Employment and poverty Eduardo Zepeda

Mexico’s growth performance deteriorated after debt crisis and with IMF-WB style stabilisation

Poverty increased with 1995 crisis, otherwise declined but remained high. Inequality has also remained high and possibly w/increasing trend

Mexico’s mixed recent performance of pro-poor growth Inequality, poverty and growth: Mexico Annual rates of change years^ gini^ poverty^ gdp^ gdp-pcpro-poor YES YES anti-poor NO YES favouring poor

Urban non-agricultural employment has been drifting away from manufacturing into services Employment (th) Sumcomercioserviciosmanufactura ,359 2,169 1,719 2, ,044 3,213 2,798 3, ,153 3,785 3,921 4,

That is, into low-mid wage activities, but relative wages in manufacturing are also declining Wages (1999 pesos per day) Non-agriculturecomercioserviciosmanufactura

Employment elasticity in mnf was high (i.e. but no productivity growth), wages declining. Employment and wages in manufacturing: 1989, 1994 and employmentprd/ocupationemploymentshare bluewageswage ratio elasticity 1productivity 1all (th.)in employmentallblue/white annual % ^

High employment elasticity manufacturing (assembly->manufacture) Maquiladora manufacturing Annual rates of change % productivity1productivity2 pro-poorelasticityval.prd/ocuvalue ad/ocuwg blue/whiteblue collar/ocu 89-92YES YES anti-poor NO YES favouring poor

Low employment elasticity manufacturing (manufacturing-> assembly) Large Manufacturing Industries Annual rates of change % labour% of yearspro-poorelasticityproductivityoc: wrk/ocuwg: blu/wht 89-92NO YES anti-poor NO YES favouring poor

90-94 pro-poor despite informalisation?; worsening in employment; pro-poor & pro- employment Informal employemnt and income from labor Annual rates of change % Self employedEmployees/microStreet vendorsUnpaidTotal ocu pro-poor^ #^ wages^ #^ wages^ #^ wages^ ## 90-94YES ? YES

Memo: indicators of the order of magnitud of informality Urban Employment (mill) and labor Income (1993 pesos) Total Occupation Self employed % ees micro bs % Street vendors % Unpaid workers % Employees % Waged wk % Full time (a/y) % ees large bs %

Informality: anti-cyclical escape valve

Ees in micro have gained; ees in large have retained their edge Relative wages Self employed ees micro bs Street vendors100 ees large bs

Poverty among working population by status The incidence of poverty is high, evidently among unemployed and vulnerable youth. The increase in poverty among the vulnerable youth is rapid. Poverty by labour status Avgyr%& wkng un220.5 vul,yth271.6

Poverty among working population by sector The incidence of poverty is highest in agriculture, then construction and light industry The reduction of poverty was fastest among extractives and services. Poverty by economic sector Avg%yr%^ agrc410.5 extrc l.ind h.ind9-9.6 cnst210.3 trade111.3 serv7-7.8 trnsp917.7

Poverty among working population by sector The incidence of poverty is highest among agriculture, unpaid and self employed The reduction of poverty was fastest among owners of micro bs. Poverty by ocupation type Avg%yr%^ ee.agr410.3 ee.n.agr91.3 self.prf self.npf ee.exc1-0.4 own.mcr own.oth7-1.6 no.pyd other190.2

CONCLUDING REMARKS Macro stabilisation has been succesful in bringing down inflation, aligning the budget and in bringing international rules to financial and banking services. The economy has modernise (the largest chink of FDI in the 90s went to services) But the economy has not growth sufficiently. Poverty and inequality remain a problem.

CONCLUDING REMARKS Trade, investment and financial market liberalisation has not been enough to increase growth. The big star of export oriented re-industrialisation, maquiladora, is now running out of steam, with China’s accession to the WTO. Other types of re-industrialisation, such as LAC’s resouce based path needs to be further developed. If Mexico’s has faced difficult employment challenges that have led to large informal activities, now that maquiladora is weakening the employment challenge will be more difficult.

CONCLUDING REMARKS Poverty reduction strategies are comprehensive, and resources channeled to these activities have been recently increasing: 1.0% gdp 96-00, 1.4% in But temporary employment programmes are declining: 1.2 m. jobs in 99 vs 300 th. in 04 24% of expend in 01 vs 6% in 04. Micro credits & supports for micro production are declining: 3% in 01 vs 1% in 04.

CONCLUDING REMARKS There is a clear need to support employment and productivity enhancement in: –urban & particularly in rural areas –focusing on micro bs & the self employed. Beyond these, there is a need to increase the employment elasticity of manufacturing.