The number of formal sector employers in Mexico declined for a second consecutive year in 2025, according to data from the Mexican Social Security Institute (IMSS).
At the end of December 2025, there were 1,029,280 IMSS-affiliated employers in Mexico, a reduction of 2.4% compared to a year earlier.
The decline came after the number of IMSS-affiliated employers fell 1.6% in 2024.
In an economic analysis document, the Center for Economic Studies of the Private Sector (CEESP) noted that the number of IMSS-affiliated employers declined by 25,667 last year.
The research center said that the decline was the largest on record.
“The IMSS results reflect the complexity of listing new employers and keeping existing ones active,” CEESP said.
It said that the reduction in IMSS-affiliated employers was mainly due to the closure (or descent into informality) of businesses with a small number of employees. Such businesses, CEESP said, are least able to afford “the constant increase in labor costs” — including due to annual increases in the minimum wage — and to withstand economic uncertainty.
Oscar Ocampo, economic development director at the Mexican Institute for Competitiveness (IMCO), noted that 83% of employers that were removed from IMSS’s list of formal sector employers in 2025 were businesses with five employees or fewer.
“This speaks to how costly it is to be a business owner in Mexico,” he said.
“In this country, it is very difficult for micro and small companies to do business,” said Ocampo, who was quoted in a report by El Sol de México.
What factors make survival difficult for businesses in Mexico?
According to Ocampo, businesses in Mexico, especially small ones, have been negatively affected by the slowdown in economic growth, low levels of investment (although foreign direct investment increased last year), the increase in the minimum wage and the increase in the number of paid vacation days to which formal sector employees are entitled.
The IMCO economic development director also said that extortion negatively impacts businesses. Extortion is a widespread problem in Mexico, and its incidence has increased since President Claudia Sheinbaum took office in October 2024.
Last July, the government launched a new national strategy against extortion as the centerpiece of its efforts to combat the crime, while in November, the Senate passed a new anti-extortion law.
Data from the ANPEC small business association shows that half of all businesses in Mexico have been victims of a crime, El Sol de México reported, and extortion is a particular problem for small businesses. Some such businesses are forced to make large payments on a regular basis to extortionists, a situation that affects their profitability and ongoing viability.
In Cuautla, Morelos, a city that journalist Ioan Grillo recently described in his publication CrashOut as Mexico’s “capital of extortion,” the crime is particularly prevalent.
“The butchers have to pay the maña, the criminals. Every kilo of beef they sell they pay 20 pesos. The tortilla shops pay. The public transport, the buses and taxis pay,” Francisco Cedeño, a local journalist, told Grillo last October.
The outlook for Mexico’s formal employment sector
In its analysis, CEESP wrote that the “signs of weakness” evident in Mexico’s formal employment sector at the end of 2025 could continue this year.
It noted that the number of formal sector employees in Mexico rose by 278,697 last year, representing an increase compared to 2024. However, CEESP pointed out that the figure is “significantly lower” than in previous years, except for “the year of the pandemic” — 2020 — when the Mexican economy contracted more than 8%.
The majority of the formal sector jobs created last year went to digital platform workers, such as Uber drivers and Rappi delivery workers, who were able to move out of the informal sector thanks to the launch of a pilot program that provided employment benefits to them.
CEESP wrote that to a “large extent,” the 2025 job creation numbers reflect “the difficulty of creating quality jobs” in Mexico, which it said increases “the need” for people to seek employment in the informal sector, which employs more than 50% of Mexican workers.
“We have already highlighted on several occasions the need for an environment that facilitates the creation of more jobs by formal companies,” CEESP said.
However, the research center said, “high labor costs” as well as “other factors such as
uncertainty resulting from high levels of insecurity and a judicial reform that could affect the intention to open new workplaces and close some existing ones” will “probably continue to limit the creation of formal jobs” this year.
With reports from El Sol de México
