Paula Garda
OECD
OECD Economic Surveys: Peru 2025
Abstract
Improving intergenerational mobility is key to unlocking Peru’s full productive potential and ensuring that all individuals, regardless of their socioeconomic background, have a fair chance to succeed. While more individuals in Peru attain higher education than their parents, limited access to quality education, widespread informality, weak school-to-work transitions, and persistent gender and regional disparities continue to constrain economic and social mobility. A person’s socioeconomic background continues to shape access to quality education and formal jobs, limiting upward mobility for youth, women, and rural populations. The chapter identifies four priorities to strengthen intergenerational mobility: improving education quality and foundational skills, especially early on; supporting school-to-work transitions through better outreach of youth not in employment, education or training and vocational training and job placement; addressing labour market gender gaps; and reducing informality among workers and firms to expand access to higher-quality jobs.
Promoting social mobility is essential for building a more inclusive and resilient economy. While poverty has declined substantially over the past two decades, opportunities to move up the income ladder remain highly unequal in Peru. Intergenerational mobility has improved but is lower than in some peer Latin American countries and the OECD, with a person’s socioeconomic background continuing to strongly influence their access to quality education, formal employment and better incomes. More Peruvians are attaining higher education levels than their parents, however, this progress has not translated into proportional income gains. As a result, many Peruvians, particularly those in rural areas, women, youth, ethnic minorities, people with disabilities and those from low-income households face barriers that limit their economic and social advancement.
Peru’s unequal access to early childhood and basic education, low quality of education, high level of informality, and large regional disparities contribute to the persistence of poor intergenerational mobility. Informality is often inherited, reinforcing cycles of low-income employment and poor social protection, perpetuating intergenerational inequalities. Education quality is particularly poor in rural areas, where students often attend under-resourced schools. High dropout rates, particularly in rural areas, and low enrolment rates among 15–19-year-olds contribute to poor education outcomes. A critical barrier to social mobility is the weak school-to-work transition. Many young people struggle to enter formal employment, due to poor educational outcomes, limited access to vocational education and training and lack of effective job placement services, contributing to persistently high not in employment, education or training (NEETs) rates. Despite progress in educational attainment, women face significant more barriers than men to formal employment, driven by caregiving responsibilities and social norms, especially in rural areas. Rural workers face great structural barriers, with formal employment concentrated in urban areas, while low-productivity informal agricultural work remains the dominant source of income in rural communities.
Persistently low intergenerational mobility weakens human capital formation, reinforces labour informality, and limits aggregate productivity. Broadening access to economic opportunities, particularly for women, youth and rural populations can raise labour force participation, unlock the country’s productive potential and talent, improve resource allocation and strengthen potential growth over the medium term.
This chapter explores the state of intergenerational mobility in Peru, drawing on new evidence and international comparisons on education and income mobility (Box 3.1) and reviews policies that help individuals improve socio-economic outcomes irrespective of their family background. It identifies barriers in education, the labour market and social protection and proposes a reform agenda to improve access to opportunities across generations. Reducing informality among workers and businesses is central as it limits access to high-productivity jobs and social protection, reducing families’ ability to invest in their children’s education and future. A more progressive tax system—particularly through enhanced personal income tax design and better use of property and potentially capital gains and wealth taxes— can also help raise revenue fairly, support redistributive goals, and improve intergenerational mobility by strengthening the legitimacy and effectiveness of the tax-benefit system, especially when combined with well-targeted cash transfers that reduce poverty and expand opportunities for disadvantaged children.
Work conducted for this Economic Survey assesses intergenerational social mobility in Peru using national household survey data, comparing Peru with other Latin American countries, including Argentina, Brazil, Chile, Colombia, and Mexico.
Two key dimensions of intergenerational mobility are explored:
Educational mobility: It is measured by analysing how closely a child's education is associated to their parents' education level. The association captures the degree to which educational attainment is transmitted across generations, with stronger links indicating lower mobility. The results are derived from a linear regression model of the child's years of schooling on the parents' years of schooling taking into account key demographic characteristics such as gender, age, and place of residence, an approached widely used in the literature (OECD, 2018[1]; Van der Weide et al., 2024[2]).
Income mobility: It is measured by ranking individuals within their respective income distributions and estimating the correlation between their income rank and their parents’ educational level. Parent education is a good proxy for the parents’ income, an approach widely used in the literature (OECD, 2018[1]). The results are derived from a linear regression of the child’s income rank on the parents' years of schooling, controlling for gender, age, and place of residence. This allows capturing the extent to which parental education predicts the child's position in the income distribution.
Note: A higher point in the graph indicates higher inter-generational mobility (i.e. lower persistence). Each point shows mobility for a birth cohort. An upward trend over time indicates increasing intergenerational mobility. Rural and female estimates are shown as deviations from the national average using mean-centring. LAC is a simple average of Brazil, Chile, Colombia, and Mexico.
Source: Ciaschi, et al. (forthcoming), “Intergenerational social mobility in Peru: comparative assessment and policy implications”.
Key findings:
Educational mobility has improved significantly: Between the 1940–49 and 1980–89 birth cohorts, Peru’s educational mobility coefficient increased by 56%, a larger increase than the 38% average across Latin American countries (Figure 3.1, panel A), reflecting expanded access to primary and secondary education, especially in rural areas. However, educational mobility in Peru still lags OECD countries like Sweden, Germany, Spain, and the United States (Van der Weide et al., 2024[2]). High dropout rates, particularly in rural areas and low enrolment rates among youth aged 15–19-year-olds, hold back progress.
Income mobility remains low: Over the same period, income mobility increased by 15%, a smaller gain than that observed in education mobility, and slightly less than the average improvement across LAC countries (Figure 3.1 Panel B). Higher educational attainment contributed to increased income mobility across generations, but low educational quality and widespread labour informality have limited the benefits of educational progress.
Large rural-urban divide: Educational mobility remains significantly lower for children in rural households due to persistent disparities in access to education (Figure 3.1, Panel A). Income mobility is also lower in rural areas (Figure 3.1, Panel B) due to fewer quality job opportunities, higher informality, and lower education quality. This rural-urban gap in mobility is wider in Peru than in most Latin American countries.
Gender disparities: Women now complete more years of education than in the past, which has helped to close the gender gap in intergenerational educational mobility (Figure 3.1, Panel A). Despite these educational gains, challenges persist in the labour market, as female workers face weaker labour participation, higher rates of informality, and occupational segregation, being disproportionately represented in lower-paying jobs.
Early childhood education programmes, especially those targeting disadvantaged children, have lasting benefits, including higher educational attainment and increased earnings in adulthood, improving intergenerational educational and income mobility (OECD, 2025[3]). While enrolment of four-year-olds is nearly universal with over 95% in 2022, comparable to the highest among OECD countries (99%), access for children under the age of three remains limited, with only 6.4% enrolled (OECD, 2024[4]). Access to early childhood education is especially limited in rural and vulnerable areas, hindering children's ability to enrol. The EduCuna programme, launched in 2024, to serve low-income children aged 12 to 36 months, is a step forward though its current reach remains limited. As highlighted in the 2023 OECD Economic Survey of Peru, gradually expanding access and improving quality, through better training for educators, of early childhood education should be priority, particularly in rural and vulnerable areas (Table 3.1).
Peru has made significant progress in expanding access to primary and secondary education, contributing to improved intergenerational educational mobility. However, persistent quality gaps, particularly in rural and vulnerable areas, undermine progress. Learning outcomes remain well below the OECD average and lag many Latin American peers, with disadvantaged students performing significantly worse than their peers from more affluent households (Figure 3.2, Panel A). Rural students often underperform compared to their urban counterparts, largely due to more limited school resources and socioeconomic background (Echazarra and Radinger, 2019[5]). Additionally, among people with disabilities aged 15 and older, 40% have only primary education and 18% have no formal education.
Improving basic education quality is essential to enable low-income students access post-secondary education and to ensure that higher educational attainment translates into better labour market outcomes. Priority should be given to improving teaching quality. Recent policy reversals, including the reinstatement of underqualified teachers, have weakened the 2012 Teacher Reform Law (Ley de Reforma Magisterial), which sought to professionalise teaching by linking career progression to merit and evaluations, notably through the national licensing exam. Nearly 40% of public-school teachers have either not taken or failed the exam, yet continue teaching, often in temporary positions without requirements for further training or exam retakes (Bruns, Schneider and Saavedra, 2023[6]). Additionally, teacher shortages and high turnover in rural areas weaken education quality and widen learning disparities, as highlighted by the 2023 OECD Economic Survey of Peru (Table 3.1). Strengthening merit-based recruitment and career progression, ensuring regular, high-quality initial teacher training and providing targeted support and incentives for rural teachers are needed to raise teaching quality and improve student learning outcomes. Improving school infrastructure is also needed. As of 2024, only 44.1% of school facilities have adequate water access and 58.7% have proper sanitation, most acute in rural areas. Investments in classrooms, sanitation, electricity, and internet are needed to provide a conducive learning environment and strengthen local governments to invest more effectively.
Persistent gaps in access to secondary education, particularly in rural areas, continue to limit educational mobility. While enrolment among 6–14-year-olds is near-universal school, only 59% of 15–19-year-olds were enrolled in education in 2022, lower than in most OECD countries (INEI, 2023[7]), reflecting cumulative dropouts that begin in earlier grades, particularly at transition points such as from primary to secondary education. Rural areas fare worse, with secondary school enrolment almost 10 percentage points lower than in urban areas, and fewer students completing secondary education (Figure 3.2, Panel B). One driver is child labour in rural and indigenous communities (UNESCO, 2024[8]), where many children, especially girls, leave school to work in family-based activities due to financial constraints and cultural norms, often reinforced by education systems not adapted to local needs (ILO, 2023[9]; Echazarra and Radinger, 2019[5]). Many secondary students in Peru disengage or drop out due to financial pressures, long distances commutes, and a lack of perceived relevance in their education—highlighting the need to offer more flexible, applied learning options to better match diverse interests and support smoother transitions to further education and work, as discussed in later sections. Adolescent pregnancy is also a determining factor for girls and adolescents to drop out of basic education.
Note: LAC is a simple average of Argentina, Brazil, Chile, Colombia, and Mexico.
Source: OECD, PISA 2022; INEI.
Expanding the limited coverage and generosity of conditional cash transfer programmes like Juntos, which is tied to school attendance, can ease financial pressures on families and encourage students to stay in school and improve school outcomes. Juntos provides bimonthly cash transfers (PEN 200 or USD 50) conditional on 85% school attendance for children aged 6 to 14, and compliance with regular health checks, with additional incentives in some regions for completing secondary grades or achieving high academic performance. However, coverage is low, especially among older students, and benefit levels are modest relative to the costs families face in keeping children in school. Successful models like Brazil’s Bolsa Família, which provides higher transfers for older students to reduce dropout at the secondary level, offer useful lessons for improving Juntos’ impact.
Implementing early warning systems can help identify and better support students at risk of dropping out. These systems use indicators such as attendance, academic performance, and behavioural issues to detect early signs of disengagement. One good example is the Costa Rica early warning system that centralises data on a digital platform, tracks student progress, and involves trained stakeholders like school principals and regional directors to prioritise high-risk cases (ECLAC, 2024[10]). These systems coupled with targeted support, such as personalised tutoring, academic counselling, and extracurricular activities, can improve student engagement and performance, as highlighted by the 2023 OECD Economic Survey. Adapting upper-secondary education curriculum and modalities to the rural and vulnerable areas realities would also help with student engagement. An example is Mexico’s Telesecundaria system, which delivers secondary education in remote areas through televised lessons and local facilitators, using flexible schedules and context-relevant content (VoxDev, 2024[11]). In Peru, some flexible modalities exist in rural areas, including boarding schools and programmes that alternate classroom instruction with periods of home-based learning. Despite their potential to expand participation, these models currently reach just over 1% of the rural secondary school population (Consejo Nacional de Educación, 2021). The Jornada Escolar Completa (Whole Day School) has also proven effective in improving learning outcomes.
A smooth school-to-work transition enables young individuals, particularly those from disadvantaged backgrounds to secure formal, well-paying jobs, thereby improving their socioeconomic status and breaking cycles of disadvantage. Enhancing school-to-work transitions is key for promoting intergenerational mobility in Peru, where many young people are disengaged from both education and training and employment (NEET) and remain mostly inactive without searching for a job (Figure 3.3, panel A). NEET status is prevalent among women due to teenage motherhood, gender stereotypes, limited access to childcare and elderly care and traditional cultural gender roles (OECD, 2022[12]). Moreover, for those entering the labour market, informal employment is predominant, with an informality rate of 85% among 15–24-year-olds in 2024, significantly higher than that of prime-aged workers. Entering the labour market through informal jobs often traps young people in low-quality employment, as lack of contracts, social protection, and training in formal settings reduces their chances of transitioning to better-paying formal jobs.
A comprehensive strategy to improve school-to-work transitions in Peru can strengthen intergenerational mobility by reducing NEET rates and improving access to formal employment. This should include better outreach to disengaged youth through second-chance education and social support, expanded access to vocational education across all levels for students from diverse backgrounds, stronger alignment between skills and labour market needs, and flexible, modular, and digital learning pathways to reach rural NEET populations.
Note: LAC is a simple average of Brazil, Chile, Colombia, Costa Rica, and Mexico.
Source: OECD Labour Force statistics; UNESCO Institute for Statistics (UIS); INEI.
3.3.1. Improving the outreach to youth not in education, employment or training
Outreach programmes through schools, municipalities, and local employment offices are needed to identify NEET youth early and connect them with tailored services. Integrated employment services should provide NEET youth with career guidance, job placement, and entrepreneurship support. Peru’s Centros de Empleo offer such services but lack national coverage and youth-specific programmes and are understaffed. The 2023 OECD Economic Survey of Peru highlights the need to expand their reach and strengthen their capacity, including better-trained caseworkers and services tailored to young job seekers. These services should be complemented by psychosocial support, and childcare support, barriers that often prevent participation, particularly among women. Models such as Chile Joven and Colombia’s Jóvenes en Acción show that combining training with support and targeted incentives improves school-to-work transitions and reduces long-term labour market exclusion. Expanding these programmes would also benefit other young people working in informal jobs by providing pathways to formal employment and training opportunities.
Second-chance education and training opportunities, delivered though flexible, modular formats and supported with financial incentives or conditional transfers, can re-engage those who left school before completing secondary education. Coverage remains low: Educación Básica Alternativa (EBA)—currently reaching only 2% of over 8 million adults with basic educational needs (Vasques Quispe, 2024) and the Jóvenes Productivos programme, which provides training to low-income youth outside formal education reaches less than 6,000 individuals annually (UNESCO, 2024[8]). The programme has introduced a dual training model that combines classroom learning with practical experience in real work settings. Scaling up such programmes, prioritising youth from rural and vulnerable areas, especially with links to recognised credentials, would expand opportunities for excluded youth.
3.3.2. Enhancing Vocational Education and Training
Vocational Education and Training (VET) can play a crucial role in facilitating the transition from school to work by equipping youth with practical skills and direct workplace experience that improve access to formal jobs (Varsik, 2025[13]). By offering alternative pathways to traditional academic routes, VET contributes to address skill shortages and reduce youth unemployment and inactivity. Modern VET programmes incorporate training in emerging technologies, preparing students for evolving job markets, supporting higher productivity.
Despite its potential to improve employment prospects, especially for disadvantaged youth (OECD, 2023[14]), VET suffers from limited quality and remains underutilised in Peru. Only 2% of Peruvians aged 15 to 24 were enrolled in VET programmes across all educational levels, significantly below the OECD average and most Latin American countries (Figure 3.3, panel B), with over 90% of VET students located in urban areas. Graduates of higher non-university technical education in Peru typically experience better earnings and employment conditions compared to those with lower levels of education attainment; in 2022, 67% of these VET graduates aged 18 to 29 earned more than the national minimum wage, compared to 45% of adults with completed secondary general education (UNESCO, 2024[8]). Although higher technical education shows better outcomes, challenges related to uneven quality still limit its full potential.
Strengthening VET requires a more integrated approach to VET governance, ensuring better oversight, and quality assurance. Peru’s VET system is highly fragmented, lacking a unified framework to align training with labour market needs. It consists of multiple providers regulated by different authorities, or, in some cases, not regulated at all (Box 3.2). This fragmentation leads to inefficiencies, overlapping functions, and limited access to flexible learning pathways. Public technical institutes, both at upper-secondary and higher levels, often suffer from insufficient funding and outdated infrastructure, hindering practical training delivery. Private VET institutions, which constitute about 75% of higher technological education providers, vary widely in quality; some offer excellent programmes, while others fail to meet minimum standards (UNESCO, 2024[8]). Cumbersome regulation has slowed the licensing process, with only 14% of vocational institutions having obtained a licence, and most others still having to undergo the process. Progress has been further hindered by a complex procedure requiring extensive documentation and the Ministry of Education’s limited operational capacity. Accreditation remains even more limited, restricting quality control and the credibility of VET programmes. The planned creation of a new employment training agency (ONFE) under the Ministry of Labour is a welcome step. ONFE is expected to function as a regulatory and coordinating body for employment training, eventually expanding the scope of the current Jóvenes Productivos programme, but addressing fragmentation and ensuring coherence will require stronger system-wide governance.
Despite 86% of jobs in Peru requiring low- to middle-level skills (OECD, 2019[15]), public investment in VET remains limited, with per-student spending at only 70% of that for university students (INEI, 2023[7]). This underinvestment weakens the ability of VET institutions to modernise training, update equipment, and adapt curricula to industry needs, undermining their role in preparing students for the labour market.
Expanding pathways from non-formal and informal VET programmes to formal VET, and across formal and sector-specific technical schools, can help vulnerable students obtain recognised certifications and improve their chances of accessing formal employment. A key enabler is the recognition of prior learning, which allows skills acquired outside traditional education systems to be formally validated (OECD, 2023[14]). The Ministry of Labour’s Certification of Labour Competencies initiative and the 2019 National Qualifications Framework are steps in this direction, aiming to standardise skill recognition and strengthen pathways within and between VET programmes. The 2025 National Strategy to Promote the Certification of Labour Competences, launched in April 2023, has a potential population of 2.8 million individuals in 2025 to enhance employability through formal recognition. The 2019 National Qualifications Framework of Peru further standardises qualifications across institutions, reducing fragmentation and facilitating educational transitions (UNESCO, 2024[8]). These efforts are particularly important for rural students, who often move between systems and face difficulties with certification portability. However, slow implementation and weak alignment of most programmes with the framework limit its effectiveness in enabling mobility and recognition.
Expanding access to vocational upper secondary education is crucial to improve school-to-work transitions for those not following tertiary education, particularly from vulnerable backgrounds. In Peru, VET is not integrated into the standard secondary curriculum, but offered in a limited number of secondary schools that combine general education with applied technical subjects (Secundaria con Formación Técnica). Coverage remains limited and highly concentrated in urban areas (UNESCO, 2024[8]). Access is particularly scarce in rural and Amazonian regions, reinforcing territorial disparities in the labour-market. Most students follow a single academic track with little room for applied learning, and existing alternatives—such as Secundarias Técnicas or CETPROs —are few, often of low quality, and offer limited pathways to further education. Data show that many students disengage or drop out because they do not perceive the value of education and often prioritise work. Introducing more flexible secondary education structures, with greater subject and programme choice, could increase student engagement, reduce dropout rates, and support smoother transitions to work or further study. While programmes like the My Technical Opportunity Strategy and the Technical Secondary Education Service Model —which reaches over 330,000 students—aim to strengthen technical education and support transitions to further training or employment, their reach remains narrow.
VET is a strategic priority in Peru, included in the National Competitiveness and Productivity Policy (2018), the National Policy on Higher and Technical-Productive Education (2020), and the National Policy for Decent Employment (2021). However, only 10% of students who complete basic education transition to technological higher education. VET enrolment is heavily concentrated in urban areas, and Lima alone accounts for most of it. It lacks a dedicated regulatory, institutional, or programmatic framework divided into four main areas (Table 3.2).
Rural-urban disparities in access to VET reflect structural gaps in the local availability of training institutions, infrastructure, and digital connectivity. Expanding digital and virtual learning can help close these gaps but must be supported by investments in digital infrastructure, connectivity, targeted financial aid and policies supporting digital literacy. Scaling up platforms like CAPACÍTA-T, which provides free, self-paced courses aligned with labour market needs outside the formal system, could expand access, especially in remote regions. To unlock its full potential, the platform should be linked to the existing certification platform and the main employment services portal, offer pathways to formal qualifications, and diversify course offerings aligned with the VET system and employers and sectoral needs. Implementing modular courses and micro-credentials, along with recognising prior learning, would increase flexibility and enable students, particularly in low-income or rural settings, to combine study with work or re-enter education at different stages (OECD, 2023[14]). Scholarship programmes like Beca 18 could be expanded to cover more VET students and associated costs, including transportation and living expenses. Brazil’s Bolsa Formação programme, which provides free technical courses and stipends to vulnerable students, offers a potential model for Peru. Canada’s Flexibility and Innovation in Apprenticeship Technical Training initiative also shows how combining in-person and online learning can effectively expand access in underserved regions.
3.3.3. Aligning skills with labour market needs
Without access to relevant, in-demand skills, young people may fail to convert education into higher earnings, reinforcing intergenerational cycles of low income. There is a significant disconnect between vocational training and labour market demands, with only 44% of Peruvian VET graduates in 2022 were employed in fields related to their training (UNESCO, 2024[8]). At the same time, employers struggle to find workers with the right skills, with 47% of firms reporting hiring difficulties, and as high as 75% in digital sectors by 2023.
Expanding apprenticeships and work-based learning can help bridge the disconnect between training and industry needs. Access to work-based learning is scarce, particularly in remote regions, where resources and employer engagement are limited. The National Policy on Higher and Technical-Productive Education has promoted pilot initiatives for youth outside higher education to test and scale up new training models in high-demand sectors, while government guidelines encourage regional training programmes that align with labour demand. SENATI’s dual training model, inspired by the German apprenticeship system, has helped students transition to formal, better-paid jobs (Angles and Lindemann, 2019[16]). Similarly, the Jóvenes Productivos (Productive Youth) programme offers dual training that combines classroom instruction with practical experience in real work environments, targeting youth in vulnerable conditions to strengthen their technical and employability skills and support future job placement. Adapting the model to other sectors and regions, and formalising agreements between training providers and firms with clear learning outcomes and mentoring responsibilities could help. This is also a feature of the Jóvenes Productivos programme, which targets vulnerable populations and innovatively integrates employer-driven, on-the-job training with the development of socioemotional, cognitive, and digital skills. Still, many firms remain reluctant to hire apprentices through formal contracts, particularly in vulnerable regions. Implementing financial and regulatory incentives can encourage firms to formalise apprenticeships. For example, Brazil and Colombia mandate that medium and large firms hire apprentices (ILO, n.d.[17]). Targeted wage subsidies or tax incentives can also make hiring apprentices more attractive, especially in rural and vulnerable regions.
Effective VET programmes require collaboration between local governments, employers, and community organisations to ensure alignment with labour market needs. Engaging firms in co-designing curriculums and managing training programmes would improve the match between developed skills and labour demand (OECD, 2019[15]). A model to replicate in Peru are the sectoral schools, such as SENATI, that collaborates closely with firms and local governments to adapt training offers to regional economic profiles and labour demands. Engaging employers to co-define qualifications and training modules using the National Qualifications Framework as a reference framework would help. Another example in Colombia is the government training institution, SENA, that actively involves local employers to design and deliver region-specific courses. Other countries have successfully aligned VET with labour market needs using data-driven approaches. Skills assessment and anticipation tools, like Estonia’s OSKA, use labour market data to forecast future skill needs and inform training priorities.
Despite gains in educational attainment and reaching similar years of schooling as men, women remain less engaged in the labour market and are more concentrated in informal and low-paying occupations and care-related sectors, limiting their ability to translate education into higher incomes and leadership opportunities. These challenges are more severe for rural women, who face compounded barriers such as scarce formal job opportunities, weaker transport infrastructure, and social norms that restrict their participation in paid work.
Peru has relatively high labour force participation rates for both men and women compared to other Latin American countries. However, the gender gap at 16 percentage points is above the OECD average of 13 percentage points in 2024. Furthermore, women's employment rates remain significantly lower than men's, with a gender employment gap wider than in most OECD countries (Figure 3.4, panel A). When in employment, women are more likely to be in lower-paid, informal, and part-time jobs, facing weaker social and employment protection (Figure 3.4, panel B). Women earn, on average, 19% less than men, even when accounting for education and experience, well above the OECD average of 11%. This wage disparity reflects deep-rooted structural barriers, including occupational segregation, caregiving responsibilities, and discrimination in hiring and wage-setting. Women are overrepresented in low-paying service sectors such as domestic work, retail, and hospitality, while men dominate higher-paying industries (OECD, 2023[18]). In addition, women business owners are far more common in the informal sector: only 22% of formal firms are female led, compared to 60% of informal firms, most of which are home-based. This home-based nature of female entrepreneurship explains a large share of the gender gap in business performance (World Bank, 2025[19]).
Reducing these gender disparities in the labour market would enhance social mobility across generations, as improved employment outcomes for women would strengthen household incomes, and enhance intergenerational mobility by improving children’s health, education, and future earnings prospects (OECD, 2018[1]). Moreover, it would yield significant economic benefits. Reducing the female employment gap by two-thirds by 2060 could raise potential output by 0.3 percentage points per year by 2050 (Chapter 1). Higher female participation in formal employment would raise productivity by better utilising human capital and support fiscal sustainability through a broader tax base and reduced reliance on social transfers, contributing to a more inclusive and resilient economy.
The unequal distribution of care work is a major driver of gender disparities in the labour market. Women perform more than three times as many unpaid care hours per week as men, limiting their economic opportunities and pushing many into informal or part-time work (INEI, 2024[20]). The gap is widest for mothers of young children, whose labour force participation is 20 percentage points lower than that of childless women. Gradually expanding access to early childhood education, especially for vulnerable families should be top priority, with the double dividend of enhancing their children's educational outcomes, as highlighted before. Investing in formal elderly care services would also ease women’s care burden and help address population ageing. While Peru adopted a national policy for older adults in 2021 and launched the “Gratitud” national programme in 2024 to expand community-based and preventive services, its implementation has been limited and most care facilities, known as Residential Care Centres for Older Adults, remain private, leaving low-income and rural elderly without access. Limited public elderly care increases pressure on households—especially women in informal and precarious jobs—and is compounded by low pension coverage: 66.4% of older adults lack coverage, including 77.1% of women and 58.8% of men. Gradually expanding home- and community-based care, with targeted public support and co-payments from higher-income groups, would improve access while maintaining fiscal sustainability.
Note: LAC is a simple average of Argentina, Brazil, Chile, Colombia, Costa Rica, and Mexico.
Source: OECD Labour Force statistics; ILO.
Despite progress in educational attainment, large gender gaps persist in fields of study and career paths, limiting women’s ability to translate higher education into better-paying jobs. Expanding women's participation in VET, especially in green and digital sectors, would improve representation in career fields with better job prospects. While women make up 60% of all VET students, they remain underrepresented in high-demand science, technology, engineering, and mathematics (STEM) fields, such as engineering, ICT, and natural sciences (UNESCO, 2024[8]). This results in female VET graduates being more likely to be employed in low-demand fields with lower wages (OECD, 2023[14]). Furthermore, implementing business skills training that target high-growth entrepreneurs, with a specific focus on women, would strengthen technical and managerial capacities.
Programmes that encourage girls to pursue STEM from early education stages can help address gender biases and stereotype-driven choices. Raising awareness and targeted scholarships, mentorship programmes, and career guidance can help close this gap. Canada’s Skilled Futures Programme offers workshops and interviews with female professionals in technical fields to encourage career exploration in high-demand sectors. Similarly, Costa Rica’s “Decidiendo Mi Futuro” programme successfully increased STEM enrolment among low-income female students by sending motivational text messages featuring women in STEM, career benefits, and enrolment guidance (IDB, 2023[21]). Targeted digital literacy programmes for women and girls, especially those in rural or disadvantaged settings, would also help. The national career platform Mi Carrera could help expand access for girls and young women by integrating gender-sensitive STEM content, mentorship, and labour-market data, especially in rural areas.
Addressing gender-based violence and discrimination in both workplaces and society is essential to ensuring women’s socioeconomic inclusion, economic participation, and access to formal, quality jobs. Violence against women combined with an overload of care responsibilities, lowers productivity, raises business costs, and pushes women into informality, perpetuating violence and restricting autonomy. Gender-based violence and workplace harassment remain major barriers to gender equality, with 34% of female workers reporting workplace harassment over the past 2 years. Peru has a strong institutional framework for gender equality, but widespread informality limits the reach of legal protections, making enforcement inconsistent (Alcazar, Távara and Huerta, 2024[22]). Some complementary initiatives such as the “Safe Company Free of Violence and Discrimination Against Women” certification, awarded to 38 companies in 2024, and promote workplace policies that prevent violence and discrimination, support work-life balance, and advance women’s participation in leadership. Reducing informality and stronger enforcement of existing regulations and shifting deeply rooted gender norms are needed to closing gender gaps.
Informality acts as a structural barrier to intergenerational mobility by limiting access to better-paying, high productivity jobs, social protection, and skill development opportunities. Informality is often passed across generations, as children of informal workers, with limited parental resources and complex school-to-work transitions, are more likely to enter informal jobs themselves (OECD, 2024[23]). About 71% of the employed population in 2024 was engaged in informal employment, a rate higher than the LAC average of 45% and higher than expected given its GDP per capita (Loayza, 2016[24]). Although informality is widespread, it is higher among rural workers, women, youth, the self-employed, people with disabilities and those with lower education or household income (Figure 3.5, Panel A). Over 60% of the population lived in households where all workers were informal, a much higher share than Latin American average (42%) (OECD/OISS, 2024[25]).
Informality is also tied to weak formal job creation, particularly in rural and low-growth areas, where most firms are informal and lack the productivity or incentives to grow and generate formal employment. Over 99% of firms are micro, small, or medium enterprises, most operating outside the formal system, and even large firms have some degree of reliance on informal labour (Figure 3.5, Panel B). These firms typically underinvest in capital, technology, and training, reinforcing cycles of low-productivity, low-income employment across generations. In 2023, 53% of the workforce was self-employed, rising to over 90% among rural agricultural households, mostly in subsistence informal work due to limited formal job opportunities.
Note: Informality is defined as those in informal units or in formal units but without pension contributions or as unpaid family worker.
Source: INEI.
Peru’s high level of informality requires a comprehensive strategy that not only improves workers' incentives to formalise but also expands the availability of formal jobs by fostering the growth of productive, formal firms, as the 2023 OECD Economic Survey of Peru has emphasised (Table 3.3) and discussed in Chapter 1 and 3 of this Survey. This includes improving access to high-quality education, lowering the cost of formal jobs, and reducing tax and regulatory burdens for businesses. Scaling up certification of labour competencies has also shown a positive impact on formalisation. Boosting worker and firm productivity through investments in education, skills, infrastructure, and technology will be crucial to enable the creation of profitable, formal jobs. Experience from other countries shows that reducing informality requires a combination of measures that lower the costs of formality, increase its benefits, and strengthen enforcement, offering valuable lessons for Peru’s own strategy (Box 3.3).
Non-wage labour costs, such as mandatory social security contributions and severance payments, tied to firm size rather than individual earnings, place a disproportionate burden on low-wage workers discouraging formalisation. This also creates incentives for businesses to stay small, informal and underreport workforce size, increasing informality. As recommended in the 2023 OECD Economic Survey of Peru, moving to a progressive contribution system based on worker’s earnings with lower rates for lower-income workers would lower barriers to formalisation while remaining fiscally neutral. Similar reforms in Colombia, to reduce non-wage labour costs, and Chile, to subsidise part of social security contributions have been effective in promoting formalisation (Box 3.3). This should be accompanied by a universal minimum pension and the calibration of social contributions rates to ensure adequate replacement rates and stronger incentives for formal employment, as highlighted in the 2023 OECD Economic Survey of Peru. Additionally, reviewing other firm-size-based policies, like tax schemes for smaller taxpayers (Chapter 1) and the mandatory profit-sharing threshold —which applies to firms with more than 20 employees increasing non-wage labour costs at that threshold— could remove incentives for businesses to remain small and informal. The mandatory profits-sharing threshold induces firms to split operations or limit hiring of formal workers of a 21st employee to avoid triggering this threshold, reducing firm investment and aggregate productivity (Tolentino, 2021[26]). Reducing regulatory burdens, streamlining permitting processes, expanding formalisation services, and improving SME’s access to finance are also key to fostering formal firm growth and quality job creation.
Strengthening labour and tax enforcement against intentional informality is also important, especially when paired with efforts to reduce the costs associated with formalisation. Limited resources of SUNAFIL, Peru's National Labour Inspection Authority, hinder its ability to enforce labour laws effectively. The agency operates with an inadequate number of inspectors, falling short of the ILO's recommendation (TUAC, 2024[27]). This shortage leads to work overloads and extended inspection processes, sometimes taking up to three years to resolve cases. Investing in additional staff and technology could bolster SUNAFIL's capacity to enforce labour laws effectively. As labour laws are better enforced, Peru could consider revising its regulatory framework for permanent contracts, which remains highly inflexible and incentivises firms to rely on temporary formal contracts—currently representing around 80% of formal employment—or to hire workers informally, as already highlighted in the 2023 OECD Economic Survey of Peru.
As informality permeates most of Peru’s socio-economic challenges, a comprehensive strategy to reduce informality must go beyond labour market and business environment policies. Addressing corruption and strengthening judicial independence (as discussed in Chapter 1) can improve incentives of formalisation, as businesses and workers are more likely to operate formally when they trust that laws and regulations are applied fairly. Shortening judicial processes would improve enforcement of labour rights and support labour inspection. Improving public spending efficiency by enhancing the quality of public services and infrastructure (as discussed in Chapter 1) can also make formalisation more appealing by demonstrating tangible benefits from tax and social contributions. These policies not only reduce informality but also foster a more dynamic economy with stronger long-term growth potential.
Several countries have reduced informality by lowering the costs of formal labour, improving skills, simplifying procedures, and strengthening enforcement. Evidence shows that the most effective reforms either reduce the cost of staying formal or increase the benefits of formality (Ulyssea et al., 2025[28]). While context matters, these experiences offer valuable lessons for Peru.
Chile: A 2008 reform introduced subsidies to partially cover pension contributions for low-income workers. This measure helped increase formal employment, especially among young and seasonal workers, and improved retirement savings (Bravo and Rau, 2013[29]; Centro de Microdatos, 2012[30]; SENSE, n.d.[31]). A comprehensive strategy combining digital tools, administrative simplification, and regulatory reform contributed to a sustained reduction in informality in Chile (ILO, 2019[32]). Key measures included the PreviRed platform for unified social security payments, the Enterprise in a Day system for fast business registration, and mandatory formal registration to access public procurement. Complementary measures—like simplified tax regimes—further supported formalisation, especially among SMEs, and reforms requiring self-employed and subcontracted workers to contribute to the social insurance system expanded coverage and strengthened incentives for formalisation.
Brazil: Increased schooling is the most important factor in explaining the decline in informality observed in Brazil between 2003 and 2012 (Haanwinckel and Soares, 2021[33]). Brazil’s MEI (Microempreendedor Individual) scheme, introduced in 2009, helped support formalisation by removing registration costs and lowering ongoing tax costs for individual entrepreneurs with very low income and one employee or less (Rocha, Ulyssea and Rachter, 2018[34]). More flexible labour markets have supported transitions to formality in Brazil by enabling informal workers to move into formal employment after trade-related shocks (Almeida, Paz and Poole, 2022[35]).
Colombia: In 2012, the Formal Employment Generation Law eliminated employer contributions to health and family welfare funds for low-wage workers, cutting non-wage labour costs by 13 percentage points. Formal employment rose significantly, particularly among small firms and young workers (Bernal et al., 2017[36]; Morales and Medina, 2017[37]; Garlati-Bertoldi, 2018[38]). The Jóvenes en Acción programme—combining vocational training with cash transfers—raised formal employment, with effects persisting in the long term (Attanasio, Kugler and Meghir, 2011[39]; Attanasio et al., 2017[40]). The introduction of a subsidised health insurance scheme for vulnerable and informal workers created incentives for low-income individuals to move into informality, as it provided similar health services for free compared to the contributory system (Camacho, Conover and Hoyos, 2013[41]).
Mexico: Labour inspections can raise formal employment, though some negative firm-level negative employment effects can be also observed (Samaniego de la Parra and Fernández Bujanda, 2024[42]). Greater financial inclusion—through access to accounts, credit, insurance, and digital payments—is linked to lower informality, especially in underserved areas (Briano-Turrent, 2025[43]). The rollout of debit cards to cash transfer recipients led small retailers to adopt card payment terminals, increasing transaction visibility and incentives to formalise (Higgins, 2024[44]).
Türkiye: Employment subsidies covering employers’ social contribution costs had a positive impact on employment, particularly in small firms, and this is driven by the positive effects on formalisation of existing workers more than creation of new jobs (Aşık et al., 2022[45]).
Uruguay: The Monotributo Social scheme offered simplified registration, flat-rate contributions, and access to health and pension coverage for self-employed workers. Formalisation rose among vulnerable groups, particularly women and rural workers (Bergolo and Cruces, 2014[46]). A reform in 2008 extended health coverage to dependents of salaried private-sector workers, increasing the incentive to hold formal jobs, especially among women, middle-aged workers, and those in small firms (Cruces and Bérgolo, 2013[47]).
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