In 2016 Mexico assigned more than six million public high school and college students a permanent social security number and registered each of them individually for national social insurance (IMSS) medical coverage, a benefit tied to school enrollment rather than to a formal job. A long-standing objection to such policies is that benefits delinked from formal contracts reduce the relative value of a formal job and subsidize informality at the margin. I study the high-school component, comparing birth cohorts still in school at rollout with slightly older cohorts and letting the contrast vary with each state’s pre-policy informality rate; the design recovers how the response scales with initial informality rather than a national average. Where informality was initially higher, precisely where the subsidy concern is sharpest, exposed cohorts pulled further ahead of adjacent unexposed cohorts in formal employment, and informal employment fell rather than rose. The response is concentrated entirely in wage employment and absent in self-employment. Delinking did not tilt young workers toward informality. The entitlement predated the reform, and schools had long listed their students; what 2016 changed was that coverage was attached to each student as a person, with the social security number that formal hiring requires, and made salient. Delivered that way, a benefit outside a formal contract worked as an on-ramp to formal employment rather than as a substitute for it.
