Informality, Gender Employment Gap, and COVID-19 in Mexico: Identifying Persistence and Dynamic Structural Effects

The objective is to analyze the impact of the COVID-19 pandemic on the dynamics of the Mexican labor market (formal-informal employment) by gender. It is built consistent micro-founded time-series from 1987:Q1 to 2019:Q4 using the Mexican urban employment surveys and estimate a VAR model linking aggregate production and each market segment. Our results suggest significant adverse effects on formal employment resulting from the COVID-19 pandemic, with lengthy job recovery for females and males. The informal sector in both genders presents a lower forecasted response to the initial production shock but substantial observed employment losses, potentially linked to structural changes in the market. In the COVID-19 crisis, the informal sector is not a substitute for formal employment losses. The complexity of this crisis suggests crafting policies to improve the easiness of the market to enhance formal job recovery while promoting gender equality. Our main contribution is to estimate the diverse employment losses by segments and a critical structural change in the labor market dynamics resulting from the COVID-19 pandemic focusing on urban employment.