We characterize the salient features of the distribution of (log) earnings of formal workers in Mexico based on social security records for the period 2005–2019. The analysis is based on a non-parametric approach and is focused, primarily, on the properties of the distribution of earnings changes. Similar to Guvenen, Karahan, Ozkan, and Song [2021], we find strong evidence of deviations from normality of this distribution in terms of negative skewness and high kurtosis, with these deviations varying with income and along the worker’s life cycle. Due to the relative size of the informal sector in the Mexican economy, we also study the impact of transitions out of and into formal employment on wages earned in the formal sector and the impact of early exposure to informality on future earnings. We document that workers who exited formal employment can take, on average, three or more years upon re-entry to achieve comparable pre-exit wage levels. In addition, we provide evidence of the facts that the rate of informality matters more than the unemployment rate for impacting long-term earnings trajectories of cohorts of new workers entering the labor market, and that having the first job in the informal sector has a negative and significant impact on future earnings.