# **1. Introduction**

Rural labor markets are a subject of widespread interest mainly because of the large number of rural population in the western hemisphere and the ways in which the rural population migrates and exports their produce. In Mexico alone, there are some 25 million rural people, most of them living in poverty.

The agricultural sector contributes just 5 percent to Mexico’s GDP while it provides employment to 45 percent of the rural workers in semi-urban areas (localities with rural population less than 15,000) and 56 percent in more dispersed rural areas (locations with less than 2,500 inhabitants). However, labor productivity and returns tend to increase as production shifts from grains to more export oriented crops such as fruits and vegetables, which has occurred in the last decade in Mexico. Moreover, export oriented crops also give a boost to rural nonfarm sector employment.

Today’s rural population in Mexico is no longer dependent on agricultural income alone. The rural population receives its income from various sources apart from agricultural activities, namely from off-farm or nonagricultural activities, remittances, and transfers. Moreover, the share of off-farm, transfers and remittances in total income is rapidly increasing for the rural population (see Verner 2004). Labor is the most important asset the poor have and nonagricultural jobs pay the highest wages in rural areas.

Households and locations operate in multiple, interacting activities and sectors, for example rural nonfarm and agriculture are complements and migration affects dynamics at the household and community levels. This has implications for policy because it requires a policy approach that is territorial in a double sense: it takes account of spatial differences and spatial interactions; and it recognizes multiple activities.

This paper tries to shed some empirical light on income generation and employment in the rural agricultural and nonagricultural sectors in Mexico. The analyses are based on ENIGH ( _Encuesta nacional de Ingresos y Gastos de los Hogares_ ) surveys from 1992 to 2002 and ENET ( _Encuesta Nacional de Empleo_ ) surveys from 1995 to 2003<sup>2</sup> . Rural poverty in Mexico is analyzed in depth in Verner (2005).

This paper is organized as follows. Section 2 addresses developments of the rural labor force, main changes in sectoral employment patterns, labor force characteristics,

> 2 The National Survey of Employment ( _Encuesta Nacional de Empleo_ , or ENE) was first collected in 1996. It contains information about the characteristics of the labor force in Mexico. ENE include variables at the individual level, for example education, hours worked, labor participation, contract type and benefits, social protection coverage, and other basic variables as gender, marital status, and age. Since 2000, ENE incorporates the National Survey of Urban Employment ( _Encuesta Nacional de Empleo Urbano_ , or ENEU). Starting in 2000 it became a quarterly survey and is renamed ENET ( _Encuesta Nacional de Empleo Trimestral_ ) and is reorganized to a panel survey that follows every single individual for 5 quarters. Since the second quarter of 2001, the ENET is representative at the national level, rural and urban level, 48 mayor cities, and Mexico’s 32 states.

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