Critical labor market issues in Mexico - Economía - Reeditor.com

. The labor market in Chiapas is facing several critical issues of which I would like to focus on four. First, the employed population working in the informal sector accounts for 22% of the total employed economically active population, 34% are women and 16.5% are men, according to official data. In Mexico as a whole, in contrast, it accounts for 29%, although several studies argue that it could be much larger reaching around 43%. This issue is particularly relevant because the informal sector is mainly characterized by low productivity and, as a result, low wages. Hence, working in the informal sector makes harder for households to increase their net disposable income and break the intergenerational transmission of poverty.

Second, depressed wages. Approximately 30% of the employed population earns less than one minimum salary (MX$56.7; equivalent to USD$4.51), 24.2% earns between 1 to 2 minimum salaries, and about 19% of the employed population does not earn any income at all. Using the Chiapas Consumer Price Index, the minimum salary grew -3.3 from 2007 to 2011. Moreover, in average, the main households’ sources of income are wages & salaries and transfers, accounting for 57% and 20%, respectively. Depressed wages imposes a barrier for households to move out of poverty.

Third, another critical issue is related to the access to health. Around 82% of the employed population in Chiapas does not have access to health services. It implies that only 16% of the employed population is registered at the Mexican Institute of Social Security (IMSS) with which they can have access to public health services. Furthermore, about 27% of the employed population is working under critical conditions, that is, the employed population is working (1) less than 35 hours a week due to market reasons, (2) more than 35 hours a week with a monthly income below the minimum salary, and (3) more than 48 hours a week earning up to two minimum salaries. This feature of the labor market also prevents households to get out of poverty.

Fourth, youth unemployment. Approximately 51% of the unemployed are between 20 and 29 years old. Labor is the main asset of the poor. If there are scarce employment opportunities for youth, the net disposable income of the poor cannot grow and a dependence on governmental transfers, in the form of conditional cash transfers, may be created. Under such circumstances the intergenerational transmission of poverty cannot be broken.

In sum, it is crucial to encourage public and private investments in Chiapas to boost growth for jobs creation. Also, at the national level, a labor reform seems to be fundamental in order to build a coherent incentive structure to make easier for companies to create more formal jobs and induce workers to join and remain in the formal sector. It is also extremely relevant to invest in more human capital and training in order to increase productivity and wages for poverty reduction.

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