Statistics on the ‘Informal’ Economy
 Informal Sector
 Informal Employment
Presentation by: Margarita F Guerrero
Inter-regional Workshop on the Production of Gender Statistics
6 -10 August 2007
New Delhi, India
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)
2
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
3
Framework of IS Definition
Household Unincorporated Enterprises
Informal ownaccount enterprises
Other own-account
enterprises
Own-account
enterprises
Enterprises of
informal employers
Other enterprises of
employers
Enterprises of
employers
Informal Sector
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
5
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)
6
Criteria for Identifying IS Enterprise
Essential
 Legal organization
Unincorporated enterprise
 Ownership
 Type of accounts
Household
No complete set of accounts
 Product destination At least some market output
Additional Operational
 Number engaged
Specific to country
 Non-registration
Specific to country
7
Optional Criteria
 Kind of economic
activity
Possible exclusion of:
 Geographic area
Possible exclusion of rural
areas
 Agriculture and related
activities
 Paid domestic services
8
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
9
Measuring the Informal Sector
 Measurement Objectives
 Measurement Options
(depend on objectives)
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
11
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
12
Employment in the informal sector in Asia and the Pacific
as a share (%) of non-agricultural employment
National definition or (a) Related concepts
Country
Georgia
Turkey
Russian Fed.
Kyrgyzstan
India
Indonesia (a)
Pakistan
Thailand (a)
Nepal
% of total
% of men
6.9
9.9
12.6
24.9
55.7
62.7
66.5
71.0
73.3
10.0
10.6
12.9
28.5
55.4
59.3
66.5
71.0
67.4
% of women
3.8
6.2
12.3
20.8
57.0
68.2
65.8
71.1
86.5
Employment in the informal sector in Asia and the Pacific
as a share (%) of non-agricultural employment
Country
% of total
National definition
Turkey
Russian Fed
Harmonized definition
Turkey
Russian Fed
% of men
% of women
9.9
12.6
10.6
12.9
6.2
12.3
11.2
5.5
11.3
5.3
10.5
5.7
Contribution of IS to GDP (unofficial)
15
Contribution of Women & Men
16
Informal Employment
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 jobrelated 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.
18
Conceptual Framework (17th ICLS Guidelines)
19
Informal Jobs of Employees
Employment 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
20
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
21
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
22
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.
23
Data Sources
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
25
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
26
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)
27
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
28
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
29
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
30
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
31
“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
32
Household Unincorporated Enterprises (HUEM)
Market
Non-market
(all or most of output marketed)
Producing at least some goods &
Producing goods & services
services for market
for own final use
Non-agricultural
Agricultural
Goods
Services
Paid domestic
Formal
Informal Forma Informal Agriculture,
forestry, fishing services
sector
sector
l
sector
Other activities Owner occupied
sector
dwelling
services
Starting point for data collection
33
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
34
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
35
Analyses of Data on IE
MDG3: Proposed New Indicator
37
Informal employment in non-agricultural employment,
by sex 1994/2000
38
Poverty rates of formal & informal
workers by sex
39
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)
Poverty rates by household category, India
(1999/2000)
43
Relative poverty rates of formal & informal
workers by sex and status in employment
44
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
45
Poverty rates by household type,
South Africa 2003
46