Understanding the Informal Economy in Mexico
The informal economy in Mexico comprises all economic units operating outside basic legal requirements and includes informal labor arrangements and business informality. These schemes generate income but lack full legal protection.
Growth in Informal Economy Contribution to GDP
According to Mexico’s National Institute of Statistics and Geography (Inegi), the informal economy contributed 25.4% to Mexico’s national GDP in 2024, marking a growth in its economic production size for four consecutive years.
- The informal economy’s growth over the past year (2023-2024) was 0.7 percentage points.
- This growth has been consistent for four years, reflecting the expanding size of informal economic activities.
Employment and Economic Impact
Beyond contributing 1 out of every 4 pesos to the GDP, the informal economy employs more than half of Mexico’s workforce: 54.4% of the total labor force is engaged in informal schemes.
The Inegi’s Measurement of the Informal Economy includes all economic units operating outside basic legal requirements, along with informal labor arrangements and business informality. These schemes generate income but lack full legal protection.
Key Sectors in the Informal Economy
Breaking down informal economic activities, the retail trade sector contributes the most value-added: 29% of total informal economy production comes from retail sales.
Construction and manufacturing industries also account for a significant portion of informal value-added, at 15.6% and 13.0%, respectively.
In 2024, sectors like agriculture, livestock, and animal husbandry saw a decrease in their contribution to the total informal value-added compared to the previous year, indicating potential shifts in employment and production approaches.
Contextual Challenges
The growth in the informal economy occurs amidst a moderate national GDP scenario over recent years. In 2024, Mexico’s total economy grew by a mere 1.5% compared to the previous year.
The substantial size of Mexico’s informal economy and its significant contribution to overall production highlight important productive and labor challenges in the country.
Key Questions and Answers
- What is the informal economy in Mexico? The informal economy includes all units operating outside basic legal requirements and encompasses informal labor arrangements and business informality.
- What percentage of Mexico’s GDP does the informal economy contribute? The informal economy contributed 25.4% to Mexico’s national GDP in 2024.
- How many workers are employed in the informal economy? Over half of Mexico’s workforce, or 54.4%, is engaged in informal schemes.
- Which sectors are key contributors to the informal economy? Retail trade, construction, and manufacturing industries are significant contributors to the informal economy.
- What challenges does the growth of the informal economy present? The substantial size and contribution of Mexico’s informal economy to overall production highlight important productive and labor challenges in the country.
