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Cadena Salom Luis David
1
y Huerta Ram&#237;rez Valeria
2
Recep
tio
n: 10/09/2023
Acepta
tio
n: 
23
/
11
/
2023
Abstract
Transformations and eventualities have 
modified the different markets of an economy. In particular, labor 
reforms have impacted aspects such as work skills, unemployment and the questioned outsourcing. Thus, 
the problem addressed in this study is the implementation of subcontracting in certain 
sectors, and the 
working conditions faced by workers hired in this modality, because they can&#180;t afford to work this way. 
Since there is no clear stance whether outsourcing is beneficial or not and who it benefits; In this work we 
are inclined to accept the
fact that this type of hiring is not supported by social security, salary 
compensation, vacation bonuses, bonuses, among other benefits that formal jobs have. In this sense, our 
objective is understanding the relationship between the reduction in subcontr
acting and the time elapsed 
since the implementation of the reform. Using information from INEGI, we determined a linear regression 
model to establish the relationship between the hiring period and the total number of subcontracted 
workers. Concluding, tha
t labor subcontracting could finalize in a total of 3.5 years from when it became 
official.
Key Words
Subcontracting, employment, 
labor reform, job precariousness.
Classification
JEL:
E24, J01, J02, J41.
Introduc
tio
n
Outsourcing, also known as 
subcontracting, is a labor phenomenon that has gained increasing 
relevance in the business world. It is a practice in which companies choose to hire the services 
of other companies for the execution of specific tasks and functions, rather than directly hir
ing 
employees on their payrolls to carry out these activities."><ImageData src=""/></Figure><P>1Third semester student of the Bachelor's Degree in Economic and Financial Engineering, La Salle University, Mexico City, <Link>luiscadena@lasallistas.org.mx </Link></P><P>2Third semester student of the Bachelor's Degree in Economic and Financial Engineering, La Salle University, Mexico City, <Link>vhuerta@lasallistas.org.mx </Link></P><Figure ActualText="This outsourcing strategy has proven to offer certain notable benefits for companies. Firstly, it 
involves a significant cost reduction, which is particularly attractive to organizations seekin
g to 
maximize their profit margins. Additionally, outsourcing allows for a deeper specialization in 
particular areas of operation, which can enhance efficiency and the quality of results obtained, 
according to Ruyter, Brown, and Burgess (2018).
However, ou
tsourcing has also generated concerns and criticisms in various parts of the world, 
including Mexico. One of the main reasons for concern is the impact on the working conditions 
of employees involved in this model. Outsourcing can lead to situations where 
workers do not 
receive the same benefits and protections they would have if they were directly employed by the 
main company. This can manifest in forms such as lack of job security, absence of mandatory 
benefits, and uncertainty about the continuity of emp
loyment. Moreover, such outsourcing can 
alter labor reforms and, consequently, restructure international agreements that Mexico has, 
including the North American Free Trade Agreement (Bensus&#225;n et al., 2020).
In the context of current economic globalization
, outsourcing has become a strategy frequently 
employed by large corporations to restructure their operations and segment them, allowing 
them to take advantage of economies of scale and ultimately maximize their profits. However, 
as pointed out by Rosas an
d Medrano (2002), this strategy, while profitable for companies, 
leaves workers in a vulnerable position."><ImageData src=""/></Figure><Figure ActualText="In Mexico, outsourcing has been the subject of a growing public debate in recent years due to its 
implications for workers' well
-
being, compliance wi
th labor laws, and income distribution. The 
increasing prevalence of outsourcing has raised additional concerns, such as labor exploitation, 
tax evasion, and inequality in access to benefits and labor rights.
As described by D&#237;az (1994), outsourcing involv
es a substantial reorganization in the allocation 
of resources and can have a significant impact on various sectors of the economy. Although it is 
a feasible strategy for large corporations, it does not necessarily translate into proportional 
benefits for 
workers. Temporality and lack of benefits are common concerns for subcontracted 
employees, who may find themselves at a disadvantage in terms of wages and job security. This 
precariousness in employment manifested during the COVID
-
19 crisis, disproportiona
tely 
affecting women and resulting in a higher frequency of subcontracting accompanied by lack of 
protection and very low wages (Border&#237;as and Martini, 2020).
This study conducted an analysis of the impact of the subcontracting reform on the Mexican 
labor 
market. Using information from the National Institute of Statistics and Geography (INEGI, 
2023) and focusing on employment in Mexico (with the manufacturing sector as a reference), 
the analysis aimed to understand the relationship between the reduction in 
subcontracting and "><ImageData src=""/></Figure><Figure ActualText="the time elapsed since the implementation of the reform. The goal was to evaluate its effect on 
employment growth, particularly in the manufacturing sector due to the prevalence of this hiring 
modality in that sector.
The present article
is structured as follows: in addition to the introduction, the first section 
provides the theoretical framework and background to subcontracting. The second section 
presents the methodology using linear regression; the third section presents the available
information and results. The fourth section compares the literature with our findings, concluding 
with conclusions, limitations, and future work.
Theoretical Framework and Background
One of the concerns regarding outsourcing is that subcontracted workers
often face lower 
wages, less job stability, and limited access to essential benefits such as social security and 
pensions. Additionally, it has been argued that outsourcing can be used by companies to 
circumvent labor and union laws, undermining workers' 
ability to organize and defend their 
rights, creating a significant gap in labor treatment between direct and subcontracted 
employees. It is becoming more prevalent, and the formal sector is consistently weakening as a 
consequence (P&#233;rez and Cordero, 1994)
. It is also important to note that some authors, such as 
Hafiz (2020), emphasize the relevance of governmental intervention to eliminate illegal 
monopsonies and provide legal resources for worker
-
formed organizations."><ImageData src=""/></Figure><Figure ActualText="In response to these concerns, the M
exican government implemented a subcontracting reform 
in 2021, aiming to protect workers' rights and ensure fair treatment in the workplace. 
Acknowledging the urgency of fair treatment for workers, at least in terms of wages, is justified 
by Carrera, Lara,
and Policardo (2022), who, through econometric analysis for the Mexican labor 
market, argue that a salary increase, besides not causing inflation, can stimulate the economy 
through increased labor productivity and contribute to economic growth.
The reform
, according to the Government of Mexico (2021), focuses on eight main points:
1.
Prohibits the use of this modality in essential activities of the company and its 
predominant economic activity.
2.
Allows the use of this modality only in specialized services and 
works.
3.
Companies receiving specialized services must be responsible for workers in case of non
-
compliance.
4.
Mandatory registration of specialized subcontracting companies with the Ministry of 
Labor and Social Welfare (STPS), subject to 
accreditation of fiscal and social security 
obligations.
5.
To prevent simulation and tax fraud, criteria from the Fiscal Code, the Income Tax Law, "><ImageData src=""/></Figure><Figure ActualText="and the VAT Law are aligned with the Federal Labor Law.
6.
Thousands of workers will transition to a formal 
employment scheme and gain the right 
to profit
-
sharing.
7.
Regarding the reform's timelines, the STPS will issue guidelines for the registration of 
specialized subcontracting companies. Once the guidelines are issued, companies have 3 
months to regularize and
transfer their workers, recognizing them as their own, and every 
3 years, companies must update their registration with the STPS.
8.
The Federal Law of State Workers is reformed to eliminate personnel subcontracting in 
the Federal Government. A diagnostic pr
ocess will begin in government agencies to 
regularize subcontracted personnel.
Furthermore, by acknowledging their employees, companies grant them the right to profit
-
sharing, and with the reform, it is expected to increase by approximately 100 billion pe
sos, the 
amount received by workers through profit
-
sharing (Government of Mexico, 2021).
While the fourth industrial revolution in labor, which includes outsourcing, changes in skill sets, 
and home
-
office, is not only necessary but inevitable, companies, w
orkers, and governments 
must adapt to these needs (de Ruyter, Brown, and Burgess, 2018). However, the outsourcing 
reform in Mexico, although initiated with the best intentions, has also raised a series of concerns 
and debates about potential consequences a
nd effects on the country's labor and economic 
landscape.
In this way, there are diverse opinions on this issue, making it somewhat more complex to 
understand due to the many perspectives it can have. One of the main points of discussion is 
that the prohib
ition of outsourcing may have negative effects on employment and, ultimately, 
on the economy as a whole. This perspective, as noted by Malacara (2021), argues that by 
eliminating the possibility of subcontracting, many people currently working under this m
odality 
could become unemployed. In other words, the reform, instead of being a positive solution, could 
bring about worse consequences than the current situation. Additionally, there is fear that 
companies may stand firm in not hiring new employees due to
the costs and additional 
requirements associated with direct hiring, potentially leading to a slowdown in job creation and 
economic recovery.
Another significant concern raised is that the prohibition of outsourcing could affect the 
competitiveness of Mex
ican companies in international markets. Outsourcing has been a 
strategy that has allowed companies to expand and compete effectively in the global arena, 
leveraging advantages such as flexibility and cost efficiency. The elimination of this option could 
h
inder the ability of companies to compete in an increasingly globalized and competitive world. 
Furthermore, issues of needs and identity have not been considered; for example, in the rural "><ImageData src=""/></Figure><Figure><ImageData src=""/></Figure><Figure><ImageData src=""/></Figure><P>=&#119886;0</P><P>&#119884;&#119894; +&#119886;1&#119883;1&#119894;+&#119886;2&#119883;2&#119894;+&#8943;+&#119886;&#119896;&#119883;&#119896;&#119894;+&#119880;&#119894; </P><Figure><ImageData src=""/></Figure><Figure><ImageData src=""/>&#119884;&#119894;&#119883;1,&#119883;2,&#8230;,&#119883;&#119896;&#119886;&#119895;</Figure><P>&#120597;&#119884;&#119894; </P><P>=&#119886;&#119895; <Figure><ImageData src=""/>&#119895;</Figure>=1,2,...,&#119896; </P><P>&#120597;&#119883;&#119895;&#119894; </P><Figure><ImageData src=""/></Figure><Figure><ImageData src=""/>&#119880;&#119894;</Figure><Figure><ImageData src=""/></Figure><Figure><ImageData src=""/></Figure><P>&#119886;&#119895;(&#119895;=1,2,...,&#119896;) </P><Figure><ImageData src=""/>&#119884;&#119894;</Figure><Figure><ImageData src=""/></Figure><P>&#119883;1,&#119883;2,&#8230;,&#119883;&#119896; 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