From Playgrounds to Growth: Bolstering early education in Mexico

by Alberto González Pandiella and Alessandro Maravalle, OECD Economics Department, Mexico Desk

Thanks to sound macroeconomic policies, the Mexican economy has been stable and resilient over the last decades.  Yet, growth has been elusive, despite Mexico’s large growth potential. Over the last two decades, Mexico’s GDP grew by around 9% while Chile grew by 68% or Dynamic Asian economies grew by 110%[1]. The ongoing redrawing of global value chains makes Mexico an attractive nearshoring destination and opens new growth opportunities. Grasping these opportunities requires several reforms, such as advancing digitalization, reducing regulatory burden or shifting to renewable energies, as detailed in the recently published 2024 Economic Survey of Mexico (OECD, 2024).  But there is one reform that will have a particularly large growth pay-off: setting a comprehensive early childhood and education network. This reform would simultaneously and cost-effectively renew two growth engines: female labour participation and skills.

Early childhood education and care is key to facilitate that Mexican women can pursue employment opportunities, as domestic and care responsibilities fall disproportionally on them, hampering their prospects to complete education or be in the labour force. At a moment when Mexican firms report difficulties to retain and find workers with the appropriate skills, taping on Mexico’s female talent would significantly boost Mexico’s growth. Female labour market participation has recently increased to 50%, its historical high, but is still the second lowest participation rate in the OECD (Figure).

Figure: Female labour force participation is low
% of female population aged 15-64, 2022

Note: LAC is a simple average of Chile, Colombia, Costa Rica, Argentina, and Brazil. Data for Argentina refer to the year 2021.
Source: OECD Labour Force Statistics.

Enhancing early childhood education and care coverage would also improve education outcomes at a moment when skills availability is becoming more central in firms’ decisions about where to invest. Mexico has a relatively young population, with significant potential to adapt to global trends that are reshaping skill needs, such as digitalization or decarbonization. But it also has two substantial challenges. First, still too many students leave the education system without completing secondary education. Second, there is room to increase education quality.  Boosting early childhood education would help with both challenges by mitigating the impact of socioeconomic disparities on educational outcomes.  Positive results will materialise in the medium-term, facilitating that more Mexicans gain the necessary skills to access formal jobs, widening the talent pool from which domestic and foreign firms can draw.

An early education network that would cover all children under 6 years old throughout Mexico would only cost 1.2% of GDP annually, a bit more than double what Mexico spends today (0.5% of GDP).  Mexico will need to find extra revenues to finance this reform, but the 2024 OECD Economic Survey (OECD, 2024) suggests that there are viable options, such as enhancing the collection of taxes on immovable property and of those related to the purchase, ownership and use of vehicles.

References:

OECD (2024), OECD Economic Surveys: Mexico 2024, OECD Publishing, Paris https://doi.org/10.1787/19990723

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[1] Growth in real PPP-adjusted GDP per capita from 2000 to 2022. Source: World Bank World Development Indicators. Dynamic Asia includes India, Indonesia, Malaysia, Philippines, Thailand, and Viet Nam.