National Transfer Accounts in Mexico Policy implications: labor market Iván Mejía Guevara imejiag@stanford.edu Stanford University 12th Global Meeting of the NTA Network, Mexico City, July 23-27, 2018
1. National Transfer Accounts (NTA)
Background Mexico is an NTA member since 2007-08. National Population Council (CONAPO): Lic. Patricia Chemor Latin American and Caribbean Demographic Centre (CELADE-CEPAL): Dr. Paulo Saad CEDA (Dr. Ronald Lee), East-West Center (Dr. Andrew Mason), IDRC, UC-Mexus Conacyt
Data National Income and Expenditure Surveys (ENIGH-INEGI) System of National Accounts (SCNM INEGI) Administrative records (Cuenta Pública SHCP)
Three main components of NTA 1. Life-cycle deficit (labor income and consumption) 2. Net transfers (public and private) 3. Asset-based reallocations (asset income and savings)
Average Labor Income by Age 160,000 Mexico 2014 120,000 80,000 Mexican Pesos 40,000 0 Labor income 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90-40,000-80,000 Compensation of Employees Self-employment labor income -120,000 Age
Average Labor Income and Consumption 160,000 Mexico 2014 120,000 Consumption 80,000 Mexican Pesos 40,000 0 Labor income 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90-40,000-80,000 Private and public consumption: Education Health Other -120,000 Age
Economic Life-cycle Deficit 160,000 Mexico 2014 120,000 Consumption Mexican Pesos 80,000 40,000 0-40,000 Deficit Labor income 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Surplus -80,000-120,000 Age
Economic Life-cycle Deficit Mexico 2014 160,000 120,000 Consumption 80,000 Deficit Labor income Mexican Pesos 40,000 0-40,000-80,000 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Surplus Other sources, other than labor income, are needed to finance the deficit of young and elderly. -120,000 Age
Economic Life-cycle Deficit 160,000 Mexico 2014 120,000 Mexican Pesos 80,000 40,000 0 Life-cycle deficit 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90-40,000-80,000 Net private transfers: Inter-household transfers Intra-household transfers Remittances Net private transfers -120,000 Age
Economic Life-cycle Deficit 160,000 Mexico 2014 120,000 Mexican Pesos 80,000 40,000 0 Life-cycle deficit 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90-40,000-80,000 Net public transfers: Taxes (ISR, IVA, IEPS) Social security contributions Cash transfers (Próspera, etc.) Net public transfers Net private transfers -120,000 Age
Economic Life-cycle Deficit 160,000 Mexico 2014 120,000 Mexican Pesos 80,000 40,000 0 Life-cycle deficit 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90-40,000-80,000-120,000 Age Net total transfers
Economic Life-cycle Deficit 160,000 Mexico 2014 120,000 80,000 Life-cycle deficit Asset-based reallocations Mexican Pesos 40,000 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90-40,000-80,000-120,000 ABRs Asset income (private, public - PEMEX) Saving (private, public) Age Net total transfers
2. Policy Implications: Labor market
Sustainable Development Goals (Goal 8) Promote inclusive and sustainable economic growth, employment and decent work for all
Labor Income and Consumption 1.4 1.2 Mexico 2014 Relative to average labor income (15-49) 1 0.8 0.6 0.4 0.2 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90
Labor Income and Consumption 1.4 1.2 Mexico 2014 Relative to average labor income (15-49) 1 0.8 0.6 0.4 Lower-middle- income countries 2006 0.2 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90
70% 60% 50% 40% Compensation of Employees relative to GDP OECD* 2011 53% 40% 64% 30% 27% 20% 10% 0% Mexico India Chile Greece Poland Slovak Republic Ireland Italy China Czech Republic Korea Norway Australia Japan Estonia Luxemburg Hungary Spain Austria European Union Belgium Germany Netherlands Portugal United States Finland France Iceland Slovenia Sweden United Kingdom Switzerland Denmark Source: Samaniego, 2014 with data from OECD.Stat
Compensation of Employees relative to GDP OECD* 2011 70% 60% Compensation of employees = 27% 2/3 Mixed Income = 15% 53% 64% 50% 40% 30% 20% 10% 0% 42% 40% Source: Samaniego, 2014 with data from OECD.Stat Mexico India Chile Greece Poland Slovak Republic Ireland Italy China Czech Republic Korea Norway Australia Japan Estonia Luxemburg Hungary Spain Austria European Union Belgium Germany Netherlands Portugal United States Finland France Iceland Slovenia Sweden United Kingdom Switzerland Denmark
Compensation of Employees relative to GDP 45% Mexico 1970-2012 40% 35% 30% 25% 20% 15% Source: Samaniego, 2014 with data from OECD.Stat 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 27%
1.4 Labor income and consumption over time 1.2 Relative to average consumption 30-49 1 0.8 0.6 0.4 1994 0.2 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Source: Mejía-Guevara (2014).
1.4 Labor income and consumption over time 1.2 Relative to average consumption 30-49 1 0.8 0.6 0.4 2004 0.2 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Source: Mejía-Guevara (2014).
1.4 Labor income and consumption over time 1.2 2014 Relative to average consumption 30-49 1 0.8 0.6 0.4 0.2 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Source: Mejía-Guevara (2014).
1.4 Labor income and consumption over time 1.2 2014 Relative to average consumption 30-49 1 0.8 0.6 0.4 2004 1994 0.2 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Source: Mejía-Guevara (2014).
Compensation of employees relative to GDP 45% Mexico 1970-2012 40% 35% 30% Economic crisis: 1982 Economic crisis: 1994-95 Economic recession: 2001 Financial crisis: 2009 25% 20% 15% Source: Samaniego, 2014 with data from OECD.Stat 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 Low economic growth, structural change, and globalization 1996 1998 2000 2002 2004 2006 2008 2010 2012
Compensation of employees relative to GDP 45% Mexico 1970-2012 40% 35% 30% 25% 20% 15% Source: Samaniego, 2014 with data from OECD.Stat Economic crisis: 1982 Economic crisis: 1994-95 Economic recession: 2001 Financial crisis: 2009 Abrupt decline in real wages that never recover the levels before 1980 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Compensation of employees relative to GDP 45% Mexico 1970-2012 40% 35% 30% 25% 20% 15% Source: Samaniego, 2014 with data from OECD.Stat Economic crisis: 1982 Economic crisis: 1994-95 Economic recession: 2001 Financial crisis: 2009 Consistent decline in formal employment 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Informal employment / total employment 2013 In 2013, the informal sector is the main source of employment. Source: OIT 2014 with information from INEGI
120,000 Regional differences in Labor Income (and consumption?) 100,000 80,000 Substantive impact in the age allocation of income across regions 60,000 40,000 20,000 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Chiapas Estado de México Nacional
Labor market is under constant pressure Significant increase in the size of the informal sector Young people looking for better opportunities (abroad, violence) Stagnant productivity and unemployment Important increase in the number of young people who neither study nor work
Policy challenges New policies oriented to attract workers and business into the formal economy Strengthening of productive investment in areas of higher value-added sectors Educational expansion Insertion in the global economy that generates growth and redistribution at the same time
3. Additional considerations: Inequalities
SDG 5: Achieve gender equality and empower all women and girls Mexico 2014 200,000 Men 150,000 Mexican Pesos 100,000 All Women 50,000-0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age
400,000 SDG 10: Reduce inequality among and within countries Mexico 2014 350,000 300,000 Post-secondary Mexican pesos 250,000 200,000 150,000 All levels 100,000 Less than primary 50,000-0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75+ Age
Thank you