MEXICO CITY -- Five years ago, Javier Leyva, a beauty shop owner in a chic southern neighborhood, bleakly pondered what he perceived to be the end of Mexico's four decades of vigorous economic growth.

"Everything is falling apart," he muttered. "Before you know it, we're going to be like Argentina, paying a thousand pesos for a pack of cigarettes."

Leyva gloomily expected his business to collapse along with the rest of the economy.

Today, Marlboros do cost nearly a thousand pesos a pack, the price Leyva gets for haircuts has been cut in half in dollar terms, and he has married and fathered a child. He compensates for all this, he says, by working longer hours.

"My biggest problem is I can't take time off anymore," he said.

In 1980, when Luis Mejia began teaching at an agricultural institute in the tiny southern Mexican town of Yajaeon, Chiapas, he earned the equivalent of $250 a month.

Modest though it was, salaries such as his were inflated by the overvalued peso of the oil-boom era, government economists contend. Today, because of sharp devaluations and inflation, he earns the peso equivalent of $90 a month even after regular raises.

"It's just enough to live on," he said.

When Mexico suddenly suspended foreign debt payments five years ago, the financial world was stunned. But few ordinary Mexicans were.

Mexico's economy had been visibly disintegrating for the previous six months. The peso, which stood at 28 to the dollar when 1982 began, was fluctuating wildly around 100 to 130 to the dollar. Local dollar accounts, most people's main hedge against further devaluation, were converted overnight into pesos at half their real value, enraging middle-class depositors.

"People were punished for having faith in Mexico and keeping their money here," bitterly recalled Joan de Villafranca, who had maintained a dollar savings account at a local bank.

Mexico has since gone through other wrenching changes. In 1983, more than 300,000 construction workers lost their jobs as real estate values crashed and the government stopped public works projects; most were never rehired. Peasants suffered from rising raw materials costs and sinking farm prices. The government reported that average annual earnings of agricultural workers plunged from the equivalent of $412 in 1982 to $163 in 1984. Most professional salaries were cut in half.

Reconstruction from the 1985 earthquake absorbed much of Mexico's small public-housing and school construction budget last year, while oil prices crashed to a third of their 1981 peak.

Nearly everyone here suffered from the steep drop in Mexico's real income as it has struggled to pay huge dollar debts with devalued pesos.

Victor Guerra received his doctorate in computer science from Rice University in 1972 and returned home to work in Mexico's national university, where he ascended quickly through the science departments into the top ranks of the administration bureaucracy.

Coordinating all the scientific research programs at the school -- which together accounted for half the basic research conducted in Mexico -- Guerra was earning the equivalent of $5,000 a month.

Then, eroded by the devaluation, his income dwindled in dollar terms"We acknowledge that there have been declines in living standards, but the policy here has been to protect the majority."

-- President Miguel de la Madrid to $650 a month. Like most salaried professionals, he did not get automatic wage adjustments to compensate for inflation.

"Going from $5,000 to $650 was a shock, but we adjusted," said Guerra, whose salary since has been raised to about $1,000 a month.

Public university salaries have been slashed throughout Mexico, forcing many teachers to moonlight and frequently miss class. Some academics, like Jorge G. Castaneda, now in his 10th year as a tenured political science professor at the national university, boost their incomes by speaking and writing for audiences abroad.

"Living on my university salary alone would be impossible," said Castaneda, whose salary was raised by 23 percent in June to about $400 a month. Before 1982 he earned $1,200 monthly.

During 1982 alone, the earning power of Mexico's urban working class sank from a level close to that of southern Europe to that of Central America.

"I used to be able to buy more things, to take vacations," said a father of four who made $10 to $15 a day as an airport taxi driver before 1982. Now he makes half that. "So you work longer, you work weekends. We're still doing better than a lot of other people are."

Officials say the economic problems of the last five years have not had the drastic effect on employment that many experts had predicted. Most Mexicans have suffered a loss in purchasing power but still have jobs, the officials assert. If the government hadn't defied its union allies and let real wages fall, unemployment would be far higher, they contend.

"We acknowledge that there have been declines in living standards," President Miguel de la Madrid said recently, "but the policy here has been to protect the majority, and not simply to give in to pressures from groups with negotiating ability."

Unemployment has been most severe in big industrial centers like Mexico City and Monterrey. Yet in May, according to government figures released last week, the unemployment rate in urban areas stood at 3.7 percent -- less than that registered in most U.S. cities and close to the jobless levels in Mexico before the economic crisis broke.

Many analysts dispute the official employment figures. In 1986, the Budget and Planning Ministry counted 1.1 million unemployed out of a total work force of 28.2 million. But the Business Coordinating Council, which groups together Mexico's leading industrial associations, produced an estimate of 3.3 million jobless. And last month the Labor Congress, a confederation of government-aligned unions, said there are 5 million unemployed.

The Labor Congress also challenges government estimates of the decline in the average worker's purchasing power, contending that real union wages have been halved since 1982. A minimum wage earner, union economists note, had to work three hours to buy two pounds of beef five years ago; today two pounds of meat costs a full day's pay.

Government economists contest labor's calculations. "These numbers are not intended as information, but as a basis for negotiation," a senior official said.

New government figures show an average real wage drop of 12 percent between 1983 and 1986, including benefits, while minimum wage earners suffered a 19.5 percent income loss, the official said.

The United Nations Economic Commission for Latin American and the Caribbean charts a bleaker picture.

The purchasing power of the minimum wage fell by 25 percent in 1983, anothert 8 percent in 1984, 1 percent in 1985, and 11 percent last year, the U.N. agency said. In 1987 this trend continued, with wages lagging about 10 percent behind inflation.

According to a study this month by one progovernment union, 43 percent of Mexico's regularly employed work force receives the minimum wage, which is now about $3.10 for an eight-hour day. Economists estimate that at least a third of Mexico's workers earn less than the legal minimum.

If wages do not rise, economists assume, more people will quit low-paying jobs to fend for themselves.

There are no reliable statistics on what the government terms "informal" employment. But the streets, parks and sidewalks of the capital are far more crowded with vendors and performers than they were five years ago. Products ranging from dollar-a-dozen roses to basketball-sized hunks of cotton candy are peddled vigorously anywhere cars or pedestrians gather. At busy intersections, bleary-eyed "fire-eaters" spit out kerosene flames over idling cars and panhandling mimes.

Many of these recent entrants into Mexico's underground economy say they didn't seek such work because they were jobless, but because they could earn more money in less time. But competition on the street is intensifying, they say.

Jorge, a soft-spoken, long-haired silversmith, sells jewelry from a sidewalk in Coyoacan plaza. When he started in 1984, he said, gesturing at the two dozen handicrafts salesmen stretched out behind him, "There were four or five of us, and now look. We are cutting into each other's earnings."

Still, he said, he makes more selling handmade earrings -- double or treble the minimum wage -- than he did working as a waiter.

"Sometimes I think about getting a steadier job," Jorge said, "but I only went to high school and I have a friend who is a doctor who isn't earning much more than I am."

Many of these "informal" jobs are occupied by minors. Some are grammar school dropouts. Others want to go to college. All are poor.

Early most mornings Carlos Rodriguez Murillo, 15, leads four younger brothers on a two-hour bus trek from Ciudad Nezahualcoyotl, a slum district on the capital's fringe, to a busy center-city crossroads.

There they join a crowd of salesmen who cater to motorists at the red light: a one-time mechanic hawking kaleidoscopes; teen-age boys washing windshields; an unemployed mason wagging the ears of his 80-cent rabbit puppets; long-skirted Indian women offering gum and lozenges, tiny children in tow.

The Rodriguez brothers were making $10 a day selling calendars until a week ago, when Mexico's education ministry started supplying surplus paperbacks to needy vendors. The five boys now sport ministry identification tags and keep half the money from the book sales.

One recent Saturday they sold 30 of their $1.40 bags of books, bringing home $20 to supplement their father's taxi-driving pay. Five years ago, said Carlos Rodriguez, the money would not have been needed. But his father's income has dropped and there are two morechildren now.

Other families supplement their incomes in less conventional ways. Javier Rendon Rodriguez, a Mexico City carpenter, spends Sunday afternoons at a cement-paved public square balancing his 10-year-old daughter, Anita, atop an aluminum pole.

Rendon, 33, trading on skills he picked up as a circus boy two decades ago, keeps the 15-foot pole planted firmly on his bald spot while Anita waves at the nonplussed crowd and an older daughter passes a hat.

"I do this mostly for amusement, but the money helps the family," he said, resting after one recent performance.

Mexican officials often argue that the economic crisis appears far more acute when viewed through the distorting lens of Mexico City. A quarter of Mexico's 81 million people and nearly half its industry are concentrated in the capital area, making the effects of recession unusually visible, they say.

"The crisis is basically a phenomenon of the center," one senior official said. "But in the provinces you see that much of the economy is doing rather well. You hardly even hear the word crisis."

Yet much of the troubles afflicting Mexico's urbanized center are symptoms of the ills of the countryside, where social services and crop subsidies have been sharply cut. More than a thousand poor migrants from rural Mexico arrive in the capital daily to settle in vast slum zones like Chalco, a ramshackle sprawl of cinderblock huts and dirt streets whose population expanded from 100,000 in 1982 to more than 400,000 today.

The capital's attraction is that it is one the cheapest places in Mexico to live, even though the debt forced the government to reduce city subsidies.

In the past year alone, subway fare jumped from one to 50 pesos. But 50 pesos is just four U.S. cents. Public transportation in most Mexican cities costs at least triple that.

Staple foods are also often more costly in rural Mexico these days. Rosa Recinos, who works in the capital but was raised on a farm near the Guatemalan border, brings groceries to her parents when she takes the 28-hour bus ride home for Christmas. Cooking oil costs three times more there than it does in Mexico City, she said, and chicken is half again as expensive.

Making things tougher, she said, are the poor prices paid for coffee and cacao, her parents' cash crops, and rising rural bus fares.

"They can't afford to go to sell in Tapachula anymore," she said, referring to the nearest big market town. "They have to find buyers right there in the village."

Another change Recinos notes in her home village is that few young people are staying. Jobs are scarce, she said, and farming doesn't pay.

Even if unemployment rates have not changed radically, many people have suffered in the economic upheaval. One industrial association estimated recently that a thousand manufacturing jobs are eliminated weekly by the shrinking local market and rising import competition -- a result of trade liberalization policies adopted in part to appease Mexico's creditors.

The vast state industrial sector employs a million people, a number little changed since 1982, budget officials say. Yet increasingly, the government is laying off thousands of skilled workers at sugar mills, truck factories, railroads, and other money-losing enterprises.

Last year the government closed the doors of 84-year-old Fundidora Monterrey, Latin America's oldest operating steelworks. The Monterrey foundry directly employed 6,000 members of government-affiliated unions.

"Shutting down Fundidora was the most painful decision I have ever been involved with," said one of the senior officials who ordered the closure.

Most state businesses, however, have lowered costs by dropping pay rates. A stewardess at Aeromexico, a government-owned airline, was making $1,000 a month when she started the job 13 years ago. But in 1982 her real earnings slipped drastically. Now she takes home $160 a month, including such extras as a $1.25 bonus for proficiency in three languages.

She stretches her income, she said, by saving much of the $50 allowance she gets when Aeromexico keeps her overnight in Europe or the United States.

"I love the job and the travel, but the only reason I survive is that I still live at home with my parents," said the stewardess, who asked not to be named. "I don't know what I would do if I had to pay rent, or if I had a child to support."

Some colleagues who do have families, she said, regularly bolster their income by illegally importing clothes and electronics goods from trips abroad. "I get terribly nervous hiding things from customs inspectors, but I would do it, too, if I had to," she said.

Despite the wage drop, she said, few employes have quit, a situation that seems to be common throughout Mexico as people see few job options and maintain hope that their salaries will improve.

Doctors, scientists, engineers, and other professionals who could find work abroad have also generally stayed on the job.

For instance, the 1,600 university scientists and research assistants supervised by Guerra have had their personal incomes cut in half since 1981. Their annual research budget has been slashed by three-quarters to $50 million. Yet few have left.

"When our wages started falling, predictions were that we were going to lose a lot of researchers to the United States, to Europe, Australia, or wherever," Guerra said. "But the fact is it didn't happen. We underestimated the commitment people felt to Mexico and to the university."

A disquieting trend, Guerra added, is that the research centers are retaining old employes, but attracting few young applicants.

One elite group hurt by falling wages are, ironically, the finance professionals who negotiate Mexico's debt deals. With salaries in some key posts now reduced to $10,000 a year, several have left government for private business.

"Income isn't a problem in a top job because your name is known and you have a political career," an official said. "But how do you keep a guy negotiating with bankers who are making 10 times what he does?