoff and others
not currently working because of illness, strike,
seasonal factors, scarcity of materials, or lack of
customers. Also, unpaid family members work-



While the relative importance of employment
in manufacturing decreased, employment in the
maquiladora industry surpassed the overall
growth rate of the urban labor force in the past
two decades. Table 4 shows data on employment
in the maquiladora industries from 1975 to 1993.
Employment growth accelerated during the
1980’s, and by 1992, there were more than
500,000 workers in the maquiladora sector. De-
spite this expansion, maquiladora workers made
up less than 2 percent of national employment
in 1993. They accounted for about 10 percent of
employment in the manufacturing sector.

Women production workers dominate the
maquiladora industry, even though growth in
employment among male production workers has
outpaced that of women. (See table 4.) Rend6n
suggests that the rise in men’s employment in
the maquiladora industries is related to the re-
duction in employment opportunities for men in
industry nationally.? This has forced them to
choose less attractive occupations at relatively
low wages. Men are also increasing their par-
ticipation in activities related to trade and serv-
ices in the maquiladora industries, areas in which
their participation had previously been low. Fur-
thermore, increased maquiladora activity in
“heavier” industries such as transportation equip-
ment helps to explain the growth in employment
of men in the maquiladora sector.

Workers in maquiladora plants are young. A
survey carried out in three northern cities re-
vealed average ages of the workers between 22
and 24 years.

Four cities that border the United States—
Tijuana, Ciudad Judrez, Matamoros, and Nuevo
Laredo—have been included in the Urban Em-
ployment Survey since 1987. Maquiladora in-

Table 4. Number of persons employed
In maquiladora industries in
Mexico, 1975 and 1980-93

Production workers
All
Year | workers | Total Percent

Men | Women
1975....| 67,214 | 57,850] 21.7 78.2
1980. 119,546 | 102,020] 22.9 773
1981... | 130,973 | 110,020] 22.6 774
1982... | 127,048 | 105,383] 22.8 774
1983... | 150,867 | 125,278 | 25.5 744
1984... | 199,684 | 165,505] 29.1 70.9
1985. 211,968 | 173,874] 31.0 69.0
1988.... | 249,833 | 203,894] 31.8 68.0
1987... | 305,253 | 248,638 | 34.0 66.0
1988... | 369,489 | 301,379| 36.8 63.2
1989.... | 429,638 | 349,602 | 38.6 61.4
1990.... | 447,606 | 361,275 | 38.9 61.1
3901.... | 467,352 | 374,827 | 39.7 60.3
1992... | 505,053 | 406,313 | 39.8 60.2
1993... | 540,927 | 440,242 | 40.5 59.5

Source: Mexican Statistical Institute, Estad/stica de la
industria de exportacién: 1975-85, table 2; 1979-89, table
2; Cuaderno de informacién oportuna, June 1992, table
2.22; Avance de informacion econémica: industria maqui-
fadora de exportaci6n, July and December 1993, table 3.

dustrial activity is concentrated in these cities,
and they have been included in the survey so that
the Mexican government can evaluate the effect
of the maquiladora program on employment cre-
ation. Except for Matamoros, these border cities
have lower unemployment, higher labor force
participation, and a higher percentage of wage
and salary workers than the national average.
Although the maquiladora plants have been a
major generator of manufacturing employment
since 1980, their growth was not large enough
to offset the overall decline in employment in
the industrial sector that occurred in the 1980's.

II. Unemployment and underemployment

Mexico has maintained low open unemployment
rates—below 5 percent—through most of the
1980’s and into the 1990's. Table 5 presents ur-
ban unemployment rates for most years from
1970 to early 1994 from the various Mexican
household surveys, as well as from the 1970
population census, Changes in coverage and defi-
nitions affect the historical comparability of these
data. Broader definitions of unemployment were
used prior to 1985.

The highest urban unemployment rate re-
corded in Mexico since 1973 was 8.0 percent in
1977. In the early 1980's, Mexico’s urban un-
employment rates declined. Then, in 1983, the

rate jumped to 6.9 percent, still a low rate for
most of the world at that time. Rates fell con-
tinuously for the rest of the 1980’s and have re-
mained below 4 percent in the 1990's.

These low rates have provoked a certain de-
gree of skepticism among labor market analysts.
Therefore, this section begins by looking at the
concepts and definitions used by the Mexican
Statistical Institute in conducting the Urban
Employment Surveys. (See the appendix for
more detailed information about the survey ques-
tionnaire.) An adjustment to U.S. concepts is
made for three recent years, characteristics of
Mexico’s open unemploymentare investigated, and

Monthly Labor Review November 1994

17


The major differences between Mexican and
U.S. concepts are as follows:

Job search period. 1n the Mexican survey, a 2-
month job search period is allowed under cer-
tain conditions, whereas the U.S. labor force sur-
vey specifies that a job search must have occurred
in the past 4 weeks for an individual to be classi-
fied as unemployed, except for persons on tem-
porary layoff and persons waiting to begin anew
job, who are classified as unemployed without
the necessity of having undertaken a recent job
search. (In January 1994, the U.S. definition was
changed so that persons waiting to begin a new job
are also required to have searched for work in the
past 4 weeks to be classified as unemployed.)

Layoffs. Persons on layoff who are expecting
to be recalled to work in 4 weeks have been clas-
sified as employed in Mexico since 1985. Such
persons are enumerated as unemployed in the
U.S. survey.*5 Persons on layoff in Mexico who
do not expect to be recalled to work in the next
30 days are not counted as unemployed, unless
they have actively sought work in the past 2
months. In contrast, persons on longer layoffs in
the United States are still counted as unemployed,
with no job search requirement applicable to
them.*© Few Mexicans would be able to afford
to be on layoff for an extended period of time.
Therefore, this difference does not help to ex-
plain the low Mexican unemployment rate, com-
pared with that of the United States.

Waiting to startanew job. Mexico classifies some
persons as employed who would be counted as
unemployed under ILO concepts and in most de-
veloped countries: persons waiting to start anew
job within a month. The Mexican surveys report
a significant number of persons in this category.
In the United States, until January 1994, such
persons were counted as unemployed and did not
have a job search requirement. Now they are
counted as unemployed only if they also actively
sought work in the previous 4 weeks. Because
the former U.S. definition was used during the
period covered by the data in this article, that
definition will be applied here in the U.S.-Mexico
comparisons.*”

Unpaid family workers. Unpaid family mem-
bers who work less than 15 hours in the refer-
ence week (or who do not work at all) have been
classified as employed in the Urban Employment
Survey since its inception in 1983. This treat-
ment does not completely follow the ILO recom-
mendation, which was amended in 1982 to count
as employed all “unpaid family workers at work
. . . irrespective of the number of hours worked

during the reference period.” Because it states
“at work,” the ILO recommendation appears to
include only unpaid family members who did
some work in the reference period, but Mexican
statisticians have chosen to include those who
did not work at all, if they expected to return to
work in 1 month. Mexican surveys report a sig-
nificant number of unpaid family members work-
ing either a marginal number of hours or no hours
at all during the reference week. In the United
States, unpaid family members who worked less
than 15 hours in the reference week are not
counted in the labor force, unless they are seek-
ing work, In the latter case, they would be un-
employed. This follows the ILO recommendation
prior to the 1982 revision.

Persons on strike. In Mexico, persons on strike
are classified as employed if they expect to re-
turn to work in 4 weeks. If they do not expect to
return to work in 4 weeks and have sought work
in the past 2 months, they are classified as un-
employed. In the United States, persons on strike
are counted as employed regardless of the dura-
tion of the strike. Because in Mexico most strikes
are not expected to last more than 4 weeks, this
seems to be a marginal difference between the
Mexican and U.S. surveys.

Age limits. Another difference between the
U.S. and Mexican surveys is in the age limits
they recognize. The U.S. CPS covers persons aged
16 years and older, while the Mexican survey
uses a much lower age limit of 12 years. The
reason for the latter is that in Mexico young per-
sons are often expected to contribute to their
family’s welfare at an early age.

Adjustment to U.S. concepts. Mexico collects
a great deal of detailed information from the Na-
tional Employment Survey, and this makes it
possible to adjust the data closer to U.S. con-
cepts. In this article, adjustment is made to U.S.
concepts operational prior to the CPS revisions
in January 1994. Only the “more urbanized”
components of the 1988, 1991, and 1993 sur-
veys are used in the following analysis because
their labor markets are more comparable with
labor markets in developed countries.

No adjustment could be made for the 2-month
extension of the job search period in Mexico
under certain circumstances. However, the effect
of this difference is likely to be small, and in one
respect (treating those under lengthy layoffs),
Mexico’s method is less inclusive than the U.S.
method, which does not require a job search on
the part of this group.

Table 6 shows the effect of (1) including as
unemployed persons waiting to begin a new job

Monthly Labor Review November 1994

19



Mexico's economic liberalization included the
reversal of a protectionist trade policy, leading to-
ward the country’s entry into the General Agree-
ment on Tariffs and Trade in 1986 and culminating
in the final approval of the North American Free
Trade Agreement by all parties in 1993. A sig-
nificant restructuring of previously protected
manufacturing industries has occurred in Mexico
in the face of increasing international competi-
tion. Reforms were designed to improve effi-
ciency and promote productivity growth through
modernization and the enlargement of capacity.

The in-bond manufacturing system (maqui-
ladoras) had already been in place since 1965; it
allowed foreign (predominantly U.S.) firms to
import duty-free components and machinery and
to process or assemble these imported goods and
components for reexport. Merchandise exported to
the United States under this program could enter
the United States with import duty paid only on
the value added in Mexico. During the 1980's, the
Mexican government successively liberalized the
maquiladora system, which employed around 10
percent of the manufacturing work force by 1991.5

The roots of the crisis were so deep that it took
more than 6 years of painful adjustments and
reforms for the new approach to start producing
visible results. Even in 1987, real gross domes-
tic product was lower than in 1981; between 1981
and 1987, real gross domestic product per capita
declined by an average of nearly 2 percent per
year. Consumer price inflation averaged nearly
100 percent annually during the same period. A
devastating earthquake that hit Mexico City in
1985 interrupted progress by requiring major
emergency expenditures and making budget
plans obsolete. Shortly thereafter, another severe
shock hit the economy when international oil
prices dropped precipitously in late 1985, reduc-
ing the average price received by Mexico for oil by
more than 50 percent. Only toward the end of the
1980’s did real output return to the level attained in
1981 and inflation fall below precrisis levels.

By 1989, the Mexican economy showed marked
improvement. Average real gross domestic prod-
uct growth accelerated from 1.5 percent a year in
1987-88 to 3.5 percent a year in 1989-92, outstrip-
ping population growth and resulting in an increase
in real gross domestic product per capita of about
1.5 percent a year. Real gross domestic product
growth slowed to about one-half of one percent in
1993 and early 1994, However, in the second quar-
ter of 1994, the economy picked up strongly, grow-
ing at an annual rate of 3.8 percent.

Sources and quality of data

This article draws upon data from both house-
hold surveys and establishment surveys con-

ducted in Mexico, but the focus is on the house-
hold surveys. Varying geographic coverage and
changing questionnaires and definitions in the
household surveys hamper historical analysis.
The article uses population censuses sparingly
(mainly to capture some long-term trends), be-
cause they are available only every 10 years and
because labor force status is not probed very deeply
in the censuses. Also, definitions have changed from.
census to census, and data collection and enumera-
tion problems related to the 1980 census rendered
it unreliable as a labor force measure. The various
sources describe characteristics of different employ-
ment universes, or they describe similar universes
using different methods. The differences discussed
below must be kept in mind when analyzing labor
force data for Mexico.

Since the mid-1980’s, Mexican labor force
surveys have probed extensively into the labor
force status of their respondents. Earlier surveys
did not probe as deeply because they were based
upon a model more applicable to measuring the
status of the labor force of developed countries.
The improvement has resulted in better enumera-
tion of marginal activities that may have gone
unreported in the earlier surveys, but it also re-
sults in breaks in historical continuity. Because
the labor force is better enumerated in the sur-
veys from 1985 onward, some caution must be
exercised in analyzing trends over time—not only
overall trends, but also trends by class of worker
and by sector of employment.

Establishment surveys. Three establishment
surveys are used as employment indicators, but
to a lesser extent than the household surveys, as
they are more limited in scope. The Monthly In-
dustrial Survey covers about 3,200 establish-
ments engaged in manufacturing. Each industrial
sector within manufacturing is represented by
establishments that combine to produce at least
65 percent of gross domestic product in the sec-
tor. Thus, some sectors are represented by 20 units
and others by hundreds. For each establishment
listed, the Monthly Industrial Survey enumerates
all employees and production workers who worked
in the establishment during the reference month.

To supplement the data from the Monthly In-
dustrial Survey, two other establishment surveys
are cited. The Maquiladora Survey covers those
establishments which assemble imported com-
ponents for reexport as finished goods; these
plants are not included in the Monthly Industrial
Survey. The 1992 National Survey of Micro-
enterprises provides detailed data on the charac-
teristics of small enterprises, many of which op-
erate in the informal sector.

Data from these three sources are used in this
article as an adjunct to employment data derived

Monthly Labor Review November 1994 5



Employment and Unemployment in Mexico

of the rate to include persons who would be
counted as unemployed under U.S. concepts
raises the rate, but it still remains relatively low.
Concepts applicable to developed countries are
inadequate for explaining the conditions in a la-
bor market with a sustained oversupply of labor,
with limited public employment services and no
safety net of unemployment insurance, and with
a conventional labor market only in the formal

Footnotes

sector of the economy. Mexico’s 10 complemen-
tary rates of unemployment represent an attempt
to measure the forms of underemployment not
encompassed in the concept of open unemploy-
ment. They indicate a high level of underemploy-
ment in Mexico, which is higher still when ad-
justments are incorporated into the income
sufficiency indicators to reflect the inflatioi
adjusted minimum wage.

ACKNOWLEDGMENTS: The authors thank Roy Campos
Esquerra, Ricardo Rodarte Garcfa, and Mario Palma Rojo
of Mexico's National Institute of Statistics, Geography, and
Informatics for answering numerous questions and provid-
ing expert interpretations, publications, and unpublished data
from the Mexican household surveys; thanks also to Teresa
Rend6n and Carlos Salas, professors at the Universidad
Nacional Auténoma de México (Mexico City) and to Greg-
ory Schoepfle, Director of the Division of Foreign Economic
Research, Bureau of International Labor Affairs, for help-
ful comments on an earlier draft of this article. Pedro Laboy,
Wolodar Lysko, and William McMichael of the Division of
Foreign Labor Statistics assisted the authors by translating
articles and technical materials. Sara Elder of the same Di-
vision provided research assistance while working on a.co-
operative educational assignment.

' The original member countries of the oc are Austria,
Belgium, Canada, Denmark, France, Germany, Greece, Ice-
land, Ireland, Italy, Luxembourg, the Netherlands, Norway,
Portugal, Spain, Sweden, Switzerland, Turkey, the United
Kingdom, and the United States, Subsequently, the follow-
ing countries became members: Japan (1964), Finland
(1969), Australia (1971), and New Zealand (1973).

2It should be noted that, from 1982 until the late 1980's,
Mexico made sharp cuts in social expenditures (for example,
on education, health, and the alleviation of poverty) due to
fiscal constraints. Furthermore, only slightly more than half
of the population has coverage for health services, old age
pensions, and disability and widowhood benefits through
the public social security system.

3 For a detailed account of Mexico's economic crisis and
the policy adjustments made during the 1980's and early
1990's, see Economic Survey of Mexico, 1991/1992 (Paris,
Organization for Economic Cooperation and Development,
1992). This section is based mainly on the ozcn's Survey.

4 Economic Survey of Mexico, p. 89.

5For further information, see Economic Survey of Mexico,
p. 138,

©The monthly industrial survey is oriented toward sup-
plying inputs for the National Accounts of Mexico; there-
fore, its focus is on collecting data on the value of produc-
tion rather than employment. In 1992, the Mexican Statistical
Institute developed a new survey, the National Survey of
Employment, Wages, Technology, Plant and Equipment,
which provides more detailed data about employment char-
acteristics from the perspective of establishments. We have
not yet reviewed this survey.

7 The Atldntida documents from the U.S. Bureau of the
Census were developed as a technical assistance package to
Latin American countries in 1965. They include all aspects
of planning and implementing household surveys in a se-
ties of case studies.

® The former Mexican Bureau of Statistics was reorga-
nized into the Instituto Nacional de Estadtstica, Geografia
¢ Informdtica and relocated to the city of Aguascalientes in

28 Monthly Labor Review November 1994

1983. The former agency, in operation since 1882, had been
dispersed in many different buildings throughout Mexico
City.

9 Mexico City, Guadalajara, Monterrey, Chihuahua, Leén,
Mérida, Orizaba, Puebla, San Luis Potosi, Tampico, Torreén,
and Veracruz.

Ciudad Juérez, Matamoros, Nuevo Laredo, and Tijuana,

‘| Cities added were Acapulco, Aguascalientes,
Campeche, Celaya, Coatzacoalcos, Colima, Cuernavaca,
Culiacén, Durango, Hermosillo, Manzanillo, Monclova,
Morelia, Oaxaca, Queretaro, Saltillo, Tepic, Toluca, Tuxtla
Gutiérrez, Villahermosa, and Zacatecas,

12 The Mexican concept of “unpaid family worker" in-
cludes a small number of unpaid nonfamily workers, A non-
family member may work for no pay in an “apprenticeship”
relation to a skilled craftworker in order to gain skills or in
order to prove his or her worth for the purpose of eventually
attaining gainful employment.

} Linda S. Peterson, Labor Force and Informal Employ-
ment in Mexico: Recent Characteristics and Trends, Staff
Paper No. 50 (U.S Bureau of the Census, Center for Inter-
national Research, October 1989), p. 2.

\4 Teresa Rendén and Carlos Salas, “La poblacién
econémicamente activa en el censo de 1980: comentarios
criticos y una propuesta de ajuste,” Estudios demogréficos
y urbanos (publication of the Center for Demographic Stud-
ies and Urban Developments at the College of Mexico), Vol.
1, No. 2, May-August 1986, pp. 291-309.

'S Some levels for recent years have been released on data
diskettes.

'© Peterson, Informal Employment in Mexico, p. 2.

"7A Report on Child Labor in Mexico and the United States,
jointly prepared by the U.S. Department of Labor and the Mexi-
can Secretariat of Labor and Social Welfare, under the terms of
the Memorandum of Understanding signed by the Secretaries
of Labor of the United States and Mexico in May 1991. The
report is undated, A Spanish version of this report was also
published: Estudio conjunto sobre el trabajo de menores en
México y Estados Unidos (Mexico City, Secretaria del Trabajo
y Previsién Social, Subsecretarfa “B,” April 1993).

18 Carmelo Mesa-Lago, “Social Security and the Infor-
mal Sector in Latin America: The Case of Mexico,” in Work
without Protections: Case Studies of the informal Sector in
Developing Countries (Bureau of International Labor Af-
fairs, 1993), p. 55.

}© Both men's and women’s unemployment were under-
stated in the old crs, but the degree of understatement was
greater for women. The old cps procedures involved a gen-
der bias because of the wording of the initial question on
labor force status. For further information, see “Revisions
in the Current Population Survey Effective January 1994,”
Employment and Earnings (Bureau of Labor Statistics, Feb-
ruary 1994), pp. 17-22.



Employment and Unemployment in Mexico

ginal activities—street vending, for example—
which results in their classification as employed
rather than unemployed, even if they work as
little as | hour a week. Part-time work, marginal
self-employment, and nonremunerated work in
family businesses are frequently the only options
for many workers in Mexico. The actual unem-
ployed are just those who have the resources to
be able to afford to search for work as their only
labor force activity. They tend to be younger and
better educated than the rest of the population.
Often, they belong to families that can afford to
support them while they search for work.
Mexico’s term for its official urban unemploy-
ment rate is desempleo abierto, or open unem-
ployment, implying that there are other, more
hidden aspects of unemployment which are not
captured by the figures. In recognition of the in-
complete nature of the official unemployment
rate, Mexico’s Instituto Nacional de Estadistica,
Geografia e Informatica (National Institute of
Statistics, Geography, and Informatics—herein-
after, Mexican Statistical Institute) has developed
a framework of complementary rates. This array
of rates expands upon the conventional urban
unemployment rate to measure 10 broader con-
cepts of unemployment and underemployment,
subsuming such groups as the so-called hidden
unemployed—those who are available for work,

but are not seeking it—and persons working part
time for economic reasons, looking for a second
job, or working long hours for low pay. Whereas
the official urban unemployment rate averaged
3.4 percent in 1993, the highest measure in the
array was 23 percent.

To provide a context for a discussion of em-
ployment and unemployment statistics in
Mexico, part I of this article sets forth informa-
tion about economic conditions during the 1980's
and 1990's, and about the source and quality of
the data used in the subsequent analysis. It then
offers a profile that contrasts the labor forces of
Mexico and the United States, followed by a
general examination of Mexico’s population and
labor force. Next, part II, on employment, fo-
cuses on Mexico’s dual labor market, comprising
a formal and an informal sector, and on sectoral
employment shifts and maquiladoras—that
unique Mexican institution begun in 1965 to pro-
mote foreign investment and jobs in the country.
Finally, part III proceeds to an analysis of open
unemployment, including adjustment of the Mexi-
can unemployment rate to U.S. concepts, and con-
cludes with a presentation of the aforementioned
complementary unemployment rates, pointing out
both the usefulness and the limitations of the frame-
work. An appendix describes in detail the National
Urban Employment Survey questionnaire.

I. Background

From the 1950’s through early 1982, Mexico
achieved substantial economic growth, signifi-
cant increases in job creation, increases in the
share of industrial output in the national prod-
uct, and higher shares of wage and salary work-
ers among the employed. This long period of
economic progress ended abruptly in 1982. Most
of the world was entering a recession in the early
1980’s, and an enormous external debt became
the trigger for one of the biggest economic cri-
ses in Latin America since 1929. In the 12 years
prior to the recession, Mexico had embarked on
a policy of aggressive deficit spending and mon-
etary expansion, willingly financed by foreign
banks offering credit at low interest rates. When
prices for Mexico’s oil exports began to fall in
1981, external financing of rising deficits con-
tinued. But as oil prices weakened further, for-
eign banks reassessed Mexico's ability to repay
its debt and were no longer willing to finance it.
In mid-1982, Mexico's loans came due with no
money to pay back international creditors, trig-
gering the “debt crisis.”?

4 Monthly Labor Review November 1994

The crisis marked a turning point for the Mexi-
can economy and brought about a thorough re-
orientation in the Government's approach to eco-
nomic development. The new Government,
which took office in December 1982, immedi-
ately instituted a series of fiscal austerity meas-
ures to redress deficits in the balance of payments
and current accounts of the country. Renegotiation
of Mexico’s large foreign debt continued through-
out the adjustment period of the 1980's.

The hallmark of the new development strat-
egy was the transformation of a highly regulated
and protected economy toward an open and mar-
ket-oriented one. Many markets were deregulated,
and the private sector was subjected to increased
competition, both domestic and foreign. Price con-
trols were progressively lifted. State enterprises
were privatized throughout the 1980's, beginning
with small public concerns and culminating with
the sale of larger enterprises and the nationalized
commercial banks in 1990 and 1991. From 1982
to May 1992, the number of state-owned enterprises
in Mexico plummeted from 1,555 to 223.4



business or on the land of some family member
or somebody else?” A “yes” response leads to
classification of the respondent as employed (as
a nonremunerated worker), while a “no” response
is probed further in the second series of questions.
Persons classified as employed under this first set
of questions are not asked the second or third set of
questions, but are moved on to the section of the
questionnaire that asks further questions about their
place of work, occupation, hours, and eamings.

The second series of questions determines
whether the respondent is employed despite not
having worked in the reference period. The em-
ployment status of those who did not work in
the reference period is defined by the individual’s
connection to work either through receipt of ben-
efits or through an expected return to work. The
first question is “Why did you not work last
week?” Response number 1 combines all ex-
cused absences with pay: “Vacation, leave, sick-
ness, trip, personal matters, studies, with pay.”
Individuals in this category are classified as em-
ployed. Other responses capture persons who did
not receive pay and are on sick leave or other
leave, are “suspended” (laid off), are on strike or
a work stoppage, or are not at work due to the
end of a season, lack of capital or customers, or
scarcity of materials. These persons are aske
when they will return to work. They are classi-
fied as employed if they expect to return within
4 weeks,

If the respondent is not assured of returning
to an old job or working at a new job within 4
weeks, he or she is then asked, “Why don’t you
work?” The possible responses are that the per-
son is disabled, a student, a homemaker, or re-
tired. Alll individuals, except the permanently dis-
abled, are then asked how they support themselves,
ina final effort to uncover informal activities.

In the third series of questions that determine
a person’s labor force status, the questions focus
on activity related to a job search. These ques-
tions are asked of persons not previously classi-
fied as employed. The first of the questions is
“Have you tried to get a job?” After asking this
question, the enumerator lists the options of look-
ing for work, trying to be self-employed, trying
to sell something, or doing paperwork for self-
employment. The question “When was the last
time that you tried to find work?” determines the
period of the job search, if there was one. If the
respondent has looked in the past month, he or
she is classed as unemployed. If the respondent
looked more than 1 month previous to, but less
than 2 months before, the reference period, a
follow-up question is asked: “For what reason
did you not look for work in the past 4 weeks?”

If the respondent says that he or she is waiting
for a layoff or strike to end, waiting for the next
season of work to begin, waiting for a reply from
a job application, or expecting a call back to work
within 3 months, then the respondent is classi-
fied as unemployed. By including the second
month as a period of conditional search, the
Mexican definition of unemployment expands
upon the 4-week job search period used in the
United States.

Although, by definition, the Mexican unem-
ployed are assumed to be available to start work,
there is no actual test of their current availability
in the survey questionnaire. By contrast, in the
U.S. survey, potentially unemployed persons are
asked whether there is any reason they could not
take a job last week. Those who are not currently
available (except because of illness) are excluded
from the unemployed.

Hidden unemployment. The category of the
hidden unemployed is also enumerated with the
same questions. According to the Mexican defi-
nition, persons who are hidden unemployed are
those who were not classified as employed or
unemployed, but are available for work. Two
groups are added together to form the hidden
unemployed, based on their responses to the third
series of questions: (1) persons who respond that
have been looking for work, but their last search
took place more than 1 month, but not more than
2 months, ago, and that their reason for not
searching in the past month was that they thought
they could not find work or that no one would
give them work; (2) persons who did not look
for work in the past 2 months because they did
not think they could find work or they were wait-
ing for a period of layoff or strike to end, wait-
ing for the next season of work to begin, waiting
for a reply from a job application, or expecting a
call back to work within 3 months. These re-
sponses result in a classification of the respond-
ent as unemployed if a search took place in the
past 2 months, but as one of the hidden unem-
ployed if the search took place more than 2
months ago. Other responses to the question on
the reason for not looking for work include “re-
cuperating from illness,” “does not need to work,”
and “does not have time to work.” These re-
sponses do not result in classification of an indi-
vidual as either unemployed or among the hid-
den unemployed. Such an individual is simply
not in the labor force.

Footnote

' A translated version of the survey questionnaire is avail-
able from the authors.

Monthly Labor Review November 1994 31



Table 3. Mexican employment by status, first-quarter 1979, and second-quarter 1988, 1991, and 1993
[Numbers in thousands]
1979 1988 1991 1993
Category
Number | Percent | Number | Percent | Number | Percent | Number | Percent
Entire country:

Total 19,177 100 28,128 - 30,534 = 32,833 =
Wage and salary workers . 12,083, 62.9 15,861 68.4 16,878 56.7 18,102 56.9
Self-employed’ ..... 4871 25.4 6371 23.5 7,283 245 8,817 27.6
Employers’ .... 652 3.4 1,690 62 2,396 8.0 1,349 42
Unpaid family workers? 4,572 82 4,057 = 3,969 — 4,560 =

‘Working less than 15 hours par week? 0 = 832 - 744 = 1,003
Adjusted unpaid family workers? 1,872 82 3,225 11.9 3,228, 10.8 3,587 11.2
Not specified 0 0 148 = 9 - 4 =
Employed, excluding “not specified” and
unpaid famiy workers working ess
than 18 hours per week . ves 19,177 100 27,148 100 29,784 100 31,826 100
Larger urban areas:*

Total . ¢) © 12,848 = 14,354 =- 15,214 =_
Wage and salary workers a) ) 9,412 74.2 10,604 74.8 14,149 742
Self-employed’ .... : © 10) 2,145 16.9 2,398 169 2,552 17.0
Employers’ ... ©) ) 589 46 693 43 734 49
Unpaid family workers? . ° a) 697 = 655 = 780

Working less than 15 hours per week? a) © 165 - 141 - 181
Adjusted unpaid family workers? : ° i) 532 42 514 36 599 40
Not specified. ... : 0) ) 4 = 4 a 0
Employed, excluding “not specified” and
unpaid family workers working less
than 15 hours per week ...........2.+ ) ) 12,879 100 14,209 100 15,033 100
Smalier areas:*

Total .. O) ° 15,280 = 16,180 ~ 17,618 -
Wage and salary workers 6) (0) 6,449 44.9 6.274 40.3 6,954 414
Self-employed’ ¢) ) 4,226 29.4 4,886 31.4 6,266 37.3
Employers! ) a) 4101 77 4,703 10.9 614 37
Unpaid family workers? . ©: a) 3,360 - 3,313 3,780 _

Working less than 15 hours per week? . . © © 767 - 599 823 —
Adjusted unpaid family workers? °) ° 2,593 18.0 2714 174 2,987 17.6
Not specified. 0) 0) 144 _ 5 = 4 =
Employed, exciuding “not specified” and

unpaid family members working less

than 15 hours per week ...........+++ © © 14,369 100 15,576 100 16,791 100

+ Persons employing intermittent agricultural workers were moved to the self-employed category in 1993. in 1991 and earlier years, they were included as

employers. Persons employing permanent agricultural workers remain in the employer category.

2 Predominantly unpaid family workers; however, a few nonfamily workers are included.

3 Reported unpaid family workers minus those working less than 15 hours in the survey week.

4 Areas with 100,000 or more inhabitants and State capitals.

5 Not available,

® Areas with fewer than 100,000 inhabitants.

Nore: Percentages for 1988, 1991, and 1993 calculated on the basis of employed, excluding “not specified” and famity members working less than 15

hours per week. Dash indicates no proportion calcuated; instead, proportions are calculated on adjusted data that follow.

Sources: Continuous Occupational Survey, 1979, and National Employment Surveys, 1988, 1991, and 1993.

ers per family increased from 1.49 to 1.59 be-
tween 1977 and 1984, and to 1.63 in 1989. De-
spite this increase, there was a decline in real
family income between 1977 and 1984 due to
the fall in purchasing power. During the next 5
years, families belonging to the first seven deciles
of the income distribution saw their real incomes
rise between 3 percent and 8 percent, but they
did not recover the losses suffered since 1977.

With the slowing of inflation beginning in
1988, there has also been a slowing in the fall of
the purchasing power of wages. In that year, al-
most 70 percent of all urban workers received
incomes below twice the minimum wage, but it

took 4.78 times the minimum wage to cover the
standard market basket of necessities, as defined
by the general coordinator of the National Plan
for Depressed Areas and Marginal Groups
(COPLAMAR).°° By 1992, the wages of workers
employed in large manufacturing establishments
covered an estimated 90 percent of the market
basket’s value, but wages in trade and in services
are far lower than those of workers in large manu-
facturing establishments.” Thus, the task of creat-
ing well-compensated jobs in Mexico is a large one.

According to a study by the Regional Employ-
ment Program for Latin America and the Carib-
bean (PREALC),?” the trend toward informal em-

Monthly Labor Review November 1994

15


Employment and Unemployment in Mexico

Table 5. Unemployment rates in urban areas of Mexico, by survey, 1970-94
{in percent)
Annual
Year unemploy- Cities covered Name of survey
ment rate
1970! , 7.0 Mexico City, Guadalajara, Monterrey | Decennial Census
1973. 73 Mexico City, average for 1973-75 Continuous Labor Force Survey
1975. 72 Mexico City, Guadalajara, Monterrey | Continuous Labor Force Survey
1976 67 Moxico City, Guadalajara, Monterrey | Continuous Labor Force Survey
1977 80 Mexico City, Guadalajara, Monterrey | Continuous Occupational Survey
1978. 69 Mexico City, Guadalajara, Monterrey | Continuous Occupational Survey
1979. 57 Mexico City, Guadalajara, Monterrey | Continuous Occupational Survey
1980 45 Mexico City, Guadalajara, Monterrey | Continuous Occupational Survey
1981 42 Mexico City, Guadalajara, Monterrey | Continuous Occupational Survey
1982. 42 Mexico City, Guadalajara, Monterrey | Continuous Occupational Survey
1983... 69 Mexico City, Guadalajara, Monterrey | Continuous Occupational Survey and
National Urban Employment Survey
combined
1984.00... . 6.0 Mexico City, Guadalajara, Monterrey | Continuous Occupational Survey and
National Urban Employment Survey
combined
OBE 44 16 urban areas National Urban Employment Survey
1986 43 16 urban areas National Urban Employment Survey
1987 3.9 16 urban areas National Urban Employment SUrvey
1988 3.6 16 urban areas National Urban Employment Survey
1989... 3.0 16 urban areas National Urban Employment Survey
1990 .. 28 16 urban areas National Urban Employment Survey
3991. 26 16 urban areas National Urban Employment Survey
1992 seeee 28 32-34 urban areas* National Urban Employment Survey
a rn 34 34-97 urban areas* National Urban Employment Survey
1994,
First quarter ... 37 87 urban areas National Urban Employment Survey
Second quarter . 35 97 urban areas National Urban Employment Survey
' Census taken January 18, 1970. The unemployment rate for the entire country was 3.8 percent.
? Concepts used from 1985 onward are different from those used prior to that year. The definition of unemployment was
narrowed Somewhat in 1985.
® First and second quarters cover 32 cities; third and fourth quarters cover 34 cities.
4 First quarter covers 24 cities, second 35, third 36, and fourth 37.
Nore: All figures are average annual unemployment rates based on quarterly rates, except where otherwise indicated.
Sources: Compiled by ais from the surveys listed. Data for 1983 and 1984 provided by the Mexican Statistical Institute,

the 10 complementary measures of unemployment
ase presented, together with the official open un-
employment rate.

Concepts and definitions

The conceptual framework of the National Ur-
ban Employment Survey generally follows the
guidelines recommended by the 1.0. However,
there are some exceptions, as well as some dif-
ferences between Mexican and U.S. concepts.
Employed persons are defined (since 1985) as
those who are 12 years or older and, in the refer-
ence week, (a) worked at least | hour for barter
or money or were self-employed; or (b) did any
work at all as an unpaid family or nonfamily
worker; or (c) were temporarily absent from work
due to illness, vacation, travel, personal reasons,
or studies and were paid while on leave (no time
limit was placed on their absence, as long as they
were paid); or (d) did not work or receive pay,

18 Monthly Labor Review November 1994

but expected either to begin a new job or to re-
turn to work within the next 4 weeks.

The unemployed are defined as persons 12
years and older who, in the reference week, did
not work for | or more hours and (1) were avail-
able for work; and (2) actively sought work in
the previous 4 weeks or (3) had sought work in
the past 1-2 months and were waiting (a) for the
next season to begin; (b) for a reply to a job ap-
plication; (c) for a job recall within the next 3
months; or (d) for the end of a strike or work
stoppage. Note that although availability is speci-
fied in this definition, no question tests the cur-
rent availability of unemployed persons.

In sum, those who expect either to start or to
Teturn to work within 4 weeks are counted as em-
ployed, regardless of the reason (layoff, strike, sea-
sonal nature of job, arranged for a new job, and
so on). If they do not expect to begin or return to
work in 4 weeks, but have sought work in the
past 2 months, they are classified as unemployed.