Changes in the Composition of Employment and Productivity in the Formal Sector of the Mexican Economy

The formal Mexican labor market has shown important changes in the last five years: the employment in the industry has been decreasing whereas the employment in the service sector has been increasing. This study looks at the consequence of such changes on the aggregate productivity of the formal sector. This work uses the data set of wages and number of workers from the Mexican Social Security Institute (Instituto Mexicano del Seguro Social). The results suggest that changes in the composition of the formal employment in Mexico did not significatively affect the average workers productivity in the formal sector. Given the relevance of the informal sector in Mexico and that in the last five years the formal employment has grown at lower rates than the economically active population, it is suggested that further analysis on this subject should consider informal employment as well.