Alberto Gonzalez Pandiella
OECD
OECD Economic Surveys: Mexico 2026
Abstract
Labour informality remains widespread in Mexico, constraining inclusion, productivity and fiscal revenues. Reducing it requires a comprehensive strategy across several policy areas, including reducing regulatory burden associated to formalising firms and workers and facilitating tax compliance. This chapter focuses on how strengthening skills and facilitating women employment can help bring informality down. Informality is strongly linked to educational attainment, with informality rates particularly high among those who have not completed secondary education. Ensuring that more students finish secondary education is a central priority, requiring early identification of those at risk of dropping out and targeted support. Better aligning education with labour market needs, both through dual vocational programmes and at university, would also expand access to formal jobs. Women face additional barriers in balancing paid formal work with care responsibilities. Limited access to childcare and short school schedules prevent many women from accessing jobs, especially formal jobs, or pursuing training.
With approximately 55% of employment outside the formal sector, or approximately 32 million people, Mexico has the second highest labour market informality rate among OECD countries and one of the highest in Latin America (Figure 2.1). Informality is deeply entrenched and is both a symptom and a driver of deeper structural issues, including persistent poverty, low productivity, high income inequality, a narrow tax base and limited access to social protection. While several reforms have sought to reduce informality (Table 2.1), it remains high, despite a slight gradual decline, and it has recently started to increase again.
As in other countries in the region, informality has no single cause (Arnold et al., 2024[1])). Previous OECD Economic Surveys have stressed the need for a comprehensive strategy cutting across multiple policy areas (Table 2.1). Past surveys have highlighted, in particular, the importance of reducing regulatory burdens (OECD, 2022[2]) and strengthening social protection (OECD, 2024[3]). Positive steps have been taken in recent years to enhance social protection and incentivise the transition to formality, notably the 2021 pension reform, which broadened access to more attractive contributory benefits, thereby encouraging formal employment. To mitigate potential adverse effects on job creation for low-wage workers, the reform was financed through a gradual and progressive increase in employer contributions between 2023 and 2030, with higher rates applying to higher-wage workers. At the same time, the continued expansion of non-contributory pensions (see Chapter 1) should be carefully evaluated and, if necessary, adjusted to preserve incentives for formal employment participation. Further increases in the minimum wage, which increased since 2018 from 42% of the median formal sector wage to 74% in 2024, should be cautious and aligned with labour productivity growth to limit their potential negative impact on formal employment, particularly among young and low-skilled workers, as recommended in the 2024 OECD Economic Survey of Mexico. Boosting financial inclusion can also help reduce informality, as highlighted in the 2022 OECD Economic Survey, with digital payment platforms offering significant potential to accelerate progress.
Note: Panel A shows informal work as measured by INEGI, which includes workers who are vulnerable due to the nature of the economic unit where they work (the informal sector) as well as those whose employment relationship is not formally recognised by their employer, even if they work in formal enterprises. Panel B shows the ILO definition of informal employment as self-employment in informal enterprises (small, unregistered enterprises) and wage employment in unprotected jobs, meaning jobs with no social contributions, in both formal and informal enterprises. The ILO definition of informality might differ from that of INEGI. LAC is the simple average of Chile, Colombia, Costa Rica, Argentina, Brazil, and Peru.
Source: INEGI Encuesta Nacional de Ocupación y Empleo (ENOE) (database); and ILOSTAT (database).
Digital single-window facilities, discussed in Chapter 4 of this Survey, could help reduce informality by lowering the economic and administrative costs of compliance with regulations. This chapter focuses on how building skills and facilitating female labour market participation can contribute to reducing informality. Equipping workers with stronger skills and expanding opportunities for women not only improves their productivity and earnings but also increases their capacity to join and remain in the formal sector.
Informality is closely linked to educational outcomes, with informality rates particularly high among those who have not completed secondary education (Figure 2.2). Many young people leave school before finishing secondary education (Figure 2.3) and often enter informal jobs where opportunities for further training are limited. Beyond completion, the quality and relevance of education are also critical for reducing informality. PISA results show that many students leave secondary school without mastering basic competencies, limiting their ability to transition into formal jobs. This creates a vicious cycle: limited skills lead to low productivity, which in turn confines workers to low-paid informal jobs with little scope to upgrade their skills. The result is a self-reinforcing trap that constrains individual prospects and weighs on economic growth. Informality is not confined only to those with lower levels of schooling. Nearly 30% of university graduates are also employed informally, underscoring that the challenge is not only access to education but also the mismatch between education and labour market needs. Strengthening learning outcomes, by raising secondary completion rates and improving the quality and relevance of education, especially in disadvantaged regions (Box 2.1), is therefore critical to reduce informality.
Informality rate by education level, % of workers, 2025-Q3
Note: Vocational education includes technical education (“educación técnica”) at upper secondary, post-secondary non-tertiary and short-cycle tertiary levels.
Source: OECD calculations based on INEGI Encuesta Nacional de Ocupación y Empleo (ENOE) (database).
% of 25–34-year-olds with below upper-secondary education as the highest level attained, 2024
Note: LAC is a simple average of Chile, Colombia, Costa Rica, Argentina, Brazil, and Peru.
Source: OECD Education at a Glance (database).
Going beyond a single indicator helps to better assess the skills situation, capturing both the quantity and relevance of skills across the workforce. A composite skills index offers a more robust and comprehensive measure, as it integrates multiple dimensions, such as skills development (e.g. tertiary graduates, vocational students) and the transition from school to work (e.g. early leavers from education and training). By combining these indicators into a single framework, the index allows for a clearer comparison across regions and a more accurate identification of policy priorities. Constructing such an index for Mexico at the state level (Boumahdi and González-Pandiella, mimeo[4]) confirms marked disparities (Figure 2.4). Northern states such as Nuevo León and central states such as Jalisco, Querétaro and Mexico City record higher values, while southern states lag behind. Informality rates are higher in southern states, where both education quality and access are worse (Figure 2.5), highlighting the importance of strengthening skills to foster formal employment. The stark differences in education quality between the northern and southern states underscores the need to better target spending by giving greater weight to the need to boost education quality in the allocation of the education transfer among states, as recommended in the 2024 OECD Economic Survey. The index further shows that skill gaps exist across all levels of education, underlining the need for policy action throughout the education system (Boumahdi and González-Pandiella, mimeo[4]), as proposed in this chapter.
Skills Index, 2023
Informality rate and Skills Index 2024, by state
Note: Significant correlation (-0.81) between informal employment and Skills Index at 0.001 level.
Reducing informality requires progress across the entire education system, from early education to tertiary, to help students acquire the skills needed for formal employment. Strengthening foundational skills, particularly literacy, numeracy and problem-solving , should be a priority, as persistent gaps at early ages limit later learning progression and contribute to high dropout rates. Increasing public spending on education, which remains relatively low (see Chapter 1), is as important as ensuring that the additional spending is used effectively. For example, to enable more students to successfully complete secondary education, a stronger data infrastructure to monitor student progression and identify those at risk of dropping out is necessary, as illustrated by successful strategies in some OECD countries (Box 2.2) and recommended in the 2024 Economic Survey (Table 2.2). Enhanced data systems could also facilitate identifying under-resourced schools and support targeted measures to reduce inequities in learning conditions.
Another key step would be the introduction of a national, standardised diagnostic test, administered annually, to assess learning outcomes and detect early signs of academic lag. Such a tool would allow a consistent measurement of performance across schools and regions, help target tutoring support to students most in need and detect in which subject areas teacher training should be prioritised. At present, resources for teacher development are highly constrained. The federal budget for teacher training amounts to just seven dollars per teacher and is often not even fully used. Strengthening teacher capacity will therefore require not only gradually increasing funding but also improving the planning and execution of training programmes. Closely involving teachers in the design of training and professional development programmes can also help build consensus around the necessary changes in the education system.
Portugal has made remarkable progress in reducing early school leaving while improving education quality, as reflected in rising PISA scores. Two decades ago, nearly 40% of young people left education before completing upper secondary, one of the highest rates in the EU. Through successive reforms, the early school leaving rate fell to about 6% in 2022. Key measures included extending compulsory schooling to age 18, introducing more flexible pathways that combine general and vocational education, and expanding targeted support for students at risk of dropping out. Schools were given greater autonomy to adapt curricula to local contexts, while national learning assessments and early warning systems helped identify struggling students and guide remedial support. Teacher professional development was also strengthened, with greater emphasis on collaborative practices and continuous feedback. At the same time, Portugal invested in disadvantaged schools and municipalities, often with the support of EU structural funds, to reduce inequalities in access and outcomes. These reforms not only reduced early school leaving but also improved learning outcomes. Portuguese students, once among the lowest performers in the OECD, now perform at the OECD average in reading, mathematics and science (Edulog, 2024[5]) and (OECD, 2023[6])
At tertiary level, Mexico faces two interrelated challenges: expanding the number of graduates (Figure 2.6) and better aligning educational programmes with labour market demand. The country produces around one million university graduates each year, yet many struggle to find jobs that match their qualifications. This mismatch reflects both limited diversification in career choices and an insufficient response of higher education institutions to evolving labour market needs. Half of all graduates come from just ten fields of study, mainly traditional disciplines such as law and business administration (IMCO, 2024[7]), with little shift in career choices compared to a decade ago, despite the growing demand for new skills. Despite strong demand from firms, training in digital fields such as software development, data analysis and cybersecurity remains limited, as discussed in Chapter 4. Beyond digital skills, Mexico’s integration into global value chains in automotive, aerospace and electronics has created growing demand for technicians in robotics, automation, industrial maintenance, and electromechanics. Without these skills, many young graduates are unable to access higher-productivity opportunities in advanced industries. This could explain why nearly 30% of university graduates are employed informally, while at the same time businesses face significant talent shortages, with three out of four firms reporting difficulties filling skilled positions (IMCO, 2023[8]). This mismatch shows that many graduates are trained for fields where formal job opportunities are limited, while fast-growing sectors, like advanced manufacturing, lack qualified workers. Unless addressed, these gaps are likely to widen as global production patterns evolve and nearshoring accelerates demand for workers in advanced manufacturing, engineering, and digital services (see also Chapter 4 in this survey). Strengthening the alignment between tertiary education and labour market needs would not only ease skills shortages but also expand access to higher-productivity, formal employment opportunities for young graduates. This will require closer collaboration with employers to adapt curricula, expand dual education models, and improve career guidance systems.
Strengthening professional orientation at all levels of education is also essential to help students make informed career choices and acquire skills relevant to labour market needs, including through vocational education programmes. Embedding career orientation and skills development modules in upper-secondary technical education could better prepare students for employment or further training. Countries such as Germany and Austria have successfully integrated dual vocational and tertiary programmes with strong private sector involvement, while Ireland and Finland regularly use labour market forecasts to adjust university admission quotas and fields of study. Denmark, the Netherlands and New Zealand provide good examples of comprehensive career guidance systems, combining personalised counselling with digital tools and labour market information to support students’ choices.
% of 25–34-year-olds with tertiary education as the highest level attained, 2024
Note: LAC refers to Chile, Colombia, Costa Rica, Argentina, Brazil, and Peru.
Source: OECD Education at a Glance (database).
In the short to medium term, vocational education and adult upskilling could provide an essential bridge for workers currently in the informal sector. International experience from countries such as Austria, Germany and Switzerland shows that vocational education is particularly effective in re-engaging adults who exited the formal education system prematurely. Dual training models developed in partnership with German authorities have delivered promising results in Mexico in skills acquisition and job placement. Several states (e.g. Guanajuato, Queretaro and Puebla) are also implementing valuable initiatives in the automotive sector, anticipating and responding to skill needs arising from automation, in close collaboration with the private sector (SecEconomía, 2025[9]). Expanding such upskilling and reskilling programmes, particularly in technical and skilled trades, would support smoother transitions into formal employment. This will require financial support mechanisms (such as reserved scholarships), institutional arrangements that enable small and medium-sized enterprises to participate meaningfully in training provision, such as shared training centres, and sustained collaboration with the private sector. Firms also play a crucial role in strengthening workforce skills through in-house training and continuous learning programmes. Promoting incentives for companies to invest in the training of their employees, such as tax recognition schemes or co-financed training funds, could help expand participation and demonstrate the productivity benefits of staff development. Firms engaging systematically in training enjoy higher productivity growth and lower turnover, while workers benefit from improved employability and greater access to formal jobs (OECD, 2021[10]). Recognising the legal status of apprentices would further support the expansion of dual vocational education by providing legal certainty for employers and trainees and encouraging firms to participate more actively in such programmes.
In response to these challenges, Plan México sets an important target of increasing by 2030 the annual number of professionals and technicians by 150000 beyond current graduation levels. Given that the country currently produces around 777000 professionals per year, this target represents a 20% increase and is a step in the right direction toward expanding the pool of skilled workers and facilitating access to formal employment. Plan México also includes initiatives to map existing skills and capacities across strategic sectors, helping to identify gaps between labour supply and demand. Extending these skills mapping efforts to other areas of the economy, such as the care sector, could facilitate that training policies respond to emerging labour needs in that area (see also section 2.3. in this chapter). To reach its objective, the plan envisages expanding access to technological high schools and universities, and strengthening vocational and technical tracks, including in underserved regions. To ensure that this expansion translates into better labour market outcomes, VET and tertiary education programmes need to be updated and provided in close consultation with employers, so that graduates acquire skills aligned with evolving demand. The job fairs planned under Plan México can also help connect graduates with formal employment opportunities and improve the matching between skills and labour demand. Some states, such as Nuevo León, Querétaro and Jalisco, have already in place skills forecasting methods and have adapted curricula in partnership with the private sector, but these initiatives remain uneven and must be scaled up significantly to meet national needs.
Strengthening language skills is another priority. A pressing challenge is the limited proficiency in English (Figure 2.7) across much of the workforce. Evidence shows that improving English skills can significantly expand employment opportunities, particularly for low-skilled workers and women (Galvez-Soriano, 2024[11]). Proficiency in English, combined with the completion of secondary education, is often a prerequisite for accessing formal employment, especially in sectors linked to global value chains. Yet many students in Mexico begin English instruction only in secondary school, when achieving high proficiency is more difficult. By contrast, countries such as Argentina and Chile have successfully expanded early English instruction into primary school. Moreover, learning outcomes are hampered by the absence of a standardised test to monitor progress, highlighted earlier in this chapter, and by limited funding for teacher training and instructional materials.
English Proficiency Index (EPI), score
Note: LAC is the simple average of Chile, Colombia, Costa Rica, Argentina, Brazil and Peru. OECD is the simple average of 24 OECD member countries where English is not the official language.
Source: English First (EF) English Proficiency Index (EPI).
Policies to strengthen skills and promote formal employment must also address the specific barriers faced by women, particularly the challenge of reconciling paid work with unpaid care responsibilities, which are disproportionally borne by women (OECD, 2017[12]). These constraints contribute directly to Mexico’s high female informality rate (Figure 2.8, panel A) and relatively low female labour force participation (Figure 2.8, panel B). Limited access to affordable childcare (Figure 2.9) and the short school timetables of children often prevent women from taking up full-time employment, completing their education, or pursuing training opportunities, as also discussed in the 2024 Economic Survey of Mexico. With women devoting on average nearly 40 hours a week to unpaid domestic and care work, twice as much as men, many women are concentrated in informal occupations that provide flexibility but offer little security, few benefits, and limited prospects for career development.
Note: In Panel A, data refers to workers aged 15+ years. In Panel B, data for Argentina, Brazil, Chile and Peru are from ILOSTAT database. LAC is a simple average of Chile, Colombia, Costa Rica, Argentina, Brazil and Peru.
Source: INEGI; OECD Labour Force Statistics (database); and ILOSTAT (database).
Share of respondents indicating that they agree with the statement “My household has access to good quality and affordable public services in the area of family supports (e.g. childcare, parental leave, etc.)”, 2024
Note: Formal workers are proxied by dependent employees with a contract, while informal workers are proxied by those without one. The share of dependent employees without a contract correlates strongly (86%) with informality rates based on social security enrolment from Mexico’s National Survey of Occupation and Employment (ENOE). The OECD average refers to the 27 countries currently covered by the OECD Risks that Matter Survey.
Source: OECD estimates based on micro-data from OECD Risks that Matter Survey 2024 (https://oe.cd/rtm).
Inadequate childcare provision is a major contributing factor (Figure 2.10). Informality is particularly high among women with caring responsibilities (Figure 2.11). Less than 5% of children under the age of three participate in an early education programme, well below the OECD average (Figure 2.12). Expanding access to high-quality early childcare is crucial, not only to support female formal labour force participation, but also as a key driver of children’s skills development and later educational outcomes (see Section 2.2). Until its discontinuation in 2019, the Estancias Infantiles programme subsidised childcare for low-income working mothers. Evaluations show that beneficiaries experienced increased labour force participation and more stable and formal employment (Calderón, 2014[13]). Its discontinuation in 2019 and replacement with a child allowance left a significant gap, as the new transfers are not linked to childcare provision and all households with children are eligible to receive them, regardless of income. As of September, 221,177 children were beneficiaries of the allowance. Coverage remains too limited to have a meaningful impact, and the benefit amount is considerably lower than the cost of childcare, making it insufficient for many families to afford childcare.
Source: OECD calculations using INEGI ENOE 2025-Q1 (database).
Expanding access to early childhood education and care is therefore essential, as also recommended in the 2024 Economic Survey of Mexico. Estimates suggest that achieving universal coverage for children under six would cost around 1.2% of GDP (UN, 2020[14]), around double current spending levels. Some states have already developed promising public-private care models. A coordinated federal strategy, designed in collaboration with subnational governments and employers, is also being developed. Establishing a federal network that prioritises low-income households and also covers families in informal employment would be a crucial step forward. The National Development Plan 2025–2030 provides a foundation for such a strategy, foreseeing the creation of a National Care System (Sistema Nacional y Progresivo de Cuidados). Initial priorities include the harmonisation of the legal and regulatory framework to set common quality standards, the modernisation of infrastructure (including the repurposing of underused schools), and the creation of an interoperable information system to assess care needs. The Child Education and Care Centres (Centros de Educación y Cuidado Infantil, CECI) are expected to be operated by the Mexican Social Security Institute (IMSS), while pilot programmes are testing new models to extend services to all children. The IMSS is also promoting a scheme between the private sector and the federal government (CECI-Empresas) for the joint establishment and financing of childcare services for the children of insured workers. The 2026 Budget also aims at promoting public spending to develop comprehensive care services, for children, elderly and people with disabilities, through the “Consolidation of a Caring Society” (Consolidación de una Sociedad de Cuidado), annex.
The availability of trained carers remains limited, underscoring the need to strengthen professionalisation through dual education models, competency certification, and updated curricula. Ensuring robust quality standards across the system will ultimately be essential for childcare services to deliver positive outcomes for both child development and women’s access to formal employment (Box 2.3), as well as increasing parents’ trust in childcare not provided by family. Complementary measures are also required to address gender stereotypes, for example through public campaigns that promote shared caregiving responsibilities, encouraging fathers’ greater take-up of parental leave, and raising awareness of the developmental and learning benefits of early childhood education.
Formality and informality for women by number of children, % of total workers, 2024-Q1
Note: The shares of formal and informal employment by number of children add up to 100%.
Source: México, ¿cómo vamos? and OXFAM México, El laberinto de la informalidad: Mitos, trampas y realidades.
% of children enrolled in early education and care services, 2023 or latest
Note: LAC is a simple average of Chile, Colombia, Costa Rica, Argentina and Brazil.
Source: OECD Family Database.
The challenge of expanding access to childcare while maintaining good quality standards in a tight fiscal space is common across countries, and a few lessons can be shared. In the face of budget constraints, governments can scale up early childhood education and care by moving beyond direct (public) provision and leveraging diverse providers. Colombia, for example, leveraged existing (largely informal) care services by regulating a home-based care system which trains, certifies and pays stipends to caregivers, which corresponded with a significant increase in childcare enrolment and mothers’ labour force participation (Rauls and Simon, 2020[15]). This is like the system of at-home “assistant maternelle” care in France. These kinds of partnerships can expand supply more quickly than building up new public infrastructure.
Rapid expansion must be accompanied by quality standards to ensure the safety, well-being and development of children and to ensure that parents enrol their children in professional childcare options when they are available. Quality standards should encompass a range of structural aspects (e.g. staff-child ratios, class sizes, curriculum frameworks, staff training requirements, monitoring), which set the foundation for process quality (i.e. interactions that children have with other children, adults, their families and their environment) (OECD, 2025[16]). Chile and Colombia have focused on caregiver qualifications. Chile mandates new childcare staff have university degrees, and Colombia has made efforts to formalise its workforce and promote training (Rauls and Simon, 2020[15]). Attention should also be given to ensuring the fair compensation of childcare workers, to help attract and retain talent (OECD, 2025[17]).
The use of new technology offers the potential to increase quality at lower cost. The government could, for example, be involved in procuring or regulating tools such as platforms for easier parent-teacher communication; tools for visual (e.g. CCTV) monitoring of children in the care facility (with the relevant privacy protections in place) by parents and/or regulators; digital or biometric verifications to ensure safe access to the facility; and digital tools for teacher training and reducing administrative burden on caregivers (e.g. time sheets and note-taking), which social workers increasingly use for case work in other OECD countries (Frey, Wijker and Hyee, 2025[18]). Advanced analytics could also be used to predict which childcare facilities require further inspection, helping agencies keep high quality of care and ensuring the well-being of children (Public Sector Tech Watch, 2018[19]) without overburdening human regulatory staff.
The structure of the school day imposes another constraint on working mothers, even when children are older. Public primary schools often operate in shifts, providing only four to five hours of instruction. Without reliable after-school provision, many mothers are unable to work full-time or must depend on extended family for childcare. By contrast, countries with full-day schooling achieve higher levels of female labour force participation. Evidence from Mexico’s Full-Time Schools Programme shows that extending the school day increased mothers’ employment by more than five percentage points (Cabrera-Hernández, Padilla-Romo and Peluffo, 2023[20]). The programme was discontinued by the federal government in 2022, although it remains in place in 6 states. Scaling up this programme would advance both women’s access to formal employment and education outcomes. Some initial steps are being taken in this direction, with the programme “La Escuela es Nuestra” offering some schools the possibility to extend the school day to up to 8 hours.
Promoting the take-up of paternity leave entitlements for fathers can also support a more balanced distribution of unpaid domestic and care work. In many OECD countries, the gender division in parental leave has become increasingly equal and is approaching a 50/50 split in some cases (e.g. Iceland, Portugal and Sweden). As noted in previous OECD Economic Surveys, Mexico currently offers 12 weeks of paid maternity leave and 1 week of paternity leave. Extending the duration of paternity leave would be an important step toward fostering more equitable caregiving roles. Unlike maternity leave, which is financed through the social security system, paternity leave is funded by employers. Take-up among fathers remains low, partly due to social stigma and because access is restricted to formal workers. Financing the leave entitlement via the social security system, as for mothers in Mexico and for fathers in many OECD countries, could facilitate broader take-up.
Care responsibilities extend beyond children. The lack of eldercare services also limits women’s ability to take-up formal jobs, a challenge that will intensify as Mexico’s population ages. According to the Encuesta Nacional del Sistema de Cuidados, in 2022 there were 20 million people aged 60 and over, of whom 29% (5.7 million) received any form of care. Most of this support is provided informally within households, usually by an unpaid female family member such as a spouse, partner or daughter. A similar pattern is observed in households with members who have disabilities, where care is also largely informal and disproportionately falls on women. Expanding home and community-based services could ease this burden while also generating formal jobs in a sector with rapidly growing demand. Providing services to two million dependent elderly persons is estimated to cost 0.5% of GDP annually and could create up to 800000 formal jobs (UN at al., 2020[21]). Efforts are underway to strengthen training and certification programmes for caregivers, but coverage remains limited. There is also a pressing need to improve administrative data to better assess levels of dependency among older adults and people with disabilities, to plan services effectively.
Women’s low participation in STEM studies remains another significant barrier to strengthening their presence in the formal labour market. In higher education, women account for only about one-third of enrolment in STEM programmes, although those who do enter achieve completion rates around 10 percentage points above those of men (OECD, 2025[22]). A similar pattern is observed at the upper secondary level, including in new technical tracks, where female participation remains markedly lower than that of men. Women with STEM qualifications face an informality rate that is about half the overall rate for women. Recognising these challenges, the National Development Plan 2025–2030 sets objectives to increase female enrolment in STEM fields and also includes efforts to encourage more women to pursue programmes traditionally dominated by men, such as dual vocational programmes in technical fields. Policy recommendations to promote greater female participation in STEM, including mentoring schemes, are discussed in Chapter 4 of this Survey.
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