Covid‐19 and its effect on formal employment in Mexico: Are there signs of recovery?

Abstract The conditions of the Mexican labor market during the Covid‐19 pandemic went through different stages. The government first declared a quarantine that lasted for several months, the effects of which continue to be quantified. In that sense, this article answers two questions, (1) what are the changes in labor formality rates before and 2 years after the Covid‐19 pandemic began in Mexico?; and (2) are there differences in economic sectors and between genders? We use the methodology proposed by Chacaltana and McMillan to measure the variation in the labor formality rate in its two components, (1) intrasectoral; and (2) intersectoral, through 9 quarterly editions of the National Occupation and Employment Survey. The results show that in the first 2 years of the pandemic and especially during the time of confinement, labor informality was not a means to maintain household income, as had happened in other economic crises. Likewise, important sectoral effects were found, with the most affected industries being nonessential ones. Finally, gender gaps widened, with women being the most affected in the formal and informal labor market due to pre‐existing conditions that were aggravated by the pandemic.