Outsourcing reform causes a new drop in employment in the service sector

Employment in the non-financial services continued its decline with the second strongest drop so far this year as an effect of changes driven by the outsourcing reform. In this way, the occupation in these activities is 19% below its level prior to the health emergency caused by covid-19.

Employment in service activities had a monthly contraction of 6% in August, with which the Employed Personnel Index reached 80.3 points, a new all-time low, according to the Monthly Survey of Services (EMS). Occupation in the line of employment support services, classification in which the outsourcing, had a monthly drop of 25.6 percent.

This is the second time so far since the economic reactivation after the initial impact of the pandemic that the level of employment in the services sector breaks the record of all-time low, after the previous month its contraction left the employment index at dimensions lower than those observed during the global financial crisis of 2009.

“Affected by the limitation to Outsourcing, in August 2021 the non-financial private services sector saw monthly decreases of -4.0% in its income, – 6.0% in its employed personnel, -3.2% in its total expenses and -14.3% in total salaries ”, he explained in networks social Julio Santaella, president of the National Institute of Statistics and Geography (Inegi).

This reduction in employment was accompanied by the second strongest drop in total earnings and a contraction in salaries of employed personnel.

The decline in the three indicators for the second time is the result of the effects of the subcontracting reform, said Gabriela Siller, director of Economic and Financial Analysis at Banco Base.

Of the nine sectors that make up this economic engine, that of business support services, where the employment services, had the strongest reduction.

“The limitation of subcontracting has caused havoc, in the same way, in the sector of business support services and waste and waste management, which shows monthly and annual lags with respect to its pre-ndemic level ”, Gabriela Siller considered.

In addition to the outsourcing reform, the level of employment in the service sector may be affected by the third wave of Covid-19 contagions, said Alejandro Saldaña, Chief Economist of Banco Ve por Más.

“Some of this can be explained by the rise in infections of the Delta variant that we saw at the end of July, but with greater force in August and therefore we see some weakness in income as well as in employed personnel such as accommodation services, preparation and drinks. Another important element is the reform of outsourcing due to the movements that have occurred in companies and therefore the marked decrease in business support services ”, explained the specialist.

The drastic fall in this sector largely pushed the negative result of employment in non-financial services, since sectors such as real estate services, professionals and health registered positive balances.

Redistribution of the labor market

“The data confirm that the labor market is rearranging with this new legal provision. As always happens, when there is a sudden and sudden change in the rules, the markets readjust and somehow respond to the incentives and the new reality, ”said Carlos Ramírez, Director of Business Development at Integralia Consultores.

Although it is still premature to know exactly the impact of the outsourcing reform on employment, added the specialist, it is worrying that the occupation in services keep your fall.

Carlos Ramírez considered that this contraction may be linked to the disappearance of companies of outsourcing and the worker migration to the parent companies, but there is still no clarity on the reduction of employment in this sector.

“It is a matter of rearrangement,” said Alejandro Saldaña. In this sense, the specialist raised the possibility that some workers who were migrated from a schedule of outsourcing to their actual employer’s payroll are now located in new sectors. “There is no general decline for this reason.”

Meanwhile, Gabriela Siller said that the indicators of non-financial services will gradually recover due to the progress in the vaccination plan, but it is likely that the outsourcing reform be like a stone in the shoe in this process.

“We expect growth in the services survey due to the decline in Covid cases, but the labor outsourcing reform continues to slow down income, employed personnel and total remuneration. I think there will be a slight rebound, but it will continue weak because finally the recovery in employment is mostly in informality and underemployment; that is to say, internal demand is very weak ”, explained the specialist.

In this perspective, Alejandro Saldaña agrees, who estimates that as the Social Mobility and consumption, the services sector will improve, although its recovery is likely to return to pre-pandemic levels until the following year.

Although the outsourcing reform may generate some distortions in this recovery process, the analyst trusts that its impact will not be as strong because until now the employment indicators at a general level they do not reflect such a marked contraction due to legal modifications.