Understanding Informality in Mexico
More than 50% of the employed population in our country works informally, and it is estimated that this sector accounts for nearly 25% of the GDP. The causes are multifaceted, with two key factors standing out:
- Poverty: Low educational attainment due to poverty leaves individuals without the necessary skills for formal employment, pushing them towards informal self-employment and trading.
- High labor formalization costs: Particularly burdensome for small and medium-sized enterprises, these costs include not only increased minimum wages but also recent changes in benefits like extended vacation days and reduced working hours.
The 13% adjustment to the minimum wage this year has significantly impacted company cost structures. Unable to absorb the salary increase, many companies have reduced their workforce, driving employees into informal jobs. Consequently, in 2025, there was a historical decline in the number of employers affiliated with the IMSS, with 25,667 employers becoming unaffiliated. Simultaneously, productive units in the informal sector have grown more rapidly than those in the formal sector.
According to data from INEGI (January-November 2025), the formally employed population decreased by 441,742 individuals while those in the informal sector increased by 962,385. Furthermore, data from INEGI, as reported by CEESP, indicates that the growth of the informal economy outpaced that of the formal economy throughout 2024 and the first half of 2025. This implies that informality contributed more to economic growth than the formal sector, with lower productivity and an average monthly labor income of $7,558 in the informal sector—half that of the formal sector’s minimum wage.
Beyond Labor Informality: Fiscal and Social Protection Informality
In addition to labor informality, fiscal and social protection informality present alarming figures (Banco Mundial and Bancomext, Reforma, January 2, 2026):
- Fiscal Informality: An astounding 80% of businesses in Mexico operate outside formal taxation, contributing to significant revenue loss for the government.
- Social Protection Informality: Of salaried employees, 42.1% lack employer-provided pension or health insurance benefits.
Impacts of Informality
Informality exacerbates job precarity, lowers productivity, reduces fiscal incomes, and excludes individuals from economic growth benefits, leading to social stagnation and poverty. To ensure sustained economic growth, President Sheinbaum must address the growing informality issue through appropriate public policies.
Key Questions and Answers
- What is informality? Informality encompasses labor, fiscal, and social protection aspects where businesses or individuals operate outside formal structures, leading to various negative consequences.
- Why is informality a concern? Informality contributes to job precarity, lowers productivity, reduces fiscal incomes, and excludes individuals from economic growth benefits, perpetuating poverty and social stagnation.
- What are the causes of informality? Key factors include poverty leading to low educational attainment and high labor formalization costs, especially for small and medium-sized enterprises.
- What are the impacts of informality on the economy? Informality negatively affects fiscal incomes, productivity, and economic growth, hindering social progress.
- What can be done to address informality? Implementing effective public policies can help desincentivize and curb the expansion of the informal sector.
