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# EXECUTIVE SUMMARY

Over the past six years, Mexico has successfully implemented a program of sweeping economic reforms and made major strides towards a complete restructuring of its economy. Surprisingly, the reform process has occurred with little impact on unemployment. Official statistics drawn from the census and from employment surveys report an unemployment rate of 2.8% in 1991. An analysis of trends indicates that, even in the worst years of economic crisis, average unemployment rates did not increase beyond 6%. These figures seem very low when compared to those for other countries, especially given the magnitude of reforms and structural changes recently experienced by the Mexican economy. They raise a number of questions about the nature and relative importance of unemployment in Mexico.

A first question is whether the official definition of unemployment adequately reflects the importance of the phenomenon. In other words, is unemployment properly measured? A second issue relates to who bears the burden of unemployment. From a welfare perspective it matters greatly whether the cost of unemploy ment is widely spread or whether it falls primarily on a few. Even if only a small fraction of the labor force is unemployed at any point in time, these individuals may have specific characteristics that would make them particularly and repeatedly vulnerable, and therefore deserving of special attention. What are, in fact, the characteristics of the unemployed? Can one identify population groups that are more vulnerable to unemployment? Within each population group, is the risk of unemployment concentrated on a small number of individuals who are repeatedly hit? Another issue revolves around the relative importance of long-term unemployment. Specifically, one would want to know whether most unemployment is associated with normal turnover (movements from one job to the next), or rather comprised primarily of individuals who are out of work for a long period of time. All these questions have important implications for the design of policies and programs aimed at the unemployed.

In this report, we attempt to answer these questions using data drawn from two surveys. Our first source of data is the quarterly urban labor force survey (ENEU), a household-based survey of sixteen main urban areas. A key feature of the ENEU is its panel structure, which allows us to analyze certain aspects of unemployment --such as unemployment duration, persistence and turnoverwhich could not be analyzed with purely cross-sectional surveys. The ENEU's main drawback, however, is its limited coverage; it provides no information on the population from the rural areas or from smaller urban centers.

Our second source of data is the National Employment Survey (ENE), which expands beyond the ENEU sample to cover in addition all other main urban areas and a sample of the rural population. The ENE is carried out every 2-3 years.

We work with both surveys, drawing on the larger ENE sample principally for the analysis of the characteristics and determinants of unemployment and on the iNEU, and its panel structure, for the analysis of the dynamics of unemployment.

The main findings of the report are the following: