The Formal/Informal Labor Divide and Social Policy Attitudes in Mexico

• In Event: New insights on the Politics of Social Policy

Abstract

In recent years, many Latin American countries have introduced new social programs funded out of general taxation that provide benefits like health insurance, old-age pensions, and income support to informal workers. The advent of these noncontributory programs has thus delivered an economic boon to these labor outsiders. For this reason, it has also, by many accounts, provided a political boost to the leaders that implemented the programs, as they have been able to court vast new constituencies of informal workers. Curiously, however, microlevel survey evidence compiled in previous studies shows formality status to have relatively small effects on attitudes about social policy. How can these two seemingly contradictory findings be reconciled? Using new data from a nationally representative survey conducted in Mexico in 2017, I show that the unconditional effect size of labor formality status (relative to formality status) on social policy attitudes is indeed small. I argue that this is because the economic bifurcation between the two sectors is not as sharp as scholars commonly presume. The two are integrated via intersectoral mobility—workers transition between the two with some frequency—and intrahousehold pooling—informal and formal workers live under a single roof. Using novel survey questions, I measure not just respondents’ formality status but also the status of their spouses and expectations about their own future status. The survey data and analyses reveal that the informal/formality divide does exist, but it is substantively meaningful only among the small share of individuals who experience virtually no integration with the opposite sector.

Author

• Andy Baker, University of Colorado, Boulder