Labor Market Discrimination Against Indigenous Peoples in Mexico: A Decomposition Analysis of Wage Differentials

Mexico’s indigenous peoples are amongst the country’s most vulnerable and marginalized. According to the Mexican National Council for the Evaluation of Social Development Policy, the percentage of indigenous peoples who live in poverty in Mexico is nearly double that of the general population: 70.3 percent versus 38.6 percent, respectively. In this context, the present study aims to explore why the gap between the indigenous and non-indigenous populations is not closing, even after occupational differences and the rural-urban divide are taken into consideration. This paper employs Oaxaca-Blinder (OB) decomposition techniques as well as two quantile decomposition approaches with data from the 2016 National Household Expenditure Revenue Survey (ENIGH) to analyze wage differentials along the entire wage distribution and differences in the prevalence of informal employment among indigenous and non-indigenous peoples in Mexico. Understanding the underlying causes of these disparities is crucial for the design of sustainable policies that may help reduce the gap in the living conditions of indigenous and non-indigenous peoples. Findings confirm that differences in coefficients account for a significant proportion of the gap in indigenous earnings, indicating that indigenous disadvantage would persist even if human capital outcomes and access to formal employment were to improve for this population subgroup.