Mexico: Labor informality is the only way to survive

Thousands of Mexicans lost their jobs amid the COVID-19 pandemic

Mexico: Labor informality is the only way to survive
Street vendors can be found throughout the country, but they are especially popular in Mexico City - Photo: German Espinosa/EL UNIVERSAL
English 21/09/2020 08:51 Mexico City Editorial Actualizada 09:00

Leer en español

Now that the majority of states are gradually resuming their economic activities after the lock-down imposed amid the COVID-19 pandemic, the informal sector is recovering more quickly than the formal sector. The situation shouldn’t surprise anyone, they are the result of the conditions dominating the country: companies have been forced to shut down or reduce their activities to the minimum, thousands of people didn’t receive support to endure the economic crisis and authorities that refuse to help the productive sector and workers. 

The situation shouldn’t surprise anyone because the informal economy has been present in Mexico for decades. Although it has varied, authorities have estimated that up to 60% of Mexicans are part of the informal sector. 

For experts, the risk is that this percentage will increase, according to the tendency registered in recent months. In the informal sector, the working population went from 47.7% in April to 54.9% in July, which amounts to 27.3 million workers. The forecasts estimate that another 3.7 million workers will join the sector in the upcoming weeks, and surpass the 31 million workers in the informal sector registered before the pandemic. 

Recommended: 18 million Mexican jobs are at risk due to the COVID-19 crisis

Having millions of people working in the informal sector means that a large part of the economy won’t be regulated by authorities, there will be no precise registry of activities, these workers won’t pay taxes or have access to benefits, mortgages, or have access to a pension once they retire. Millions will be excluded from social benefits, something that will deepen inequality. 

Nevertheless, authorities have part of the solution. For companies to be considered “formal,” they must pay taxes and fulfill a series of bureaucratic requisites. Simplifying these obligations would become an incentive to join the formal sector, especially because the conditions imposed by the government often push formal companies to join the informal sector. 

There are two scenarios for the workers who are scarcely or moderately qualified: joining a formal company and receive a precarious salary and perhaps not receive the benefits established by the law. The other option is to join the informal sector. 

Currently, labor informality is the only way to survive for millions of people. However, it shouldn’t be justified as an outlet amid unemployment rates. The federal government would have to fix what previous administrations didn’t want to or couldn’t fix before it’s too late.