Breakdown: Unpacking Mexico’s Very Low Unemployment Numbers

Mexico registered exceptionally low unemployment numbers for 2023, culminating in an almost two-decade low point by the end of the year. 

While the unemployment data itself is very relevant to understanding the state of the Mexican labor market, it is but a piece of a bigger, somewhat complicated puzzle.

The numbers: Mexico’s unemployment rate closed 2023 at 2.8%, equivalent to 1.59 million people.

• That was Mexico’s lowest yearly unemployment rate in 18 years, according to the country’s National Institute for Statistics and Geography (INEGI). 

• For the month of December 2023, unemployment fell to 2.6%, another 18-year low. 

• The unemployment rate remained below 3% throughout all of 2023, hitting a historical low of 2.4% in March.

Why it matters: The BPO sector’s talent pool tends to be composed of young and/or inexperienced workers. This group includes –but isn’t limited to– high-school and college students, young graduates and young adults with no college or even high school education.

• Investors and talent sourcers in the BPO industry tend to equate high unemployment with high availability of talent, and vice versa.

• Of the 1.59 million unemployed in Mexico by the end of the year, 34% (about 544,900 people) were between 15 and 24 years old. 

Some explaining: For the Mexican government, the unemployed are “economically active” people who haven’t been able to land a job.

• The “economically active population” (known as PEA) are working-age people (15 years and older) who are either employed or actively seeking for employment. The unemployed are included within the PEA.  

• As of December of 2023, Mexico’s PEA stood at 60.7 million, according to INEGI’s data.

• The services sector is by far the biggest source of employment in Mexico. It represents 63% of the country’s PEA, equivalent to 37.3 million people. 

Diving deeper: There are two other major categories within Mexico’s PEA: the underemployed and the informally employed.

• The underemployed are those who are formally employed, work less than 35 hours a week and wish to work more hours. 

  • The underemployment rate hit 7.9% (4.5 million people) by the end of 2023.

• The informally employed are people working with none of the rights and obligations that come with legal employment (social security, paid vacation time, income taxation, etc.). 

  • Mexico’s informality rate closed 2023 at 53.6% (31.7 million people). That number has remained above 50% for the past two decades.

For your consideration: By December of 2023, Mexico’s unemployed and underemployed population added up to 6.1 million.

• If one adds the informally employed to that equation, the number hits 43.2 million.

NSAM’s take: Long story short, talent availability for the BPO sector in Mexico is considerably greater than the straight unemployment numbers suggest.

Like in several other Latin American countries, the labor landscape in Mexico is distorted by high levels of informality, a job market that isn’t always up to par with the needs of the population and an education system that tends to fall short of the expectations of employers.

The BPO sector has been able to thrive in that landscape within Mexico, becoming one of the go-to options for students and young adults seeking to break into the job market. High-schoolers and college students are the lifeblood of many call centers in the country.

Investors need not worry about unemployment numbers being so low in Mexico. The data does point to a tighter labor market, but talent is far from scarce if the underemployed and the informally employed are taken into account. 

Unfortunately, call centers have also garnered a reputation in Mexico –and beyond– as an employment option for the desperate, leading to high churn rates and the proliferation of horrid office tales in social media, forums and even the press. 

Focusing so much on unemployment rates feeds into this notion of the BPO sector as a predatory industry. Some companies are trying to wash away those perceptions, aiming to turn the BPO industry into an actual career-building option, with opportunities for upskilling and specialization. A long road still lies ahead, however.

There’s also the matter of automation. There’s no shortage of stories out there of call center agents losing their jobs to their virtual counterparts.

With more and more tech firms entering the CX space, BPO providers will need to step up their game, offering a mix of automated solutions and highly skilled (and human) problem solvers.