Low Unemployment, Fragile Jobs: Precarious Work Reaches Millions in Mexico

Even as unemployment remains near record lows, informality and harsh working conditions are rising, pointing to a more vulnerable labor market.

In March, Mexico’s labor market continued to show apparent strength in traditional metrics: the unemployment rate stood at 2.4%, a historically low level. However, behind that figure, signs of deterioration in job quality are growing more pronounced, with a rebound in both informality and “critical working conditions,” according to INEGI’s National Survey of Occupation and Employment (ENOE).

Total employment rose to 60.2 million people, an annual increase of 422,000 workers. The problem is that this quantitative gain was not matched by a proportional improvement in pay, stability, or access to social protection. Amid moderate economic growth and cost pressures on companies—particularly in services and retail—the jobs being created tend to be concentrated in low-productivity segments with high turnover.

In March, the rate of critical working conditions reached 39.6% of the employed population, up from 38.4% in the same month a year earlier. This indicator includes people working fewer than 35 hours for market-related reasons, those working more than 35 hours while earning less than the minimum wage, and those working more than 48 hours a week while earning up to two minimum wages. In practical terms, the figure suggests that nearly 4 out of 10 employed people face precarious work arrangements—roughly 24 million workers.

Underemployment—which captures those who need to work more hours to make ends meet—also ticked up slightly to 6.7%. While not a sharp jump, its persistence is consistent with an economy where employment “adjusts” more through hours and wages than through layoffs, keeping unemployment low at the cost of greater deterioration in workers’ well-being.

At the same time, labor informality rose again, reaching 54.8% of the employed population, up from 54.3% a year earlier. This means about 33 million people are working without full access to social security or under vulnerable arrangements. Employment in the informal sector—often unregistered microbusinesses with low investment and low productivity—accounted for 29.4% of the total, also posting an annual increase.

What Rising Informality Reveals: Stagnant Productivity and Pressure on Incomes

The rise in informality is not just a labor-market phenomenon; it is also a macroeconomic symptom. A labor market where more than half of employment remains outside the formal economy limits tax collection, reduces effective social-security coverage, and constrains investment in training. In practice, that tends to translate into smaller productivity gains and, therefore, lower potential growth. While sectors tied to the relocation of supply chains (nearshoring) have created opportunities in some regions, most informal employment is concentrated in small-scale retail and service activities, where there is little room to raise real wages and income volatility is high.

The backdrop of recent years also helps put the problem in context: even with meaningful minimum-wage hikes and a policy focused on wage recovery, the labor market’s uneven structure means the benefits are passed through unevenly. In informal jobs, the ability to absorb higher labor costs is limited, and adjustment often happens through irregular schedules, fewer benefits, or holding multiple jobs. This helps explain why unemployment remains low even as the share of people with insufficient income or schedules that do not reflect stable labor-market attachment increases.

Looking ahead, employment trends will depend on the pace of economic activity, the strength of investment, and the capacity to bring more productive units into the formal economy. Public policy faces a complex balancing act: boosting productivity requires regulatory improvements, infrastructure, financing, and a stronger rule of law, while reducing precariousness calls for mechanisms that make formalization worthwhile and expand social-protection coverage without discouraging job creation.

Overall, the ENOE data point to a labor market that maintains low unemployment figures, but on a fragile foundation: more informality, more underemployment, and a high share of workers in critical conditions. The challenge is not only to create jobs, but to improve their quality so that growth—when it comes—translates more consistently into household well-being.