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Mexico’s informal sector accounts for 60 percent of workers

December 13, 2012

Newly released official statistics show 60 percent of Mexico’s labor force work informally, paying no taxes and claiming no social security.

Using new methodology, the National Institute of Statistics and Geography (INEGI) revealed this week that Mexico’s informal sector now comprises 29.3 million workers, 60.1 percent of the total 48.7 million laborers in the country. This is more than double the 14.2 million recorded in the last such survey.

Of the 18 million men and 11.3 million women who work informally, 23.5 percent are aged 14 to 24; 42.9 percent are aged 25 to 44; 27.3 percent are aged 45 to 64; and 6.2 percent are over 65.

They include 2.1 million domestic staff and 6.2 million agricultural workers. In rural areas the informal work force represents 73.5 percent of those in employment, while the figure drops to 47 percent in urban areas with a population above 100,000.

Northern states such as Baja California (41.6 percent), Chihuahua (42.8) and Nuevo Leon (43) have the lowest proportion of informal workers, while in southern states like Oaxaca (80.8), Guerrero (80.8) and Chiapas (76.5) the percentage is staggeringly high.

On average, formally registered workers earn 38.4 pesos per hour, while informal workers make just 24.08 pesos per hour.

With such a small proportion of workers paying taxes, the Mexican government collects far less revenue than it should. It has one of the smallest tax takes in Latin America and remains dependent on income from state-oil-monopoly Pemex to fund nearly a third of the federal budget.

New Finance Minister Luis Videgaray said on Monday that the government will consider changes to existing tax laws – including controversial VAT exemptions – to boost revenue and pay for programs proposed by President Enrique Peña Nieto.

Late last month the International Monetary Fund (IMF) urged Mexico to adopt tax and subsidy reforms to raise its low ratio of revenue to gross domestic product (currently around 18 percent, just over half the OECD average of 34 percent) and reduce its dependence on income from oil.

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