Statistics on the ‘Informal’ Economy

Informal Sector Informal Employment

Presentation by: Margarita F Guerrero

Inter-regional Workshop on the Production of Gender Statistics6 -10 August 2007New Delhi, India

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Informal Sector (IS): Definition Adopted by the 15th ICLS (1993) and included in

the SNA 1993 Defined in terms of characteristics of production

units/enterprises (enterprise approach) rather than characteristics of persons or their jobs (labour approach)

Defined as subsector of the SNA institutional sector ‘households’ (unincorporated household enterprises)

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Characteristics of IS activities Registration: not registered according to existing

registration laws (e.g., tax office; social security) Scale of operation: small; low levels of organization,

productivity and income Employment: self-employed worker with no or very

few regular paid employees Place of business: ‘invisible’ places– small shops; at

home; no fixed location Objective: generation of income

Framework of IS Definition

Informal own-account enterprises

Enterprises of informal employers

Other own-account enterprises

Other enterprises of employers

Household Unincorporated Enterprises

Own-account enterprises

Enterprises of employers

Informal Sector

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Informal Own-Account Enterprises Operated by own-account workers, either

alone, or in partnership with members of same or other households

May employ family workers and occasional employees, but not employees on continuous basis

Include all or exclude those registered under certain specified national legislation

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Enterprises of Informal Employers Owned and operated by employers, either alone

or in partnership with members of same or other households, but which employ one or more employees on continuous basis Employees (hired on continuous basis) below a

specified number Non-registration of the enterprise Non-registration of employees (labour laws)

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Criteria for Identifying IS Enterprise

Essential Legal organization Unincorporated enterprise Ownership Household Type of accounts No complete set of accounts Product destination At least some market output

Additional Operational Number engaged Specific to country Non-registration Specific to country

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Optional Criteria

Kind of economic activity

Possible exclusion of: Agriculture and related

activities Paid domestic services

Geographic area Possible exclusion of rural areas

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Harmonized definition based on the recommendations of the Delhi Group For international comparability-- narrower definition

based on the largest common denominator of currently used national definitions.

3 essential criteria + additional criteria to be applied simultaneously: Productive units with less than five paid employees, and Productive units not registered, and Exclusion of households employing paid domestic

employees

Measuring the Informal Sector

Measurement Objectives Measurement Options

(depend on objectives)

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Measurement Objectives Employment in the informal sector Structural information of enterprise—

Number and characteristics of enterprises Production activities Income generation Capital equipment Operational conditions and constraints Linkage between formal and informal sectors

Demand of households for goods and services produced by the informal sector

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Employment in the Informal Sector All persons who are employed in at least

one informal sector unit irrespective of their status in employment and whether it is their main or secondary job

Resolution concerning statistics of employment in the informal sector

-ICLS 1993

Country % of total % of men % of women

Georgia 6.9 10.0 3.8Turkey 9.9 10.6 6.2Russian Fed. 12.6 12.9 12.3Kyrgyzstan 24.9 28.5 20.8India 55.7 55.4 57.0Indonesia (a) 62.7 59.3 68.2Pakistan 66.5 66.5 65.8Thailand (a) 71.0 71.0 71.1Nepal 73.3 67.4 86.5

Employment in the informal sector in Asia and the Pacific as a share (%) of non-agricultural employment

National definition or (a) Related concepts

Country % of total % of men % of women

National definitionTurkey 9.9 10.6 6.2Russian Fed 12.6 12.9 12.3Harmonized definitionTurkey 11.2 11.3 10.5Russian Fed 5.5 5.3 5.7

Employment in the informal sector in Asia and the Pacific as a share (%) of non-agricultural employment

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Contribution of IS to GDP (unofficial)

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Contribution of Women & Men

Informal Employment

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Conceptual Framework: IE Purpose: Relate/extend enterprise-based concept of

employment in the IS in consistent manner with/to a broader, job-based concept of IE.

Basis: Employed persons hold jobs having various job-related characteristics, which are undertaken in production units (enterprises) having various enterprise-related characteristics.

Observation unit for employment: Jobs rather than employed persons (reason: multiple jobholders).

Result: Total employment classified by type of production unit and type of job.

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Conceptual Framework (17th ICLS Guidelines)

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Informal Jobs of EmployeesEmployment relationship is not subject to— National labour laws Income taxation Social protection or entitlement to certain

employment benefits, such as Advance notice of dismissal Severance pay Paid annual or sick leave

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Reasons for Informality Non-declaration of job or of employees Casual jobs or jobs of a limited short duration Jobs with hours of work or wages below a specified

threshold (e.g., threshold for social security contributions)

Employment by unincorporated enterprises of by persons in households

Jobs where employee’s work of place is outside the premises of the employer’s enterprise

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Informal Employment (IE)

= Total number of informal jobs, whether carried out in formal sector enterprises, informal sector enterprises, or households, or

= Total number of persons engaged in informal jobs during a given reference period

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Components of IE Employment in the informal sector: Sum of

Cells 3 to 8. Informal employment: Sum of Cells 1 to 6 and

8 to 10. Informal employment outside the informal

sector: Sum of Cells 1, 2, 9 and 10.

Data Sources

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Surveys on the Informal Sector Labour force survey Household income and expenditure survey Informal sector enterprise survey Informal sector mixed household-enterprise

survey Independent or ‘stand-alone’ ‘Rider’ to labour force or other survey

“1-2” survey

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LFS: Questions for measuring employment in the informal sector (1) All respondents:

Number of persons usually working in the enterprise by status in employment

Place of work Own-account workers, employers,

contributing family workers: Form of registration of the enterprise, or Type of tax payment by the enterprise

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LFS: Questions for measuring employment in the informal sector (2)

Employees: Kind of ownership of the enterprise If private: Legal organisation of enterprise If unknown, Type of the enterprise (approximate

information)

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Persons in informal employment =

Employers and own-account workers having informal sector enterprises +

All contributing family workers + Producers of goods exclusively for own final

use by their households + Employees, including paid domestic workers

with informal jobs

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Measuring IE thru an LFS (1) Employees: additional questions for the

identification of informal jobs of employees. All other status-in-employment categories:

whether production unit is formal enterprise, informal sector enterprise or household

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Measuring IE thru an LFS (2) Some operational criteria used by countries to

define informal employment: Lack of written employment contract Lack of entitlement to paid annual leave or sick

leave or maternity benefits Lack of coverage by social security system Lack of stable or guaranteed work

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Mixed Household & Enterprise Surveys

Reporting units: IS entrepreneur/operator Observation units: IS enterprises

Household enterprises Establishments

Types Independent Module attached to existing household survey Integrated survey

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“1-2-” Survey Approach: Basic Idea

Data is collected in two phases First phase—

Collect data on employment, including informal employment Collect data on characteristics to be able to identify HUEMs

Second phase— Use first phase data to construct sampling frame for HUEMs Collect data on HUEM

Identification of ‘informal sector’ enterprise is done in the data analysis stage

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Market(all or most of output marketed)

Non-market

Producing at least some goods & services for market

Producing goods & services for own final use

Non-agricultural Agricultural Goods ServicesFormal sector

Informal sector

Formal sector

Informal sector

Agriculture, forestry, fishing

Paid domestic services

Other activities Owner occupied dwelling services

Household Unincorporated Enterprises (HUEM)

Starting point for data collection

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Identifying Criteria: HUEM HUEM1. Legal organization

Production units that are not constituted as separate legal entities independently of their owners

HUEM2. Book-keeping practice Production units that do not keep a complete set of

accounts HUEM3. Product destination

At least some of the products are sold in the market

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Project on Measurement of IS & IE Utilize existing data collection vehicles

Phase 1- labour force survey (LFS) Introduce modifications

LFS- include data items for identifying HUEM (includes ICLS criteria on informal sector) and measuring informal employment

Phase 2- HUEM survey Integrate into regular data collection system

Analyses of Data on IE

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MDG3: Proposed New Indicator

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Informal employment in non-agricultural employment, by sex 1994/2000

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Poverty rates of formal & informal workers by sex

Segmentation of Informal Employment by Average Earnings and Sex (UNIFEM, 2005)

Poverty Risks of Households by Sources of Income (UNIFEM, 2005)

Poverty risk of households by sources of primary income (UNIFEM, 2005)

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Poverty rates by household category, India (1999/2000)

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Relative poverty rates of formal & informal workers by sex and status in employment

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Poverty rates among persons in households sustaining themselves on income from informal employment by type of employment income and industry, Urban India

Source: Sastry, 2004 using data on EUS, 1999/2000

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Poverty rates by household type,South Africa 2003