The Burden of Labour Costs in Mexico

32 Pages Posted: 1 Mar 2007


We analysed labour costs in Mexico and evaluated their impact in terms of firm performance. Using a new survey, we studied how firms chose to conduct a firing procedure (i.e. mandatory payment, negotiation, or legal dispute) and the actual costs derived from that decision. We found that firms that negotiate have, on average, lower costs. This may mean that workers subvaluate the legal benefits. Moreover, legal disputes may increase firing costs by 50 per cent. We contributed to the analysis of the impact of such costs on employment and found that, when firms negotiate or pay higher costs, this decreases the level of employment. We also analysed the impact of Social Benefits on employment using an industrial survey. We found that a 10 per cent increment in these benefits may have a negative long-term impact of 9 per cent on the level of employment.

Suggested Citation

Montes Rojas, Gabriel V. and Santamaría, Mauricio, The Burden of Labour Costs in Mexico. Labour, Vol. 21, No. 1, pp. 157-188, March 2007, Available at SSRN: or

Gabriel V. Montes Rojas (Contact Author)

University of Illinois at Urbana-Champaign ( email )

601 E John St
Champaign, IL 61820
United States

Mauricio Santamaría


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