Mexico labor informality impacts tax revenue and employment quality

Mexico is facing significant challenges regarding labor informality and its impact on tax revenue. During the first quarter of 2026, the labor informality rate reached 54.8% of the employed population, leaving only 45.2% in formal employment.

In the State of Mexico, while the number of employed persons rose to over 8.1 million, 55.4% of workers were in informal roles. Additionally, the rate of critical occupation conditions increased to 44.3%. A large portion of the non-agricultural workforce, approximately 47.7%, is concentrated in micro-businesses, which often face limitations in capital, technology, and productivity.

This high level of informality is directly affecting federal tax collection. The participation of Income Tax (ISR) in total tax revenue has dropped to 52.2%, marking its lowest level in two decades. The expansion of the taxpayer base remains a primary challenge for the government as informal activities prevent workers and economic units from fully integrating into the tax system.