Economics: A harsh labor outlook for year-end 2020
Labor market data for the third quarter of 2020 offers an initial glimpse of the extent to which household economies grew increasingly precarious after the Mexican economy experienced its most pronounced contraction on record in 2Q20. The glimpse is initial because the data is somewhat distorted by the Inegi's having yet to adjust its second quarter numbers to compensate for the less comprehensive phone surveys it had to rely on between April and June, a deficiency the institute hopes eventually to resolve. In the meantime, we are relying on a combination of phone-poll data and our own estimates to fill in the gaps.
There are some troubling trends that can be inferred from the survey results, such as the extent to which job losses have been disproportionately concentrated among the lowest paid, many of whom have had to take the next available job, which may offer a lower daily wage and worse conditions.
More broadly, there has been a considerable erosion of the employed population (EP) alongside an even more pronounced narrowing of the economically active population. That explains why we have not witnessed a substantial reduction in the percentage of the EP that is currently actively employed, as well as how limited the rise in the jobless rate has been.
We have also witnessed a considerable increase in the economically inactive population that is available to work, which can be considered as disguised unemployment. To further cloud the situation, last week the López Obrador administration tried but failed to reach an understanding with business leaders on a labor reform proposal it presented in mid November for imposing restrictions on outsourcing practices. The reform that will probably be put to a vote in Congress this week further heightens uncertainty and threatens to erect other hurdles to labor market recovery. While clamping down on illegal forms of outsourcing practices as well as insourcing ones, in its current form the reform would pose additional obstacles to the flexibilization of the labor market the country needs in order to achieve a serious and sustainable recovery next year.
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