Poverty, deregulation, and employment in the informal sector of Mexico

54 ESP Discussion Paper Series 21226 Poverty, Dereglation and Employment in the Informa Sector of Mexico Ana Lua Ozo0wo de Almeidva Le AlMes, Scott E. M. Grab= March 1995 FILE COPY Education and Social Policy Department Human Resources Development and Operations Policy The World Bank  ESP Discussion Papers reflect work in progess. They. are intended to make lessons emerging from the current work pzogram available to operational staff quickly and easily, as well as to stimulate discussion and comment. They also serve as the building blocks for subsequent policy and best practice papers. The views expressed here are those of the authors and should not be attributed to the World Bank or its Board of Executive Directors or the countries they represent. i.  POVERTY, DEREGULATION AND EMPLOYMENT IN THE INFORMAL SECTOR OF MEXICO Contents Acknowledgements ............ Vii Acronyms ......... Viii Summary . ix 1. The Mexican Labor Market: Segmentation, Crisis and Restructuring .I 1.1 Introduction . i.2 Urban Population Growth ...................................... ; 2 1.3 Migration .3 1.4 Labor Force Participation. 3 1.5 The Wage Crisis: Recession and Recovery. 5 1.6 Unemployment .7 1.7 Distribution of Employment by Firm Size and Sector. 9 1.8 Conclusion .11 2. The Informal Sector and Poverty in Mexico .14 2.1 Introduction: The Informal Sector Revisited .14 2.2 Size of the Infonnal Sector in Mexico: Long-Term and Cyclical Patterns of Growth.. 15 2.3 Occupational Structure and Firm Size: Tracing Family Survival Strategies .18 2.4 Sectoral Distribution of the informal Sector by Gender .21 2.5 Wages and Working Conditions in the Informal Sector .26 2.6 The Informal Sector as a Source of Income .29 2.7 Poverty in the Informal Sector .30 2.8 Conclusion .33 iii  3. Microfirm Support and Poverty Alleviation in Mexico ........................................... 34 3.1 Introduction: Strategies for Microfirm Support ............................................... 34 3.2 Finance ............................................... 35 3.3 Training and Technical Assistance ......................... 37 3.4 Fiscal and Regulatory Reform in Mexico ................................................ 38 3.4.1 Fiscal Reform: The Simplified Regime ................................................ 39 3.4.2 Streamlining Regulations: The Ventanilla Unica De Gestidn ............ .............. 39 3.5 Conclusion ........ 41 4. A Model of Deregulation ................................ 44 4.1 Introduction ............................... 44 4.2 Costs ............................... 45 4.2.1 Economic Costs ............................... 45 4.2.2 Regulatory Costs ............................... 46 4.3 Market Structure and the Informal Sector ............................... 47 4.3.1 Economic Costs: T. ................. 49 4.3.2 Regulatory Costs: R ................. 49 4.3.3 Product Market and Labor Market .......................................................... 51 4.3.4 Entries, Exits and Evasion During Economic Expansions and Contractions ........ 52 4.1 Costs And Benefits of Deregulation ........................................................... 54 4.4.1 Deregulation ........................................................... 54 4.4.2 Public Revenues Foregone ........................................ 56 4.3 The Benefit of Deregulation to Microfirms ...................... .................... 56 5. Deregulation of Microfirms: The Case of Mexico ............................................ 59 5.1 Sources of Information ............................................ 60 5.2 Regulatory Costs ............................................ 60 5.3 Compliance Costs as Measured by the Economic Census .................................... 61 5.3.1 Firm Characteristics ............................................ 61 5.3.2 Findings ............................................ 62 5.4 Patterns of Regulatory Compliance and Evasion .......................................... 62 5.4.1 Firm Characteristics .......................................... 63 5.4.2 Findings .......................................... 63 5.5 Evasion Costs .......................................... 64 iv  5.6 Cost of Deregulation: Empirical Estimate ................................................. 64 5.7 Benefits of Deregulation ................................................. 65 5.8 Conclusion and Policy Implications . ................................................. 66 Appendix 1: Compliance and Evasion Behavior of Microfirms in Mexico ....................... 72 Bibliography ................................................... 86 v  List Of Tables Table 1.1: P6pul ation Growth Rates: 1930 to 1980 .................................. 2.... , . ......2 Table 1.2: Population Growth Rates in Mexico (Total and Urban) .2 Table 1.3: Rates Of Labor Force Participation ..................................., ,,. , . ....3 Table 1.4: Rates Of Labor Force Participation by Age Group ...................................................................4 'Table 1.5: Labor Force Participation Rates in Main Urban Areas .5 Table 1.6: Purchasing Power of Industrial and Minnmum Wages ........ ............................................6 Table 1.7: Sectoral Wages .6 Table 1.8: Unemployment by Gender . ,,,. .. ,,. 7 Table 1.9: Unemployment Rates by Age, 1992 ,...8 Table 1.10: Educational Profile of the Unemployed .9 Table 1.11: Percent Disribution of Salaied Employment by Firm Size (Number of Workers) . 9 Table 1.12: Sectoral Distnbution of Total Employment in Urban Areas ................................................ 10 Table 1. 13: Selected Indicators From Sector Accounts (In 1980 Prices) .. 12 Table 1.14: Percent Change in Sectoral Indicators (1980-1991) .. 13 Table 2.1: Estimates of the Size of the Mexican Informal Sector .. 16 Table 2.2: Occupational Structure of Mexico .. 19 Table 2.3: Employnent Status in 1988 ................................1.................2...........0... ............ .... 20 Table 2.4: Occupational Structure of Microfirms .... 20 Table 2.5: Distribution of Owners and Self-Employed by Firms (1989) .21 Table 2.6: Sectoral Distribution of the Informl Secto .21 Table 2.7: Sectoral Distribution of Microfirm Employment (Percent) .22 Table 2.8: Distribution of Microfirm Employment by Sector and Gender .23 Table 2.9: Formal and Informal Employment in the Agricultural Sector. 25 Table 2.10: Monthly Wages in Mexico .26 Table 2.11: Wage Distnbution in the Informal Sector .28 Table 2.12: Social Security Coverage in the Infonnal Sector .29 Table 2.13: Prior Occupation of Informal Entrepreneurs ...................................................... 30 Table 2.14: Reasons Why Owners & Self-Employed Joined the Informal Sctor .30 Table 2.15: Poverty Rates In Mexico .32 Table 2.16: Distribution of Poverty in Mexico .32 Table 2.17: Income Distribution in Mexico .33 Table 3.1 Microfirm Support Programs in Mexico .42 Table 5.1: Regulatory Costs For Microfirnms in Mexico ...................................................... 68 Table 5.2: Sectorsal Variables ................... 69 Table 5.3: Per Firm Variables ................................................................................ 70 Table 5.4: Ratios .................... 71 vi  Acknowledgements While reserving for themselves the responsibility for all errors and omissions, the authors gratefully thank the following individuals for their helpful information and suggestions: Oey Astra Meesook, Zafiris Tzannatos (ESP), John Innes, Rosaria Troia and Alex Panagides (LA2HR), Fernando Medina (INEGI), Jorge Arreola (SEDESOL), Jose Lufs Marcal (STPS), Guillermo Bernal and Miguel Cdrdenas (PRONASOL), Felipe Campos and Mario Gabriel Budebo (SHCP), Norma Gonzrlez and Josefina Lara (CIMO), Lourdes GonzAlez and Jaime Ortiz (SECOFI), Ricardo Le6n (FINCA), Brfgida GarcIa, Orlandina de Oliveira, Jose Lufs Mendez and Fransisico Zapata (El Colegio de Mexico), Rodolfo de la Torre (ITAM), and Enrique Davila. vii  Acronyms AMB (Asociaci6n Mexicana de Bancos) BANMEXT (Banco Mexicano de Exportaciones) BANRURAL (Banco Rural) CIMO (Calidad Integral y Modernizaci6n de la Mano de Obra) COMIN (Comisi6n Mixta Para la Modermizaci6n de la Industria Micro, Pequena y Mediana) COSNET (Consejo del Sistema Nacional de Educaci6n Tecnol6gica) EAP (Economically Active Population) ENAMIN (Encuesta Nacional de Micronegocios) ENE (Encuesta Nacional de Empleo) ENEI (Encuesta Nacional de la Economfa Informal) ENEU (Encuesta Nacional de Empleo Urbano) ILO (International Labor Office) IMSS (Instto Mexicano de Seguridad Social) LFP (Labor Force Participation) NAFIN (Nacional Financiera) PREALC (Programa Regional de Empleo para AmErica Latina y el Caribe) PRONASOL (Programa Nacional de Solidaridad) SECOFI (Secretarfa de Comercio y Fomento Industrial) SHCP (Secretarfa de Hacienda y Credito Pdblico) STPS (Secretarfa de Trabajo y PrevisiOn Social) viii  Summary Roughly 41 percent of the work force in Mexico's major cities is employed in the informal sector, composed of the self-employed and workers in firms of less than five employees, including owners. Microfrm employment is a common point of entry into the urban work force for rural migrants, and an important supplier of jobs and income to the poor. The informal sector, then, should figure prominently in poverty alleviation strategies. The most common strategies to assist microfirms include the provision of credit, training and marketing services. This study explores another potentially important component, deregulation, in the range of strtegies. Research in this study shows that the "real" regulatory costs, including the costs of both compliance and evasion, are qiite high in Mexico. Regulatory costs absorb 20 percent of total costs, and impose a significant burden on the start-p and operation of microfirns. This study will offer an initial calculation of the potential job-creating effect of a deregulatory policy directed at microfirms, under the assumption of constant wages. The study is organized in the following manner: Chapter 1 will survey the Mexican labor market and identify those features which contribute to growth in the informal sector, with reference to both long-term and cyclical faors. Chapter 2 will explore the relevance of the informal sector as a locus of poverty in Mexico, with particular aention to its occupational configuration, worklng conditions, and its role in the survival of poor households. Chapter 3 will provide an overview of the major iniatives in Mexico aimed at reducing poverty in the informal sector. Chapter 4 offers a theoretical model for calculatdng the costs and benefits of deregulation for microfirms, which is then applied to the Mexican case in Chapter 5. ix  x  1. The Mexican Labor Market: Segmentation, Crisis and Restructuring 1.1 Introduction The Mexican labor force is divided between those who are institutionally 'protected," and the 'unprotected," whose working conditions are beyond the influence of labor regulations. Institutional protection (or its absence), however, is only one of the many characteristics which divide the Mexican labor force. Protected workers in the "modem' or "formal" sector of the economy are typically found in large firms with a modern capital base. They enjoy relatively high wages, social security, vacation, pensions and employment security as mandated by legislation. By contrast, those unable to find work in such firms resort to the next best alternative, the so-called "informal sector," in small firms or self-employment, engaged in labor-intensive activities, without job security or benefits.' Demographic, institutional and educational factors coincide in this dichotomy between the "formal' and "informal" segments of Mexico's labor force. Population growth and rural- urban migration generate excess labor supply, especially in urban areas, which outstrips the modern sector's demand for workers. Growing labor force participation rates, especially among women and youths, also contribute to a rising urban labor supply. In the absence of better alternatives, and lacking any- form of unemployment insurance, 'excess" workers accept jobs under precarious worling' conditions, or subsist through self-employment. In the industrial sector, the ability of labor unions to raise the wages of their members is a key factor behind the labor force's division into 'protected" and "unprotected" groups. In the services sector, a worker's educational attributes are definitive in his insertion in either '*e- formal or informal sectors. The experience of a severe economic crisis and the introduction' of a radical reform process by the recent Administration have both countered and reinforced this dichotomy. Labor unions have been weakened - first by a severe squeeze on wages, which, in the industrial sector, lost about 43 percent of their value between 1980 and 1988. Their influence was further diminished by the privatization of many, state enterprises and trade liberalization. Virtually all sectors of the economy are now or wihl be exposed to external competition. Changes' in the structure of demand for labor, associated with the process of modernization itself, contibute to the growing importance of small firms, in which "unprotected' employment prevails. The rise of a wage-earning, industrial labor force fed a rising demand for commerce and services. Grdwth in these sectors has fostered employment in activities dominated by small'finis, such as services to firms--and- individuals. More recently, the emergence of the maqula industry,-n which subcontracting is a common arrangement, has alsb been a factor-in the rise of small-firm employment, especially in the border cities. i more precise definition of 'informality" will be intoduced in the following chapter.  Political change, economic growth and modernization will not suffice to incorporate the Mexican labor force into one -"modern" or -"formal" sector.2 Despite the existence of persistent constraints on their income-generating capacity (small scale of production, disadvantageous access to credit, information and other inputs, and relatively small capital base), small firms will continue to be an important employer in Mexico. 1.2 Urban Population Growth Mexico experienced dramatic population growth after the 1940s, even by Latin- American standards. High fertility rates continued into the 1970s, when the first official efforts to promote birth control measures were undertaken. Aggressive steps in widenig the coverage and improving the delivery of health services (through, for example, the creation of the Mexican Social Security Institute - IMSS) especially in the cities, where services were more abundant and of better quality, contributed to the accelerating growth rates. The urbanizing side-effects of these trends were so strong that the population in localities of more than 5,000, which constiuted 38 percent of the total population in 1940, rose to 60 percent by 1980. TABLE L1: POPULATION GRO.WTH RATES: 1930 TO 1980 ._______ . __.__- Annul-Rate of Accumuated Growth 1930-40 19o40-0 1i69500' ' 96197o 19701980 Urban 2.5 5.5 5.3 3.3 4.6 IRural 1.S 1.S 1.6 1.7 1.4 Tot 1.7 2.8 3.1 3.5 Source: Necochea Vergara (1990) Note: "Urban' on this table, refers to localities with over 5,000 inhabitants Growth rates have only begun to decline since the 1970s. Although total population growth in Mexico is slowing, urban population growth rates remain consistently above national averages, implying that the trend towards urbanization will continue. Growth in Mexico City has tapered off - now, provincial cities are growing. TABLE 1.2: POPULATION GROWVR RATES IN MEXICO (TOTAL AND URBAN) Urban Population Year Total Urban as % of Total 1980 2.42 3.51 - 66.4 -- 1985 1.97 2.89 69.6 - 1990 1.74 2.57 72.6 Sources: INEGI, Censo General de Poblacion v Vivienda,The World Bank, (1993) 2Gacia and Tokmnan (1985), rather pessimistically conclude that for the overall occupational situation of Latin America to improve, aamual economic growth rates would have to surpass 5 percent. 2  13 Migration Migration is the driving force behind Mexico's experience of rapid urbanizaion, especially ini"the country's central -region. Between 1950. and 197.0, Mexico City was. the destination for most migrants. The mass movement to the cities.was precipitated by the spread of labor-substituting technology and -the growing difference between urban and rural living standards, which was accentuated by industrialization and the expanding civil service.3 The inequality incurred by rapid-but uneven economic growth (which averaged 6 percent per year), and labor-saving advances in agriculture contributed to the relative deterioration in living staiila'ds for ajlarge contingency of rural workers and spurred their migration to the main cities.'-' 1.4 Labor Force Participation -The effects of urban-population -growth .o labor supply have been intensified by the entry -of women and youth- into the workfdorce. Traditionally, high fertility rates, scarce opportnies and low -.educational levels-. conspired to keep women's participation at low levels. After 1970, however, women's opportunities expanded through growth in activities in which 'female employment was predominant,-and by their success in peneting sectors dominted by men. Older women were drawn into non-wage activities, maiyI in commerce, personalservices and piecework, while younger women - beneficiaries of programs to expand educational access - most oftn. became wage-workers (Garcia, 1994). TABLE, 1 RATES OF LABOR FORCE PCARICIPATIO- - (1:2 YE ARSNDOLDER} - Ger - 9O70 1979 - 1991 'Men 72.0 71.3- -7 -.7 Women 16.4 21.5 31.5' Total 43.6 45.5 53.6 Source: Garcia (1994) 3Gregory (1981) details the diffcrential effects of fiscal and sectoral development policies on productivity and earnings in urban and naml labor markets in Mexico. 'Me _masrement of labor force participation in Mexico is a contentious issue, owing to large discrepances between different sources, especially in the neasoume of female participation and the activity of -non-wage workers. Table 1.3 dmaws upon those sources which are considered to be most comparable and reliable. (See Garia, 1994) 3  Throughout the critical period of the 1980s, women's participation rates continued to climb, a trend which is observed throughout the Latin-American region. Upward shifts in the age profile of economically active women suggest that, instead of abandoning the labor market after marriage or the bhih of their first children, which had been the predominant trend, more women are continuiig in the-workc force and raising families at the same time.5 During the same period, men's participation aes also increased, though,not as drastically. From 1987- to'- 1992 youth participation rates have surged notably, especialy among 12 to 19 year olds. As seen in dte following table, the,participation rates of this group grew fiom 25 to 29 perceuiL luhoo Iessdm a thdid of all ten to 19 years old participate in the labqr force, their share as a percentage of the total labor force has readhed nearly one-fifth, whilee'other groups - even those with steady or slighdy growing participation rates - have declined in their share of the labor force. TABLE 14: RATES OF LABOR FORCE PARTICIPATION BY AGE. GROUP -~Age. ________1987 .1988 1989 1990 1991 '1992 -10 ..,FRate 25.0 25.9 25,3 26.1 27.7 29.1' ` t19 Share-of Total'EAP 17.4 - --17.9 17.5 18.1 -18.8 19.4' __-_ % in-agegroup 62.8 624.- 63.3 62.9 64.1 64.3 D24 ShareofTotalEAP 17.1 - 16.9 17.1 17.1 - 17.0 16.8 25 - LFP Rate 69T J - 69.8 69.6- 69.2 69.7 70& o 34 Share of Total EAP 28.3. 28.4- :283 28.3 27.8 27.8 35 LFP Rate 68.1 68.2 68.3 68.0 69.3 69.6 to 44 Share of Total EAP 19.1 19.0 19.0 19.0 18.9 18.7 45 LFP Rate 47.9 47.6 -48.0 46.5 47.5 47.7 and over Share of TotaEAP 1-8.1- -17.9 18.0 17.5 -17.5 17.3 Total Shar of Tota EA- ICN.0 100.0 100.0 100.0 100.0 100.0 LFP = La-boE Force Partciption Rate EAP = Ectwomically-ActivePopulation Source: ENEU. - 5This interpretation is suppoed by Garcia and Oliveira (1992), who, using regression analysis, determined that the recession of the 1980s reduoed the negative impact of children on female labor force participation, especially for salaried, manual workers. 4  TABLE 1.S: LABOR FORCE PARTICIPATION RATES IN MAIN URBAN AREAS city 1987' -1988 1989 1990 1991 1992 Mexico D.F. 51.7 52.4 53.0 53.0 54.3 55.0 Juarez, - 52.1 52.0 52.1 53.7 52.8 53.8 Chihuahua 48.4 49.4 50.1 51.1 52.2 52.0 Guadalajara 54.1 54.9 53.6 51.2 55.6 57.9 Leon 50.7 50.9 51.-1 51.5 52.3 52.2 Matamoros 53.5 53.0 52.8 52.5 55.7 56.0 Merida 48.1 -46.0 .443.0 46.0 47.9 53.6 Monterrey 49.5 51.3 509 53.0 53.6 54.6 Nuevo Laredo -- 46.7- 49.1 49.2 50.9 49.8 50.5 Orizaba 52.5 50.5 48.8 47.0 48.3 46.9 Puebla 47.0 47.4 47.2 47.9 48.2 50.6 San Luis Potosi 45.7 44.6 47.3 48.4 48.3 48.1 Tampico -48.4 473. 44.9 44.5 50.5 54.9 riuana 7 48.6- 50.6 51.7 61.8 50.7 50.9 Torreon 48.2 47.3 49.6 48.8 50.9 51.1 I Veracruz 53.0 1 50.1 1 46.1 49.0 51.6 54.6 Source: ENEU Just as urban-rural migration has occurred throughout the country, growing participation rates have been observed in both the largest and medium-sized cities across Mexico. While the increase since 1987 is particularly notable in important industrial centers such as Mexico City, Guadalajra and Monterrey, the growth trend is evident throughout the series in Table 1.7. Orizaba was the only city observed to have a decreasing participation rate. 1.5 Ihe Wage Crisis: Recession and Recovery A deep recession, followed by the debt crisis and structural adjustment in the 1980s left lasting effects on the wage structure of the Mexican labor market, presented in Tables 1.6 and 1.7. Declining wages were the primary mechanism through which the effects of the crisis and adjustment were rnsmitted to the population. By 1988, declining output, falling demand and high inflation reduced the real value of wages to 57 percent of their 1980 value. Ihe minimum wage fell to less than half its 1980 value (Table 1.6). The partial and inconsistent recovery since 1987 has left wages in 1992 at 60 percent of their 1980 value. 5  TABLE L6: PlURCHIASING POWER OF INDUSTRAL4 AND MINIMUM WAGES (INDDEX: lff loo) Year Industisal Wages Minimum Wage 1940 100.00 100.00 1981 l03.00- 100.70 1982 foL-.50 88.70 1983 74:50 *73.50 1984 71.60 68.20 1985 72.A0. 67.00 1986 63.90 60.60 1987 60.30- 56.30 1988 57.10 A930 1989 * 58.10 47.30 1990 60.80 42.00 1991 63.20 39350 1992 60.00 39.00 Source. insdo AMxcano de Seguri&d Socidl TABLE 1.7: SECTORAL WAGES _ Sectors 1980 1983 1986 1989 1991 1991 as l - - - % of 1980 Agiculture 17 141 14 12 11 65 _ _ 145 106 100 99 104 71 Manufactuing 133 107 99 113 130 97 Contction 96 72 64 56 61 64 Electricity/Gas 296 243 184 183 202 68 Food Services 82 64 56 52 57 70 Trans./Comm. 111 93 87 91 94 85 Financial Services 184 144 139 151 191 104 Other Services 95 77 68 71 82 86 Total 79 63 58 59 67 85 Sowuce: Estimates from National Accounts (see footnote below) 'he pattern of real wages by sector demonstrates a considerable downward flexibility in all secrs. Two of the highest paid sectors, Miing and Electricity/Gas were among the most downwardly flexible. Electricity/Gas continues at the top of the wage structure, nevertheless, with Mining near the top. Even though wages in Construction were already relatively low, they absorbed a strong downward shock during the recession. The extreme flexibility of wages in Construction, a notoriously informal sector, contrasts vividly with the Wage figures in this table are not diroctly comparable with those in the preceding table, which originate in a different source of information (IMSS). Figures in this table are from the National Accounts, which calculate employment levels based on reported production and productivity estimates. Tlhe wage figures, then, are not directly observed, but are roughly estimated. These figures are own only to explore sectoral diffeees. 6  pattern observed in Manufacturing and Financial Services, where the descent was less precipitous and the recovery more rapid. The recession and adjustment had opposite. effects at different points in Ihe intersectoral wage structure. The heaviest losses and the highest gains of the recession/adjustment period were concentrated at the top of the wage structure (i.e., the highest wages lost the most), while at the bottom of the wage structure, losses predominate. At the very top, for example, wages in Electricity/Gas, as a proportion of the economy-wide average wage, declined, while Financial Services increased. At the extreme bottom, wages in Agriculture and Food Services fell even lower, while Other Services gained slightly. In the upper middle range, Mining and Manufacturing switched places. For any given year, pronounced sectoral wage differentials are evident, especially between Agriculture and all other sectors. Agriculture is at the extreme bottom, followed by food services, construction, and other services. Low wages in these sectors (and transport), in which informal employment is most frequent, are reflected in the earnings differential between informal and formal workers, as will be seen in the following chapter. Wages in the informal sector are truly "market-based," as institutional arrangements such as collective bargaining or the minimum wage, do not apply. Also, consistent with the contention that Mexico's more privileged groups have been the first to benefit from recent reforms, it is notable that only wages in Fmancial Services have fully recovered from the effects of the crisis. 1.6 Unemployment The effects of recession, the debt crisis and adjustment policies were not reflected in higher aggregate unemployment levels in Mexico. In part, this fact is owed to the wage flexibility shown in the previous section: firms compensated for reductions in sales and output by allowing real wages to deteriorate and thereby reduce labor costs. Two other factors, however, should be bome in mind in interpreting unemployment levels in Mexico. First, there is no unemployment compensation scheme, so unemployment itself is a "luxury' that can only be afforded by those with higher levels of family income. Secondly, official unemployment estimates may be biased downward. TABLE 1.8: UNEMPLOYMENT BY GENDER (COVERS 16 UBAN ) - Year Total Men Women 1987 3.9 3.4 4.9 1988 3.6 3.0 4.7 1989 3.0 2.6 3.8 1990 2.8 2.6 3.1 1991 2.6 2.5 2.9 1992 2.9 2.7 3.2 Source: ENEU Riboud and Revenga (1993) explore the characteristics and determinants of unemployment in Mexico, and provide alternative estimates of unemployment-to correct for 7  potential flaws in official estimates. They find that Mexico's unemployment rates, which are measured over a week, may understate unemployment by half. Riboud and Revenga expind the period of reference (how recently a respondent has actively looked for work) from a week to two months, and include apparently idle male respondents of working age, who are neither in school nor tending a family, arriving at- estimates that are almost double the official rate. Tbey also find that unemployment, while not as widespread as might be expected, is frequently experienced by a large number of workers, owing to high worker turnover.7 Between 15 and 20 percent of the population experiences a phase of unemployment at some point in the year. Another notable characteristic of Mexican unemployment is its prevalence among the young, as shown in Table 1.9, below. In 1992, the highest rates affected those between ages 15 rugh 19 - that is, those whose labor frce participation rates have experienced the largest increase. The second greatest percentages were ages 12 to 14 (also in the group of growing ptcipation), and ages 20 to 24.' Riboud and- Revenga esfimate that as many as half of the teenagers who have abandoned school in search of work will experience at least one peiod of unemployment over the course of a year, owing to the difficlties in finding a job for someone with litle education and no experience. TABLE 1.9: UNEMPLOYMENT RATES BY AGE, 192 Age Percentage 12-14 4.5 15-19 7.4 20-24 4.5 25-34 2.3 35-44 1.3 45-54 1.4 . 55-64 1.2 65+ 1.2 Source: ENEU A cross-section of the unemployed population by educational levels reveals the growing employment problems of those with higher educat. Their share as a percentage of all those unemployed rose from 26 to 31 percent between 1987 and 1992. This utend caminly embodies the effects of increased atdance at universities, but it also probably reflects the hact that unemploymenlt in Mexico is a lryw thatonly the better-off can afford. 7Worker tunover is a notable featre of employment in the maquikidora factories, and has been the subject of reoent study. See Carrilo and Santiblnez (STPS, 1993) and Carrillo, ed. (STPS, 1993). 8  TABLE 1.10: EDUCATIONAL PROFILE OF THE UNEMPLOYED (COVERS 16 URBAN AREAS) . Pereentage Level of 1988 1990 1992 Education . No Education 1.4 1.6 2.0 Prim. Xncomplete 7.6 7.3 7.3 Prim. Complete 16.3 18.6 16.1 Started Secondary 48.1 43.9 44.1 Higher Level 26.6 28.6 30.5 Total 100.01 100.0 100.0 Source: ENEU. 1.7 Distribution -of Employnt by Firm Size and Sector In Mexico, the labor force is mainly divided-up ito very large and very smal firms, with a raty small proportion of workes (roughly 18 percent) in medim sized firms. The absence of a middle gound between teagest and the smalest firms is one fcor behind the -dualistic- configuration of the labforce in Mexico. Productivity, wages, and working onditions between lre firm, contas with those-found im small.fiims. The many disadvantages which constrain Production and sales in small firms, cluding diseconomies of (small) scale, higher pnces for inputs, lack of access to credit, and limited capital accumulation keep wages low and working Conditons precarious in the small fm sector. Differences in the attibutes of large and small firms, and their outcomes in tms of wages and employment, will be explored in dil in the following cpters. The dirison of the labor force into very lrge and very small firms has become increasingly striking, as large firms have given way to small. This trend.is evident in Table i.10. In 1987, small and large firms employed roughly 39 and 43 percent of the labor force rectey. Since then, roughly 2 percent of the work force in lrge firms has id to the small fim sector, so that each sector now employs rougbly 41 pecent of all workers. It is ieresting to note that Ihe medium-sized sectr, after an inita drop and recovery, has remained relatively stable. TABLE Ll1: PERCENT DISTRIBUTION OF SALARIED EMPLOYMENT BY FIM SI(NMR OF WOE Year I_to S 6 to 50 51I+ Total 1987 38.6 18.0 43.4 100 1988 -39.8 16.0 44.2 100 1989 40.6 16.3 43.1 100 1990 40.3 17.0 42.7 100 1991 40.0 18.0 42.0 100 1992 41.1 18.1 40.8 100 Source: ENEU 9  The trend towards employmt in small firms, which is observed in other countries of the region as well, is driven by several forces. Fr increasing =cmeion, unleashed by free-market reforms, has driven many large companies to downsize and replace in-house production widh subcontractig aa eats with maller firms. Beerfa (Portes, Castells and Benton, 1989), in a case study of the garment industry of Mexico City, shows dua such subcontating behavior by large firms reflects their efforts to tap into lage pools of cheap, unskilled laborer.T Demand for labor in the smal firm sector will also be increased in tandem wih continued expansion of the maquia industry, upon which microfirns are more heavily reliant, both for iputs and as a source of demand.9 TABLE L12: SECTORAL DISTRIBlTION OF TOTAL EMPLOYMENT IN URBAN AREAS (COVERS 16 URBAN AREAS- Sector 1987 1988 1989 1990 1991 1992 Ariculturul 1.60 | 1.60 1.40 1.30 1.30 1.50 Ind. Min./Elect. 1.30 1.10 1.20 1.00 0.80 0.90 End. Production 24.40 24.60 24.80 24.40 24.10 22.00 Construction- 5.20 4.80 4.80 5.10 5.20 5.60 Commerdal 19.-0Q 19.70 20.30 20.60 20.60 21.10 Service 35.20 35.20 35.10 35.40 35.50 36.20 ComunilTrans. 5.90 5.80 5.60 5.60 6.10 6.10 Government 7.10 6.70 6.40 6.10 6.00 6.20 Worlinfg i U.S. 030 0.50 -0.40 0.50 0.40 0.40 Total 100.00 100.00 100.00 100.00 100.00 100.00 Source: ENEU The trend twards increasing employment in small firms is reinforced by seCtoral shits in taW employment tDwards those sectors in which smal firm employment is common, especially Services and Commerce (to be discussed in die next Chapter). Togedher, these twO sectors account for over 57 percen of tal eoymen - up from 54 percent in 1987. M u ing (mdustrial production) employs only 22 percent of the working poplaton, demonstrating relative stability undl a 2 percen drop beween 1991 and 1992. Employment in Construction, like salaies, vaies widely with shor-term economic trends. Whether growth m ithe Services sector (or the Tertary sector as a whole) embodies a trnd towards "excess tertia o bas been the subject of debate. Sice the 1970s, the ILO has argued that over employment in the Tertary sector is the rsult of -supply-led fators (urbanizo and population growth), that swell the labor force beyond the economy's abilty to generate jobs. From this pepective, "excess" employment in the Tertiy sector should be viewed as hidden memployment, and further growth in the sector's employment levels would only be a sign of wekns in the other sectors. By conast, Gregory (1981) refui this chaactizion of the Teriary sector, and points out that enployment in the Services sector has, over the long run, grown in tandem with m g. In his agument, Gregory analyzes employment, factor tBeeia Cm Porws, Castells and Benton, ads, 1989) provides a semiral case study of subcontracting and wage differentials in the garment industry of Mexico City. 'Gincr de lb Rios (m Scitatn, Pas and Orun, eds. 1991) demotb at fir s with less hn fve employe have the highest atio of maquila to out and sales. 10  productivity, and wages, and concludes hat the sector has been "a full participant and contrbutor to growth." Recen trends are difficult to discern. First, wages and productivity in all sectors were severely affected by the crisis and adjusent policies. As discussed in Section 1.5, wage freezing policies and their impact on differem sectors caused exogenous shifts in the inteectoral wage diffentials. Productvity was likewise distorted downward, in response to falling demand. So long-erm trends may be obscured by short-term variations. Overal however, the sectoral accounts provide some information and evidence for both ihe "positive" -(Gregory) and "negative" (ILO) interetations descried above. Tables 1.15 and 1 16 summarize key indicators between 1980 -and 1991. Employment growth is certainly highest in the Terdary sector, especially in Fmance, which employs relatively few people. Other Services and Food Services are by far the largest components of the Tertary sector. In 1991, for example, more people were employed in Other Services than in the entire Primary or Secondary sectrs. Outu growth in the Tertiary sector, however, has kept pace with other sectors, even when Fmancial Services are exclued. Wages, also, did not decline as rapidly, but this probably reflects the fact *aofficial wage-squeezing policies were not as effecdve in the tertiary sector. Those occupied in seavices, which are often rendered to individuals, are able to adjust- their fees to iflation, unlike -contacted workers in large mana firms. The oupuper worker figures (Q/N in Table 1.14) show that growth in the Tertiary sector does not compare fvoraly wit the Secondary sector, where outputer-worker has grown by 11.53 percent Some of the Secondary sector's components stand out as high performers in this respect: output-per-worker in an n, for example, grew by about 25 percent, while its employment levels were relaively stable. (Mhe increase may be the resut of falling labor costs, since wages decreased by 25 percent). By contast, in the Tertay sector, gains in productivity per worker are modest, at 3.37 percent 1.8 Conclusion Long-term trends,--short-term crises and structural changes in the labor market conspire in the growing importace of microfirms as a source of employment in Mexico. As in the past, continued growth in the urban labor supply will surely outpace job-creation in the formal sector. Under such circumstances, employment in the informal sectr is the next best (and often the only) alternative to "protected" jobs in the formal sector. These trends are reinforced by shifts in the sectoral distribution of the labor force toward increased employment in thosesectors in which smal firm employment is most common. The following chapter will explore the significance of these trends for the poor in Mexico. 11  TABLE L13: SELECTED INDICATORS FROM SECTOR ACCOUNTS (IN 198O PRICES) 1980 1985 1990 1991 Agriculture 2,226 572,903,000 580,527,000 N : 74 6,096,353 5,732,264 5,958,914 2/N 90 . 96 100 97 .____________ W 17 14 12 11 Mining 191,998,000 242,870,000 254,124;,000 253969n,0C N 209,097 258,202 279,540 275,168 .IN 918. 941 909 922 _____________ W 145 112 99 104 Manufacturing Q 2_38M,193,000, 2,555,677,000 2241,62J 31 0 N Z,'41,411 2,50534 2,510,276 _ 632,50i6 g/N* , 977 1,043 1,165 1.221 ________ _ W. 133 104 120 130 Constructin j Q 608,287?000 536,509,000 537,305,000 553,961,000 ; - . N - 1,930,207 1,955,486 2,410,9t5 2,4898054 QAN 315 274 223 223 W 96 69 58 61 Electriciy Q 78,921,000 93,951,000 117,488;000 121,464,000 and N 81,246 99,315 113,384 112;498 Gas . QZN 971 946 1,036 1,080 W '296 202 188 202 Food 1,48036,000 1 k676,988,000 1,760,637,000 Services N 294055 3I47 -33955 3,467,260 . QAN : 505 __3_.. 495 508 W 82 60. 54 57 Transport Q 404,829,000 . 430,201,000 500,494,000 528,703,000 and N 904,161 1,028,521 1,073,615 1,113,944 Comuniciation QAiN 448 418 466 475 W 111 91 90 94 Financial Q 434,370,000 542,936,000 647,410,^ 000 630 Services N 352,226 469,824 495,234 502,367 QLN 1,233 1,156 1,307 1,344 W 184 _143 170 191 Otder g. .66 1,159,053,000 1,177,695,000 1,225,088,000 Sereas N 5,753,322 6,450,456 6,531,198 6 695,265 Q/N . 175 ISO180 180 183 W 95 75 75 82 Total Q 7,106,236,000 7,716,607,000 8,408,969,000 8,750,957,000 N _ 156 21,956,149 22,536,351 2 QAN 350 351 373 379 W 79 62 63 67 Q = product value (in 1980 prices) N = number of workers Q(N = product per worker W = average wage Sowurc INEGI, Naioral Acxounts 12  TABLE L14: PERCENT CHLANGE IN SECTORAL INDICATdORS (I 991) Primary 18.75 6.04 1.09 -29.01 Secondary 21.31 14.57 11.53 -25.14 Tertiary w/o Finance 21.32 17.49 3.37 -19.10 Total Teriary 25.77 18.38 6.31 -10.17 Total 23.14 13.97 8.29 -15.19 Source: Table 1.13. 13  2. The Informal Sector and Poverty in Mexico 2.1 Introduction: The Informal Sector Revisited In Mexico, as in other countries, labor market researchers, poverty analysts and policy makers resist -the use of the term "informal sector," wbich they characterize as excessively broad and operationally unhelpful. The extreme breadth of the concept is manifested in the contrasting firm types, individuals and activities it encompasses: large and small businesses, run or staffed by both the rich and poor, who are engaged in everything from unregistered domestic service to drug trafficking. This heterogeneity, and the proliferation of nuanced definitions of the informal sector (such as the 'hidden' or "traditional" economy) reach such extremes that some researchers effectively discard the concept.'0 It may be more analytically precise to speak of informality itself as describing an identifiable characteristic shared by different types of finns, rather than an informal s o and then explore its implications for specific subsets of firms or workers. The approach in this paper is to retain, for convenience, the term "informal sector," roughly equivalent to the microfirm sector (firms of five employees or fewer), and to allow for slight shifts in definition as different sources are cited. As the discussion of informality has evolved in the past twenty years or so, however, basic characteristics have been agreed-upon, and certain sectors and activities, such as criminal activities, have been eliminated from most definitions. In the broadest sense, informality is the condition of non-compliance with a given set of standards and regulations." These range from outright prohibitions on particular activities, to inspection requirements, zoning laws, labor legislation, and tax regimes. In Mexico, this conception of the informal sector is reflected in references to it as the "underground" economy, as in the study produced by the Centro de Esudios Econ6micos del Sector Privado (CEEP, 1987), which "blames" supposedly high Mexican tax rates for the existence of a vast economfa subterrdnea. Roberts (1993) argues, however, that it is more accurate to portray informality and formality as two extremes on either end of a spectrum of regulatory compliance, with most firms, including small firms, located somewhere along the continuum. Very few firms are completely informal-instead, they comply with those regulations which are easiest or for which the costs of evasion exceed the costs of compliance, while evading the most burdensome regulations, or those least likely to be enforced. Both of these responses, compliance and evasion, create additional costs to the enterprise and, in consequence, lower its productivity.'2 '0 Se Cartays (1987) and Giner de los Rios in Schatan et. al., eds. (1991). 11 Poems and Benton (1984) 12'hese issues are analyzed in chapters 4 and 5. 14  Ihis chapter will explore the role of the informal sector as a source of employment in Mexico and its significance for the poor. How do its growth dynamics correspond to long and shortem chages .in the labor market and the economy at large? Who works in the informal sector, -and in what capacity? The final section will offer some original findings on the relationship between poverty and the informal sector. Whenever original findings are presented in this chapter, the informal sector is defined as having the following two components: * owners and workers (both paid and unpaid) in firms with fewer than five employees * the self-employed, excluding professionals and those with schooling above secondary. Such a definition corresponds to widely accepted notions of informality - especially in Mexico and Latin America - including those promulgated by the International Labor Organization (ILO) through the Programa Regional para Amnca Laina y el Caribe (PREALC) - which associate small firm size with higher incidence of regulatory evasion. Some aspects of smallness render the small firm unable to bear the costs of full compliance with the,regulatory framework: low levels of capitalization, small volume and low values of production. Others - having only a few employees, who are likely to be famIlT members, itinerancy or production in household-based shops - faciitate the evasive stategy. 3 The informal sector supplies both income and goods to the poor. Policies and programs directed at the informal sector therefore have significant poverty-reducing potential. The occupational configuration within the informal sector indirectly corroborates its role as a self-help safety net for poor families, while its distribution across activities demonstrates its wrle as a supplier of goods and services for low-income consumers. These assertions are confirmed by original findings presented at the end of this chapter. Poverty rates in- the informal sector are double those found in the formal sector, and the majority of the working poor - including those who are extremely poor - are self-employed or work in micro firms, either as salaried employees or unpaid family workers. As an important arena for self-help, and a key supplier of low-cost goods, the informal sector is an appropriate operational focus for policies to enhamce the poor's efforts to provide for themselves and their families. 2.2 Size of the hiformal Sector in Macico: Long-Term and Cyclical Patterms of Growth The Secretarta de TRabajo y Previsi6n Social (STPS) attempted in 1975 to estima Ste size of the informal sector. Despite consistenty high growth rates, the emergence of a modemn idusti strucure and successes in extending social security coverage throughout Mexico, large segments of the labor force continued to be employed under substandard conditions. The choice of criteria-workers earning less than the legal minimum wage-reflects early connotations of regulatory evasion, labor precariousness and marginality associated with informality. Using data from the 1970 Population Census, STPS calclated that perhaps as much as 25 percent of the labor The evasive stategy iself, however, entails other costs and dists production decisions, so that the -benefits' of evasion are, in effect, only marginal and perhaps even negative, -as will be explained in Chapter 4. 15  force (3,251,664 people) nationaly and almost 30 percent (2,150,291) in Mexico City were worlcing m the informal sector. The first dect attempt to measure and survey the informal sector was uidertaken in the following year, in the form of a special module (Encuesta Compkmenaria) of the ongoing occupational survey of households in Mexico City, Guadalajara and Monterrey.. The use of dffferent criteria for inclusion in the informal sector (see footnote), and erhaps the exclusive f6cus on a few urban areas,in whicb it was known that infornality was likely to be strong, resulted in a much higher estimate: 38.2 percent of the labor force."4 Since then, a variety of authors have estimated the size of the informal sector in Mexico, using different criteria, years of reference, census/survey sources and with varying geographical coverage.'- Most sources estmate infqrmality in a given year, precluding the possibility of time- series analysis; only a few offer estimates for more tha one year. Despite such problems, however, most available information suggests that the informal sector has -not only persisted despite rapid iodeniabon, but that it is, in fact, growing faster than employment in the formal sector. The results of two such estimates, at themational level, are summizd in the following table. As these probably express minium andW, maximum estimates, the size of the informal sector (depending on how it is defined) iies somewhere in between. TABLE 2.1: ESTIMATES OFTHE2 SIZE OF THE MEXICAN WIFORMAL SECT4R Author Criteria | 970 | 979 1980 | 1983 198 Garcia non-wage 37.8% - - 37.1% =- 45.8% = workers 4,897,028 7,114,778 10,049,299 workefs wokners woarers (Source) Conimd -~~ _ Rndd6n/Salas owers, self- 17.0% = 20.3% 24.3= employed and 3,256,000 4,560,50 7,168,900 unaid wo.eas worke workes (Sorce) CoNtinual Nal Natona Oconal 0 nomeExpense Enpozment Survcy ., , ,y Sw ty Note: a The 1980 Census sufers from widely-recopizd inadequacies, including a lae dnber of unspecified observatios in the category of occuatio status. For her estn3tes, Garnia asmints that the distibution of unspecified obsewvations mros the pattern of specified observtos. bThe Natonal Employment Survey (Enauesta Nacional de Ocupacion) rplaced the quayry Contiual Ocupaonal Survey (Ecua ntinua sobre Ocaciaon). Source: SIPS (1993), El Secor infognal en Mcnco 14 The informal sector is supposed to consist of those.workers who, eaming no more than minimum wage, also lack two of the following: a steady work contract, mandated benefits (vacation, pensions or retirement, etc.) or syndical representation. 16  As part of the recent Poverty Assessment mission undertaken by the World Bank, recent estimates of the informal sector's size were calculated using the 1992 Income/Expense survey. According to these estimates, approximately 41 percent of all those employed are in the informal sector, defined as owners and workers (paid and unpaid) in firms of fewer-than five employees, and the self-employed (minus professionals) with no higher education." Previous time series studies state that total employment is growing at an increasing rate. From the preceding table (from Rend6n and Salas), the informal sector grew 8.8 percent annually between 1979 and 1983, with the rate of growth increasing to 9.5 percent between 1983 and 1988. Such growth is indirectly corroborated by changes in the occupational structure, as outlined in the following section, especially the growing proportion of the, work force employed as unpaid family workers. Owing to changes in migratory patterns, the growth rate of the informal sector in Mexico City has probably slowed, as migration has been increasingly directed towards the medium-sized cities. Using a relatively "strict" definition of informality, Roberts (op. cit.) estimates that it ranges between 19 and 26 percent in Mexico's main cities (Mexico City, Guadalajara, lijuana, Monterrey, Ciudad Juarez, Nuevo Laredo, Matamnoros).'6 He points out that variations in the size of the informal sector by city embody the particularities of each urban economy. Small and medium-sized businesses are traditionally important in Guadalajara for example, while the rise of small firms in Nuevo Laredo and Tijuana is more intimately linked with the recent growth of the maquila industry. At any given point, both long-term trends and short-term variations will affect the size of the informal sector. Rapid growth in the urban labor supply and insufficient job creation by the formal sector are key examples of the former. Similarly, it is possible that trade liberalization and increasing competition will contribute to informal sector growth as downsizing and subcontracting (as in the case of the maquila industry) emerge as cost- reducing strategies by large firms." As the ILO points out, however, cyclical variations - embodying the effects of short- term shocks in the formal economy - are also evident. In Mexico, as in other countries in the region, the informal sector displays counter-cyclical growth patterns (in relation to GDP) that highlight its role as a "safety net" for families during times of economic crisis (ILO - World Employment Review, 1988. ILO: Geneva). Jusidman (STPS, 1993) confirms this counter- cyclical pattern of growth using regression analysis. She finds that the informal sector increases its share of employment during periods of falling GDP, though there is some delay in the response" (STPS, 1993). I5 This figure is not an official estimate of the World BaRnk. 16 Roberts includes only those workers who are in "unregistered" businesses - though, in fact, many microbusinesses are somewhere on the continuum between full compliance and total evasion of registration requirements. " See, for example, Portes and Benton (1984) and Carillo (1989). " While this affirmation holds true for the informal sector as a whole, some of its subsectors move in opposite directions in response to changes in the GDP. During recessionary periods, informal commercial activities increase. By contrast, employment in personal services (such as domestic service, cleaning, etc.) increases during periods of GDP growth - demonstating that demand for certain informal sector services is dependent upon income in the formal sector. In the same study, Jusidman 17  23 Occupational Structure and Firm Size: Tracing Famnily Survival Strategies During the 1980s, self-employment and entrepreneurship emerged as important income-earning opportunities in the face of rapidly declining wages. Roberts (DOL, 1993) argues that, given the scarcity of jobs in formal finns during the recession, the need to supplement family income spurred the creation -of very small businesses in sectors and activities characterized by ease of entry.' The effect of supplemental income in supporting household consumption is shown by Lizstig (1992), -in her study of reforms in the Mexican economy. Even though wage income per worker-fell 42 percent between 1983 and 1988, private per capita consumption fell only 11 percent. ln effect, the consequences of falling wages were mitigated through increased reliance on non-wage sources of income. Indirect evidence of the informal sector's role in household strategies has emerged from recent studies, using regression analysis. As mentioned in the previous section, Jusidman finds that the informal sector, as a whole, increases its share of employment during recessionary periods. In the same study, she finds correlation -between increasing labor force participation rates and -the size of the informal sector, especially in commercial activities. When job-creation in the formal sector slows down, families in need of income send members into the informal sector. Section 2.5 below will explore the effects of wages and wage differentials on this process. Household strategies are also mirrored in the occupational structure of the labor force. An increase in ownership with intensive-use of family workers, and a corresponding decline in the weight of non-wage workers in the occupational structure, emerge as notable characteristics of the informal sector's evolution over the past decade. As portrayed in Table 2.2, below, the share of salaried workers in total employment dropped from 62.3 to 57.4 percent between 1979 and 1988. By contrast, the -category of family workers has demonstrated consistently high growth rates since 1960, and now encompasses 13 percent of the informal work force. Owners, also, have nearly doubled their share in the occupational structure: from 3.4 percent in 1979 to 6.0 percent in 1988. While the trend towards increase is evident throughout, accelerating growth rates are particularly notable in the last period, in which the effects of a growing economic crisis began to be felt by the population. examnes the effect of increasing labor force participation rates on the informal sector's share of employment. 9 Tohman (1987) explains that ease of entry (low capital requirements) is a key determinant in the decisions of migrants and the urban poor to start an informal business. 18  TABLE 2.2: -OCCUPATIONAL STRUCTURE OF MEXICO TotaJ Salaied Sdf- Family Owner Not Speciried Employed Help 1950 8,346 3,906 3,405 968 67 ____0____ % 1 .47 .41 .11 .01 0 1960 10,220 6,173 3,454 511 82 0 ____I ___ I -.6 .34 .05 .01- 0 1970 13,873 8,629 3,482 - - 902 860 0 % 1 .62 .25 .07 ..-06 0 1979 19,177 12,066 4,874 1,580 656 0 % 1 .64 .25 .08 .03 0 1988 27,654 15,861 6,371 3,584 1,690 148 % 1 : .57 .23 .13 .06 .01 Annual Growth RaLte 1950-1969 2.57 4.04 .0.11 -0.35 13.63 0.00 1970-1978 3.66 3.80 3.S i 6.43 - -2.96 0.00 1979-1988 4.15 3.08 3.02 9.53 11.08 0.00 Source: Brigida Garcia (1950, 1960, 1970, 1979), Direccion General de Empleo (1988), Encuesta NMional de Empko (1988), S TPS (1993), Cuadernos del Trabajo 2, El Secor Informal en Mcdco, pg. 8 Two recent surveys confirm the preponderance of family workers -and owners in the informal sector itself, while providing other useful information concerning firm size, sectoral distribution, activities, level of capitalization, cost structure, and clientele. They also provide information concerning the personal characteristics of employees and the attitudes of microentrepreneurs.2