Mexico-Income Distribution

In the mid-1990s, Mexico had a highly inequitable distribution of income, a pattern that, according to government statistics, became particularly skewed during the economic crisis of the 1980s. The country's continuing inability to create sufficient employment opportunities for its labor force has produced high levels of unemployment and underemployment and has required aggressive survival strategies among Mexico's poor. Such strategies include sending more family members, even children, into the labor market and reducing consumption of basic commodities.

The 1990 census reported a total national workforce of 24.3 million people. Although population growth slowed to around 2 percent per annum in the early and mid-1990s, analysts estimated that the workforce expanded by up to 4 percent per annum over the same period. Workforce expansion is expected to remain at these rates through the late 1990s, as those born during the peak fertility years of 1970-76 come of age. Thus, Mexico will need approximately 1 million new jobs each year through the remainder of the 1990s to provide work for persons entering the job market. During the early 1990s, however, net job growth was believed to have been less than 500,000 per annum.

Approximately 10 percent of all Mexicans can be characterized as belonging to the upper- and upper-middle-income sectors, consisting of the nation's business executives and government leaders. Upper-income Mexicans are both highly urbanized and well educated. Government surveys of household income revealed that these groups absorbed an increasing share of wealth during the 1980s. The top 10 percent of the population accounted for 33 percent of all income in 1984 and 38 percent in 1992.

The middle sector comprises approximately 30 percent of the nation. Like its upper-income counterparts, this sector is largely urban and has educational levels superior to the national average. It consists of professionals, mid-level government and private-sector employees, office workers, shopkeepers, and other nonmanual workers. The middle-sector share of overall income declined from 39 percent in 1984 to 36 percent in 1992. Inflation seriously eroded the purchasing power of the middle class during that period, causing many to modify their buying habits and to withdraw from private education and health care systems.

The remaining 60 percent of Mexicans make up the lower sector, itself a heterogeneous group of industrial workers, informal-sector employees, and peasants. Of these, industrial workers have the most favored situation, reflecting both their higher wage scale and membership in the health care system and retirement or disability programs of the Mexican Institute of Social Security (Instituto Mexicano del Seguro Social--IMSS) (see Health and Social Security, this ch.). However, industrial workers also experienced a decline in purchasing power and share of national income during the 1980s. Overall, the bottom 60 percent of the population saw its share of total income fall from 29 percent in 1984 to 26 percent in 1992.

Analysts estimate that the informal sector of the economy represents from 30 to 40 percent of the urban workforce in the mid-1990s. Informal-sector workers are self-employed or work in small firms (during 1993, businesses with one to five employees accounted for 42 percent of the urban workforce). They face considerable job instability, and, unlike those in the formal sector, are effectively excluded from IMSS benefits. The informal sector includes street vendors, domestic servants, pieceworkers in small establishments, and most construction workers.

During the early 1990s, Mexico reported unemployment rates of between 3 and 4 percent. These rates, based on surveys of conditions in Mexico's three dozen largest cities, excluded those who had ceased looking for work over the previous two months, as well as those working only a few hours per week. A much more accurate government measure of unemployment and underemployment includes both the unemployed and those who work less than thirty-five hours per week. This level of urban partial employment and unemployment stood at around 20 percent during the early 1990s. The government does not measure rural unemployment or underemployment, where rates are regarded by analysts as significantly higher than those found in urban Mexico.

According to government statistics, the vast majority of urban workers in the early 1990s earned less than US$15 per day. Minimum wage rates vary according to region and are adjusted every January to account for inflation. If inflation rates are high, labor groups can ask the regulatory committee, the Tripartite National Minimum Wage Commission, to consider an additional raise during the year. In December 1995 in Mexico City, the daily minimum wage stood at 20.15 new pesos, or US$2.70 (for value of new peso--see Glossary). In 1993 the government reported that 10 percent of workers earned less than the minimum wage, 34.7 percent made between one and two times the minimum wage, and 36.5 percent received between two and five times the minimum wage.

Government surveys of household income in 1984 and 1989 revealed a worsening pattern of income distribution. As noted by economist Rodolfo de la Torre, the poorest 30 percent of the population had only 9 percent of total national income in 1984, a figure that had dropped to 8.1 percent in the 1989 survey. The poorest half saw its share of income drop from 20.8 percent in 1984 to 18.8 percent in 1989. The middle 30 percent of the population controlled 29.7 percent of the total income in 1984 but only 27 percent in 1989. In contrast, the wealthiest 20 percent received 49.5 percent of all income in 1984 and 53.6 percent in 1989. Income for the top 10 percent alone increased from 32.8 percent in 1984 to 37.9 percent five years later.

Throughout 1995 Mexico experienced a sharp economic contraction. Observers estimated that approximately 1 million jobs were lost during this period. Official unemployment rates skyrocketed to more than 6 percent for the year. Interest rates also rose sharply in the wake of several currency devaluations. Millions of Mexicans with adjustable-rate mortgages or substantial credit-card debt were particularly hard hit. Analysts suggested that the events of 1995 may have contributed to a further skewing of income distribution, with the wealthiest Mexicans more able to weather the economic storm because their capital often resided abroad.

Structure of Society

Data as of June 1996