Luis Monroy-Gomez-Franco
Alberto González Pandiella1
Expanding Social Protection and Addressing Informality in Latin America
This chapter builds on an original background report prepared by Luis Monroy-Gomez-Franco for the OECD. The current version has been revised and edited by Alberto González Pandiella (OECD), incorporating additional updates.
Abstract
Informality remains a key challenge in Mexico, with more than half of the population employed informally and thus largely excluded from social protection. This perpetuates low productivity, high poverty, and persistent inequality. Despite recent pension reforms and the expansion of social programmes, over 34% of Mexicans still lacked access to health services in 2024. This chapter pays particular attention to broadening access to health, outlining a path toward a universal healthcare system underpinned by a social registry and a unified identity number, integrated with pensions and tax administration. Financing this expansion through general taxation rather than higher social security contributions would support formal job creation and the extension of social protection.
Informality is a long-standing structural challenge in Mexico’s labour market, with nearly half of the population relying exclusively on informal employment. Informal workers are often excluded from social protection systems, as eligibility is typically linked to formal-sector jobs.
Informality is both a cause and consequence of low economic growth (Ros, 2015, 2019; Levy, 2019; Levy and López-Calva, 2020). It is also closely associated with low productivity and high poverty rates. Breaking this cycle is essential to reducing inequality and fostering inclusive economic development.
This chapter proposes a series of reforms to transform Mexico’s social security system with the dual aim of reducing informality and expanding social protection. While recent pension reforms have sought to increase coverage and the number of social programme beneficiaries has grown, major challenges remain. According to INEGI (National Statistical Institute), approximately 34.2% of the population—about 44.5 million people—lacked access to health services in 2024. Advancing toward universal health coverage therefore remains a pressing priority.
To address this, the chapter focuses on establishing a universal healthcare system with comprehensive coverage, underpinned by a universal social registry. This registry would be integrated with the new health system and linked to both the pension system and tax administration. A central component of the reform is the introduction of a unified identity number, allowing individuals to interact seamlessly with healthcare, pension, and tax systems. Currently absent in Mexico, such a system would provide the institutional foundation needed to move away from informality as a defining characteristic of the labour market.
In addition, the chapter presents options for tax reform to finance the expansion of health coverage. Rather than increasing social security contributions, which can raise the cost of formal employment and discourage job creation, the proposed approach would rely on an increase in general taxation. This would avoid reducing disincentives to formal employment and support broader formalisation of the economy.
Informal employment represents more than half of total employment in the Mexican economy. Most informal workers are subordinate employees. Table 9.1 presents an overview of the structure of the Mexican employed population by type of employment and informality. This structure has remained relatively stable, even during the Covid-19 pandemic.
(Percentage of the total employed population and number of persons)
Note: Data refer to the Encuesta Nacional de Ocupación y Empleo (ENO) for 2020 Q1 and from 2023 onwards, and to the Encuesta Nacional de Ocupación y Empleo (Nueva Edición) (ENOEN) from 2020 Q3 to 2022 Q4.Survey weights were employed.
Both informal employees and informal self-employed workers earn less, on average, than formal employees. Figure 9.1 shows the composition of each decile in the labour income distribution of the employed workforce by type of employment and formality condition. Formal employment is almost non-existent in the lowest deciles of the income distribution, whereas informal employment is low among the upper deciles. Poverty rates are also higher among informal workers (CONEVAL, 2024).
% of each decile
Note: Information from the Encuesta Nacional de Ocupación y Empleo 2024. Survey weights were employed.
Source: INEGI.
Informality implies not just higher poverty rates, but also lower rates of social protection. Table 9.2 shows the proportion of subordinate workers with access to different social protection benefits in Mexico. Across the board, informal workers are less likely to be covered than formal workers. Only 2.3% of all formal subordinate workers declare not to have any benefits, compared to 71.5% of informal subordinate workers. The benefit with the highest coverage rate among the informal employed is the end-of-year bonus, at 25%. The current labour law mandates most of these benefits to all workers, regardless of their formality status, including the profit-sharing arrangement in private businesses, a retirement savings account, the end-of-year bonus, and paid vacation time. Thus, although the definition of informality for subordinate workers is typically limited to the absence of access to healthcare, in practice, informal employment often entails a much broader lack of labour rights. Informal subordinate workers are generally engaged in employment relationships that fail to provide the protections and benefits mandated under labour law. These include the absence of written contracts, social security contributions, pension entitlements, paid leave, severance pay, and occupational safety guarantees. As a result, informality implies a situation in which most of the rights that should be afforded to workers under formal employment arrangements are not respected or enforced.
(Mexico, 2024-1)
Note: Data refer to the Encuesta Nacional de Ocupación y Empleo (ENOE) for 2024 Q1, except data for working poor households that comes from the Encuesta Nacional de Ocupación y Empleo (Nueva Edición) (ENOEN) for 2022 Q1. Survey weights were employed. Printed contracts refer to the share of workers with a copy of their employment contract. Loan funds refer to having access to loans through the employer. Care work leave refers to having a stipulated time to attend to care work outside the workplace. Working poor household refers to the person inhabiting a household in which the labour income per capita of the household is below the extreme poverty line. No benefits refer to not having access to any of the benefits stated in the table.
An additional consequence of informal employment is job insecurity. Around 91% of formal employees declare to have a printed copy of their work contract, compared to just 10% of informal subordinate workers, putting informal workers at a disadvantage when it comes to defending their legal rights as employees. This asymmetry is compounded by the prevalence of poverty among the households in which these workers live, as 25% of them live in households with a labour income below the poverty line, which increases the costs of quitting to look for a better job.
The current social protection system is composed by separate, parallel contributory and non-contributory systems. The bedrock of the social security system is the Mexican Institute of Social Security (Instituto Mexicano del Seguro Social, IMSS), created in 1943 (Hidalgo-Garza, 2021). The IMSS, accessible only to formal private sector workers, requires contributions from both employees and employers, and provides healthcare, pension, and other benefits. In addition, IMSS offers a voluntary affiliation scheme (Modalidad 33 for health coverage, and Modalidad 40 for pension contributions), allowing self-employed individuals, informal workers, or others outside the formal sector to access certain benefits by paying fixed monthly contributions directly. In 1959, the state expanded contributory social protection by creating the Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado (ISSSTE), to fulfill the same role as the IMSS for public employees. The remainder of the population, largely informal workers excluded from these contributory systems, rely on a series of fragmented supplemental programs. The IMSS has taken steps to expand coverage to previously excluded groups. Two notable initiatives include the Independent Workers Program (Programa de Trabajadores Independientes, PTI) and the Domestic Workers Program (Programa de Trabajadoras del Hogar, PTH). The PTI allows self-employed individuals to voluntarily enroll in the IMSS system, offering them access to full social security benefits in exchange for monthly contributions tailored to their situation. The PTH, initially launched as a pilot and made mandatory in 2024, enables domestic workers to be registered with multiple employers and benefit from pooled contributions.
In the healthcare system, formal workers have access to all three levels of care—ranging from basic ambulatory visits at local clinics to highly specialized surgical procedures in advanced hospitals. Institutions such as IMSS and ISSSTE provide comprehensive coverage for insured individuals, including care for a wide range of medical conditions, chronic illnesses, and specialized treatments (CIEP, 2018).
Initially, non-contributory health programs were limited to services directly provided by the state through the Ministry of Health. Over time, these programs expanded to include other mechanisms such as IMSS-Bienestar, a collaboration between the federal government and IMSS to deliver healthcare to vulnerable populations, and Seguro Popular (2003–2020), a funding scheme jointly implemented by federal and state governments. However, the scope of services offered by these programs was significantly more limited than those available through formal social security systems. For example, Seguro Popular covered 1,603 medical interventions and diagnoses, while the earlier version of IMSS-Bienestar primarily focused on providing care in rural and peri-urban areas (CIEP, 2018).
Following the dissolution of Seguro Popular in 2021, the Institute of Health for Well-being (INSABI) was created. After INSABI itself was dissolved in 2023, the decentralised public body IMSS-Bienestar (OPD IMSS-Bienestar) was established, drawing on the institutional experience and operational model of the previous IMSS-Bienestar program. According to the latest data from CONEVAL, 34% of the population lack access to health services—highlighting the persistent challenge of ensuring universal access, regardless of individuals’ employment status in the formal or informal sector.
The current pension system, composed of multiple schemes administered by six institutions, is also highly fragmented. The largest pension scheme is administered by the IMSS and enrols 83% of contributing workers. Four other institutions manage the pensions of government employees ISSSTE), two state-owned companies and members of the armed forces. The Ministry of Wellbeing (Secretaría de Bienestar, SEBIEN) provides support for workers not covered by contributory systems through universal non-contributory pensions for vulnerable populations, including individuals with disabilities.
The coverage of the non-contributory parts of the health care system have been growing, either through the predecessors of the IMSS-Bienestar programme or by creating new schemes such as “Seguro Popular”. Some authors argue that the expansion of these programs contributed to the growth of informal employment arrangements, as they reduced the opportunity costs of these type of employment arrangements for both employers and employees (Levy, 2008 and 2018).
A comprehensive reform package to strengthen the social protection system could help reduce informal employment in Mexico. It should be accompanied by measures to simplify labour and business regulations, enhance workers’ skills, and strengthen enforcement, as outlined in latest OECD Economic Surveys of Mexico (for example OECD (2022)).
A universal healthcare system, detaching access from job characteristics, would be a key step to significantly improve informal workers’ situation. In addition, this system represents an opportunity to strengthen the relationship between the population and the State by creating a mechanism through which a person can interact with the tax, healthcare, and pension systems. The specific mechanism is an identity number, the equivalent of a social security number, that would serve as a key for all interactions between the person and the different State agencies.
As individuals register in the new healthcare system, all existing identifiers in the tax and pension systems will be linked to their new unique identifier. For both workers and employers, this integration streamlines administrative processes, reducing the costs associated with formalisation. For instance, employers will be able to pay pension contributions and taxes for workers using a single identifier. Workers, on the other hand, will benefit from having all their accounts related to the State consolidated into a unified system. Furthermore, for the State, this system simplifies the enforcement of labour laws by enabling the identification of discrepancies between a business’s tax records, its employees’ tax records, and contributions to the pension system. This enhanced transparency will facilitate more effective oversight and compliance.
While the unique identifier serves as a tool to connect individuals with the various systems involved in formal employment relationships, its introduction would not add an unnecessary layer of bureaucracy without clear benefits. Implemented in isolation, it might risk doing so. However, by integrating it into the universal healthcare system, the identifier would be seen as a gateway to tangible benefits, specifically improved access to healthcare services.
This approach not only underscores the advantages of formal employment but also enhances the incentives to engage with the other two components of the system: taxes and pensions. By demonstrating the practical benefits of formality, the identifier becomes a central mechanism for fostering broader participation and compliance.
The World Health Organization and the World Bank set three key dimensions that need to be covered in the construction of a universal healthcare systems. The first dimension is effective universal coverage, meaning that all people are eligible for healthcare benefits, regardless of employment status or contributions, and that the benefits provided are actually accessible to all. The second is financial sustainability. And the third is accordance between the system and the population that it serves (WHO/WB, 2015). In other words, the ability of the system to meet the basic needs of the population, including reproductive, maternal, and child healthcare, prevention and treatment for infectious disease, and treatment for non-transmittable chronic disease. The benefits of introducing a universal health system include expanding coverage to those that need it and eliminating the inefficiencies associated with the fragmentation of the current system.
There are already several estimations of the costs of constructing a universal healthcare system in Mexico that meets these characteristics. The Centro de Investigación Económica y Presupuestaria (CIEP) estimated that guaranteed essential medical coverage and coverage of services related to the three most common non-transmissible diseases in Mexico would cost 4.6% of GDP in 2016. A less ambitious system covering only essential healthcare would cost 4.4% of GDP (CIEP, 2018). Altamirano et al. (2020) provide a higher estimation of 4.8% of GDP in 2019 for essential services, assuming a coverage rate of 76%. This is similar to the estimation of 4.6 % of the GDP by Antón-Sarabia and Hernández-Trillo (2017) for a universal healthcare system that provides the same services as IMSS. The narrow range of estimates and characteristics of the proposals suggest a convergence in opinion on the type of universal healthcare system that would be feasible for Mexico. All cases, however, indicate a significant increase in resources allocated to healthcare, as healthcare expenditures represent 2.4% of GDP in 2025. These estimates are likely to be a lower bound, as they do not account for the impact of the Covid-19 pandemic, or the need to improve physical and personnel resources.
With these additional factors in mind, the proposal in this chapter is to introduce a universal healthcare system with a per capita annual expenditure between 1,195.48-1,307.55 PPP dollars, or 5.39-5.90% of GDP. This represents expanding the proposal by Altamirano et al. (2020) to an assumed 100% effective coverage rate and increasing estimated per capita annual expenditure by 10%. The services offered would be equivalent to those currently offered by IMSS, as in the proposal by Antón-Sarabia and Hernández-Trillo (2017) and CIEP (2018). The corresponding gaps in financing would be around 2.63-3.14% of GDP.
The proposed reform requires the design of a clear pathway for institutional convergence to ensure that existing hospital infrastructure has sufficient resources to meet the increased demand generated by an expanded package of services. Given its scale and central role in healthcare provision, the integration process could logically begin with the IMSS system. This would involve building on existing frameworks, such as the agreements with the recently created decentralised public body, IMSS-Bienestar, to guarantee universal and free access to medical and hospital services for individuals not affiliated with social security institutions. However, defining the specific structure and institutional configuration of a new universal healthcare system is a complex undertaking that falls beyond the scope of this paper. Regardless, strengthening digital infrastructure and operational capacities will be essential to support any such transformation.
Several options are available for financing the new universal healthcare system and to do so in a progressive way. These include increasing income taxes for top earners, expanding the range of goods subject to the Value Added Tax (VAT) and raising its rates, and introducing new taxes on wealth. Table 9.3 provides a summary of these options, which are further detailed in the sections below.
Income tax is one of the first candidates for change, as it can achieve two goals simultaneously: raising tax revenues and decreasing inequality through increased progressivity. Evidence suggests that although the current income tax scheme is already redistributive, progressivity can still be improved (Scott et al. 2017 and Hlasny, 2019).
One possible proposal would be to increase tax rates for higher income tax brackets (brackets V to XI), with an increase from 35% to 47% for the top bracket. Assuming only 18% of self-employed workers remain informal, this change would increase tax collection from 3.627% of GDP to an estimated 4.143% of GDP. The number of total deductions could also be capped at 10% of income, down from the current 15%. The bottom tax rate would not change, in line with the secondary goal of increasing progressivity.
An alternative to this proposal would be to generate more brackets between the current IX and XI income brackets, increasing the progressivity in those sections of the income distribution. However, this alternative would need to maintain a high-top tax rate to achieve the necessary collection potential to finance a universal healthcare system, as mentioned in Ramírez Cuellar (coord.) (2021) and in Clavellina et al. (2021).
In addition to personal income taxes, changes to the income tax for businesses and corporations could also be made. Without changing the tax rate (30% of net profits), there is room to boost collection by changing the deductions allowed. As CIEP (2021) shows, most deductions many are difficult to justify as promoting desirable business practices. For example, deductions are currently allowed for the purchase of internal combustion automobiles and consumption in restaurants. This proposal includes the elimination of both deductions, which would increase revenue collection by 0.09% of the GDP (SHCP, 2020).
The second possibility for increasing revenue involves reforming the Value Added Tax (VAT). Currently, the VAT rate is set at 16%, but several goods and services are either exempt—such as rents, educational services, and local transportation—or subject to a zero-tax rate, including food and beverages, medicines, and female hygiene products.
This proposal suggests raising the VAT rate from 16% to 18%, while eliminating all exemptions but retaining zero tax rates. The aim is to strike a balance between the need to expand tax revenues to fund the new universal healthcare system and the importance of minimising the burden of higher VAT rates on low-income households. This reform is projected to increase tax revenues from 4.35% of GDP to 5.62% of GDP.
Two additional tax changes are considered to complement the VAT increase and further enhance funding for the universal healthcare system. First, an increase in the "Impuesto Sobre Automóviles Nuevos" (Tax on New Automobiles, ISAN) rate from 2.72% to 3%, which would raise revenue from 0.043% to 0.058% of GDP. Second, an adjustment to the tobacco tax, as calculated by CIEP (2020), which would increase revenue from 0.177% to 0.263% of GDP.
Assets and wealth are also highly concentrated at the top of the distribution, indicating space for a more progressive property tax. To increase progressivity and to reduce the burden on labour income, this proposal assesses how to the introduction of a net wealth tax, a capital gains tax and an estate tax.
The net wealth tax would follow a design similar to the proposal by CIEP (2021) but would increase the annual tax rate from 1% to 2% of annual net wealth for those with wealth of more than 20 million pesos. This tax would produce a 0.4% GDP increase in tax revenue. Although a progressive tax could render higher funds, a flat tax rate is easier to administer and serves as a starting point for developing the state’s capabilities for taxing property. Thus, this proposal represents a compromise between increasing progressivity and limiting the resources required by the state to implement the reform.
A similar approach is proposed for the introduction of an estate tax, a levy on the net value of a deceased person’s assets before they are transferred to heirs. The proposed tax is expected to generate revenues equivalent to 0.2% of GDP, placing it at the lower end of the range collected by other countries that apply similar taxes (OECD, 2021). As with the other tax proposals, implementing a low, flat-rate estate tax would facilitate efficient administration and collection, while minimising the risk of capital flight or tax avoidance through emigration. Greater progressivity, such as higher rates for larger estates, could be introduced in future reforms as the system matures.
Note: Unless other source is cited in the text, all calculations on the proposal’s effects are made using the CIEP Fiscal Simulator public module available at http://simuladorfiscal.ciep.mx/. The model employs the assumptions made by the expenditure budget for 2022 regarding the growth rates of the Mexican economy in the following years. We assume that the effect of introducing the universal healthcare system led to informal employment being reduced to 18% of the total employed labour force. This is equivalent to assuming that all informal subordinate workers become formal workers. The income tax ranges are expressed in PPP USD from 2012 from OCDE (2022b).
All together, these changes to the tax system would correspond to an increase in tax collection of 2.612% of GDP. This would be sufficient to fund the lower bound of the universal health system reform.
It is important to note that the proposed reform excludes from its considerations the social security contributions currently paid to finance the social security system. These contributions represent nearly 1.7% of the country’s GDP. These resources can be used to finance part of the transition costs associated to the implementation of the universal healthcare system. Once this transition is complete, these resources could be redirected to strengthen the existing pension system, paving the way for subsequent reforms.
Additionally, these contributions are not considered a permanent funding source for the new universal healthcare system. This is because the portion allocated to the IMSS healthcare system would be replaced by an increase in general taxes. As a result, over time, the social security contributions currently paid by formal workers could gradually decrease.
In January 2021, congress approved a series of changes to the pension system, including a new minimum guaranteed pension, increased employer contributions, and a reduction in the minimum number of weeks worked required for a worker to receive a pension1.
According to the reform, the amount of the guaranteed minimum pension depends on the number of weeks of formal employment and average wage during formal employment. At the bottom of the scale are workers who, on average, earned the minimum wage, are 60 years old, and worked formally for 1,000 weeks. These workers are entitled to a guaranteed pension of 264.78 PPP USD, equivalent to 1.34 times the national poverty line in the first quarter of 2022. As weeks of formal employment and average wage during formal employment increase, so does the guaranteed minimum pension, with a cap at 832.1 PPP USD, or 4.27 times the poverty line, for workers over 64 years old with more than 1,250 weeks of formal employment and who earned an average income of more than five times the minimum wage. The reform also reduces the number of days of employment required to receive a pension from 1,250 weeks to 750 weeks2. This extends benefits to workers with shorter formal employment tenures, typically more vulnerable workers, and incentivises contributions by workers in low-security jobs by lowering the barrier to benefit access.
To fund the increased benefit coverage, the reform increases state and employer contributions, including the establishment of a flat employer contribution of 2 % of wages, plus a scaled employer contribution that increases with wages, and a scaled public contribution that decreases with wages (called the “social contribution rate”). The reform maintains a flat worker’s contribution of 1.13% of wages. The transition to this new system is taking place between 2023 and 2030, gradually increasing the total contribution rate from 6.5 % of wages to 15 %. Table 9.4 shows the graduated scale of employer contributions by wage and each years’ expected rate increase.
(Percentage of the worker’s wage with which she is registered in the pension fund)
Note: The administrative measurement unit (AMU) is an amount used by the Mexican federal government as a monetary reference for different bureaucratic processes. Its value for 2022 corresponds to 301.34 PPP USD from 2021. It actualizes yearly according to the annual rate of inflation each January. The table shows the total employer contribution rate to the pension rate, composed of a 2 % flat rate for the concept of retirement and a varying rate associated with unemployment and old age.
Source: “Decreto por el que se reforman, adicionan y derogan diversas disposiciones de la Ley del Seguro Social y de la Ley de los Sistemas de Ahorro para el Retiro.”
This new financing system is progressive, with the government shouldering 58% of total contributions for workers at the bottom of the distribution and 0% for workers at the top, and employers shouldering 34% and 92% of contributions, respectively. This structure is designed to facilitate the hiring of lower-income workers at the margins of formality, as the costs associated with hiring these employees in terms of social contributions are lower. On the other end of the income distribution, this reform may lead to lower incomes for high-earning workers as employers may pass off increased contributions to employees (Levy, 2008).
As a whole, this reform increases wage replacement rates for all workers3, with the largest impact on workers earning less than 1,475.95 PPP USD per month during formal employment, according to calculations by the Mexican Central Bank. For example, the replacement rate for workers with an average base contribution salary of 590.39 PPP USD will increase from 62 to 92% of the contribution salary (Banco de México, 2022).
While the reform is a big step in the right direction, three challenges remain for the pension system. The first is increased pressure on the government budget from workers who retired or will retire under a defined benefit4 scheme. In 2017, these expenditures already amounted to 2.96% of GDP. They are expected to grow to reach nearly 5% of GDP in 2045 (Villarreal and Macías, 2020). To contain expenditure, Villarreal and Macías (2020) suggest capping the maximum benefit for workers under this system who have not yet retired, but this in itself would not be sufficient to mitigate the pressure. The increased tax revenue associated with integrating more individuals into the tax system through the reforms proposed in this chapter could provide more resources to finance the gap, but further measures will likely be needed.
A second problem is the low capitalisation of the individual accounts systems resulting from low contribution rates and low wages (Moreno-Brid, Garry and Monroy Gómez Franco, 2014). As Colín (2019) shows, current capitalisation rates in the IMSS system are well below sufficient to guarantee replacement rates above the poverty line. This puts additional pressure on public finances, as the State must supplement individual accounts with enough funds to reach the guaranteed minimum. The magnitude of this financing gap is difficult to assess, particularly given the changes to the contribution rates outlined in the 2021 reform, but the risk of insufficient funds remains.
The third challenge is system fragmentation. There are currently two major individual account systems (IMSS and ISSSTE) operating under the same regulations and supervised by the same entity. There has also already been a push to increase movement of funds between the two systems. In the case of defined benefit systems, however, consolidation would require the creation of a new entity designed to concentrate the necessary resources until defined benefit schemes are completely phased out. This would present a political economy challenge, as it implies displacing resources from IMSS and ISSSTE.
In recent years, Mexico has made efforts to universalise access to social programmes, with a particular focus on vulnerable populations, while also aiming to lower administrative and operative costs. In 2018, the administration overhauled existing cash transfer programmes at the federal level, including the well-known Opportunidades programme (also known as PROGRESA or PROSPERA). The overhaul included the elimination of conditionalities, particularly those linked to school attendance, the disappearance of the health component, and the introduction of a universal scholarship program for students in primary and secondary school. An apprenticeship program was also introduced, designed to improve the labour market insertion of Mexicans between 19 and 29 years old who are neither attending school nor employed. The program relies on a registry of different private and public institutions to provide mentorship, while the government directly pays the trainees 541.91 PPP dollars per month for a year. However, as documented by CONEVAL (2020), the design of the program lacks a tracking mechanism to guarantee the insertion of former trainees into the labour market after the year in the program. Universal non-contributory pensions have also taken a central and growing role in the policy toolkit to reduce poverty, as analysed in the 2022 OECD Economic Survey of Mexico (OECD, 2022c).
As a result of these efforts, the total number of social program recipients increased to 32% of all households in 2024, up from 28% in 2018. However, a key pending challenge is improving the targeting of these programmes to ensure a greater share of benefits reach households in the lowest income deciles, as discussed in the 2022 OECD Economic Survey of Mexico (OECD, 2022c). There is significant scope to improve both the efficiency and equity of the system by addressing the fragmentation of social policy. Numerous schemes are currently managed by different levels of government, often resulting in overlapping responsibilities and gaps in coverage (OECD, 2022c). While the federal government has made progress—reducing the number of federally administered programmes from 272 in 2009 to 123 in 2021—fragmentation remains. Of these 123 programmes, 57% are delivered directly and maintain beneficiary registries, while the rest are implemented through intermediaries such as state or local governments, some of which lack proper records. In addition, states operate 1,444 programmes and municipalities a further 6,829 (CONEVAL, 2021). Establishing a unified, comprehensive registry of beneficiaries across all levels of government could greatly enhance coordination, reduce duplication, and improve targeting. Leveraging digital technologies, such as centralised registries, machine learning algorithms, and alternative data sources like mobile phone or satellite data, could significantly lower the cost of implementing such a system and enhance its precision and effectiveness (OECD, 2022c).
The proposal outlined in this chapter will undoubtedly encounter significant implementation challenges, which merit discussion in this concluding section. A critical challenge is securing broad popular and political support for the consolidation of existing healthcare systems and the proposed tax reforms. .
Historically, reforming Mexico’s tax system has posed significant challenges for the federal government (Aboites-Aguilar and Unda-Gutiérrez, 2011). To overcome this longstanding obstacle, political forces across the spectrum must reach a consensus on the need to universalise the healthcare system, reduce informality and establish appropriate financing mechanisms. The plural committee responsible for the report coordinated by Ramírez-Cuéllar (2021) provides a promising example of the potential for such agreement. To foster public trust, the negotiation process should be conducted with the highest degree of transparency.
Overcoming public resistance will require a clear communication strategy that highlights the direct connection between the proposed tax reforms and the tangible benefits of a universal healthcare system and reduced informality. Messaging should emphasize that universal healthcare stands to benefit all citizens, not just the poor. Securing the support of key stakeholders, including unions, employers, and healthcare professionals, will also be critical. Public acceptance can be strengthened by stressing the increased progressivity of the reform, while the business sector may be encouraged by its potential to enhance employment stability and improve access to public services.
Although the challenges are substantial, they are not insurmountable. In fact, they may become more manageable as the urgency of reform becomes increasingly apparent. This chapter seeks to contribute to the dialogue by unpacking the complexities involved and highlighting the far-reaching benefits that stronger social protection and reduced informality can bring to all Mexicans.
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← 1. Decreto por el que se reforman, adicionan y derogan diversas disposiciones de la Ley del Seguro Social y de la Ley de los Sistemas de Ahorro para el Retiro. December 16, 2020.
← 2. The minimum of 750 weeks will climb gradually until reaching 1,000 weeks of work in 2031.
← 3. The replacement rate is defined as the share that the pension represents of the average contribution base salary.
← 4. A defined benefit scheme is a pension scheme in which the person is guaranteed to receive a specific amount as a pension when she retires. In contrast, a defined contribution scheme is a pension scheme in which the person makes a defined contribution to her retirement savings fund throughout her career.