OFFICIAL FIGURES SPIN UNEMPLOYMENT FIGURES AND THE

UNCLAS SECTION 01 OF 03 MEXICO 005930

SIPDIS

SIPDIS

DEPT FOR DRL/AWH AND ILCSR AND WHA/MEX, DOL FOR ILAB

E.O. 12958: N/A
TAGS: ELAB ECON SOCI PGOV PINR MX
SUBJECT: OFFICIAL FIGURES SPIN UNEMPLOYMENT FIGURES AND THE
GROWTH OF MEXICO,S INFORMAL ECONOMY

REF: REF: MEXICO 4150


1. SUMMARY: On November 15 INEGI, the GOM,s National
Statistics Institute, issued a report stating that during the
twelve-month period ending September 2007 Mexico,s official
unemployment rate dropped from 4 percent to 3.9 percent. The
INEGI report also indicated that during the same twelve-month
period some 130,000 additional workers found jobs on the
informal economy. This acknowledged increase in the
estimated number of persons employed on the informal economy
brings the figure of those similarly employed to roughly to
11.53 million workers. According to INEGI, this number
represents 26.9 percent of all economically active persons in
Mexico over 14 years of age. The official estimate of those
employed in Mexico,s informal economy notwithstanding, both
the World Bank and the OECD calculate that the real number of
persons similarly employed is closer to 45 percent of the
country,s working population. In commenting on the INEGI
report, a senior Secretariat of Labor (STPS) official pointed
to the employment figures as proof that President Calderon,s
administration was keeping its campaign promise to promote
job creation. The STPS official also stated that the GOM was
currently in the process of revising its only formal job
creation program &First Job8. Unfortunately, the &First
Job8 program is widely viewed both by Mexico,s private
sector and by its organized labor movement as an overly
bureaucratic initiative that has thus far produced few
concrete results. END SUMMARY.


A DROP IN OFFICIAL UNEMPLOYMENT FIGURES
--------------


2. On November 15 INEGI, Mexico,s National Statistics
Institute, released a report that gave the GOM,s official
unemployment figures for the twelve-month period ending
September 2007. According to INEGI, during the period in
question, the official unemployment rate in Mexico showed a
minor drop from 4 percent to 3.9 percent. The report
announcing this, at best, slight drop in unemployment
received considerable coverage in the Mexican media; far
beyond what might be reasonably expected for such a modest
achievement. The media attention given the latest release of
Mexico,s official unemployment figures seems especially
puzzling when one recalls that this past July the GOM,s
Secretariat of Labor (STPS) was estimating the official

SIPDIS
unemployment figure at only 3.6 percent.


3. Regardless of which number one chooses to use for
Mexico,s official unemployment rate, 3.6 percent or 3.9,
both figures are somewhat misleading and should be viewed
cautiously. Mexico,s official unemployment figures count
people as employed if they work as little as one hour a week,
make little distinction between those formally and fully
employed, underemployed person or persons actively looking
for work; all are counted as being employed. Once these
factors are taken into account the real unemployment rate
could be three or four times as high as the official figures.
The rise in the official unemployment figures from 3.6 to
3.9 percent could be attributed to normal population growth
and the consequent increase in the number of new entrants
into the Mexican job market. However, given the ongoing,
massive, and all but officially GOM sanctioned, migration of
Mexican workers to the US, it is difficult to see a bright
side to the current employment situation in Mexico.


INFORMAL ECONOMY CONTINUES TO GROW
--------------


4. In the same report that announced the modest drop in
Mexico,s official unemployment figure INEGI also released
figures showing an increase in the number of persons employed
in the informal economy. According to INEGI, the number of
persons calculated to be working in the informal economy is
estimated at roughly 11.53 million persons which the GOM
agency states is some 26.9 percent of all working people over
14 years of age. This figure of over 11.5 million workers,
which is INEGI,s best guess for the twelve-month period
ending September 2007, represents an increase of nearly
130,000 people over the same period in the previous year.


5. In responding to press inquiries about the meaning of the

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figures for the growth in the informal economy INEGI
acknowledged that the increase in informal jobs was a result
of the slow growth of the Mexican economy. Another possible
but unacknowledged reason for the growth informal economy can
also be guessed at by an examination of some of the other
figures contained in the INEGI report. These figures showed
that for the roughly 42.9 million persons who are employed in
the formal economy, 32.5 percent of them earn, at most, three
times the daily minimum wage; or approximately USD 15.00.
Given the number of persons whose salaries on the formal
economy do not pay the equivalent of USD 15.00 per day it is
not surprising that many workers are prepared to try their
luck on a job in the informal economy (or risk the hazards of
migrating to the US).


WORLD BANK, OECD DIFFER WITH INEGI ON THE INFORMAL ECONOMY
-------------- --------------


6. Although INEGI places the number of people employed in
Mexico,s informal economy at 26.9 percent of working people
over the age of 14 both the World Bank and the OCED differ
with this official GOM figure. According to these two
international financial institutions, the real size of the
number of persons working in Mexico,s informal economy is
somewhere between 42-45 percent of all working people. The
World Bank and OCED figures closely match an estimate made
this past July by the Governor of the Bank of Mexico, the
country,s central bank, who stated that 44 out of every 100
jobs created in Mexico are generated in the informal economy.


STPS OFFICIAL PROMOTES JOB CREATION FIGURES; PROMISES MORE
-------------- --------------


7. Shortly after the release of the INEGI report an
Assistant Secretary level official of the GOM,s Secretariat
of Labor (STPS) took advantage of a public labor related
event to laud the government,s accomplishments with regard
to job creation and reducing unemployment. According to the
STPS official, President Calderon is living up to his
campaign promise to be the &Employment President8. In
support of this position the STPS official claimed that in
the first nine months of the Calderon administration the
government had created 618,000 jobs on the formal economy
with all of them registered with Mexican Social Security,
IMSS (which is responsible for administering Mexico,s
national health care and pension/retirement systems). The
statement of the STPS official notwithstanding, an economist
interviewed in one of Mexico more well respected newspapers
claimed that at least 51 percent of the jobs the GOM says it
created are either part-time jobs or outsourced jobs with
little or no stability.


8. The STSP official also stated that the GOM was currently
in the process of revising and re-launching its only formal
job creation program &First Job8. One of the main reasons
sited by Mexican businessmen as a major obstacle to job
creation is the high cost and bureaucratic complexity for
employers of enrolling workers into Mexico,s Social Security
system. A significant number of employers in Mexico go to
great lengths to avoid the cost and difficulty of enrolling
their employees into IMSS. In order to overcome this
barrier, and spur job creation, the Calderon government
proposed to subsidize the cost of enrolling new employees
into IMSS for up to one year for all workers hired into
permanent positions with its &First Job8 program.


9. Unfortunately, the &First Job8 program is widely viewed
both by Mexico,s private sector and by its organized labor
movement as an overly bureaucratic initiative that has
produced few concrete results. After several months of
seeing how the &First Job8 program has been implement
Mexico,s business sector and organized labor movement are in
agreement that the complexity of enrolling a newly hired
employee into it is every bit as difficult, if not more so,
as it is to enroll a new employee hired without the program.
Moreover, they claim that the subsidies promised do not cover
the full cost of IMSS enrollment. The subsidies paid vary
greatly with the type of job and are often too low to entice
employers to put up with the increased administrative burden.
Such negative criticisms of the &First Job8 program
notwithstanding, the STPS official stated that the GOM was

MEXICO 00005930 003 OF 003


committed to making it work. He did not however, specify
when the revised &First Job8 program would be officially
re-launched.


COMMENT
--------------


10. The INEGI report was an opportunity for the GOM to
remind the country that it was aware of the vital importance
of job creation. It could also have been an opportunity to
honestly acknowledge that the government,s efforts at job
creation have yet to produce any significant results.
Indirectly, the GOM did signal its intention to solider on
with its endeavors to address Mexico,s pressing need for
more and better paid jobs. Mostly, however, the GOM,s
handling of the results of the INEGI report came across as an
attempt at spin designed to show everyone that President
Calderon had not forgotten his campaign promise to be the
&Employment President.8








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