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November 1994, Vol. 117, No. 11
Employment and unemployment in Mexico's labor force
Susan Fleck and Constance Sorrentino
With the negotiation and passage of the North American Free Trade Agreement, interest in the Mexican economy has increased. Mexico is the world's 13th largest economy and a major participant in world trade. The country is America's third largest trading partner, after Japan and Canada, and bilateral trade has grown rapidly since Mexico joined the General Agreement on Tariffs and Trade in 1986. Furthermore, part of Mexico's rapid labor force growth has been absorbed by the United States through migration. From the twin perspectives of trade and immigration policies, it is important to analyze the extent to which Mexico has been able to provide adequate employment for its growing labor force.
Mexico became a member of the Organization for Economic Cooperation and Development (OECD) in May 1994.1 The country's per capita income is in the range of that seen in the lower income OECD countries such as Greece and Portugal. Mexico's labor market, however, differs from that of other OECD member countries. The variations reflect different demographic and economic developments, as well as different labor market institutions (or the lack thereof). One of the most striking differences is in unemployment rates. Over the 1980's, when most OECD countries experienced persistently high unemployment despite a prolonged economic upswing, Mexico managed to reduce its unemployment rates to very low levels during a period of economic restructuring and little growth.
The official urban unemployment rate for Mexico fell continuously from 1983 to 1991, reaching a low of 2.6 percent in 1991. In 1993 and early 1994, the rate rose somewhat, but remained under 4 percent. Rural unemployment rates are even lower. In highly developed countries, such low rates would be interpreted as a sign of full employment, but the same cannot be said for Mexico.
Basically, two factors help to explain the low measured unemployment rates in Mexico. First, the Mexican concept of unemployment excludes some persons who would be counted as unemployed under the U.S. concept. Adjustment to the U.S. concept would raise the reported rate, but would still leave it relatively low. Second, and more important, Mexico's low unemployment rates mask a large number of persons in unstable, marginal jobs. Thus, the rates reflect the need for persons to subsist through any work at all, rather than a situation of full employment.
This excerpt is from an article published in the November 1994 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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1 The original member countries of the OECD are Austria, Belgium, Canada, Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States. Subsequently, the following countries because members: Japan (1964), Finland (1969), Australia (1971), and New Zealand (1973).
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