UNECA/UNSD Regional Workshop
November 2005
Informal sector
UN STATISTICS DIVISION
Economic Statistics Branch
1
Thrust

Improving the international
comparability of official statistics on
informal sector
Informal sector definition

“… units that operate at a low level of
organization, with little or no division
between labor and capital as factors of
production and on a small scale. Labor
relations – where they exist – are based
mostly on casual employment, kinship or
personal and social relations rather than
contractual arrangements with formal
guarantees” (para. 5 (1) from the Resolution
Analytical and policy relevance

In terms of employment and income
generation, these units make significant
contributions in developing countries with
high rates of economically active population
growth, high rates of urbanization, large
segments of population not covered by social
security systems, and high rates of
subcontracting to small enterprises by large
enterprises
Statistical concept (15th ICLS)

enterprise-based characteristics
reflecting homogeneous production
units with similar economic objectives,
behavior and decision making processes
and by and large in accordance with the
terminology and principles of the 1993
SNA
Statistical Concept (15th ICLS)



Legal status: Informal enterprises are household unincorporated
enterprises owned by one or several individuals of the same
household, or jointly with other households for which no
complete sets of accounts are available (including balance
sheets); or in other words informal enterprises are not
incorporated as separate legal entities that are independent of
their owners.
Market production: all or at least some[1] of the goods or
services produced are meant for sale and barter and thereby
excluding production of goods and services exclusively carried
out for own final use.[1] The 1993 SNA formulation of market
producers are those that produce all or most as compared to all
or at least some of the goods or services.
Size of employment, number of paid employees should be under
a nationally determined threshold and/or non-registration of the
units or non-registration of employees under factories or
commercial acts, tax or social security laws, professional groups’
regulatory acts, or similar acts, laws or regulations established
by national legislative bodies
Statistical concept (15th ICLS)
Exclusions
 Agricultural and related activities
 Production for own use


units producing exclusively for own use differ in
their economic objectives, behavior and decisions
from market producers
(i) services from owner occupied dwellings, (ii)
services for own use by employing paid domestic
staff as employees, (iii) construction and major
renovations of buildings and other gross fixed
capital formation for their own use, and (iv) goods
for own final consumption.
Clarifications
Legal Status

The first criterion of the informal sector on
legal status is identical to the definition of
the 1993 SNA. In its application, the 1993
SNA update should be clarified by being
more prescriptive to exclude from the
household sector those units that meet the
criteria of quasi-corporations with the intent
that the household sector would not include
“formal sector” enterprises as distinct from
“informal sector” enterprises.
Change in 1993 SNA

The informal sector principle of on market
production is not identical with the definition
of the 1993 SNA. The 1993 SNA formulates
market producers as those that sell most or
all of their production on the market at
economic significant prices while the 15th
ICLS uses the phrase some or all. A change
to the 1993 SNA is proposed to adopt the
description of the 15th ICLS only for
household unincorporated enterprises
Supplementary definition of
informal sector
Exclude the size/non-registration criteria
 diverse national practices in applying the size
and non-registration criteria, the international
definition of the informal sector has
hampered the international comparability of
official statistics of the informal sector’s
contribution to employment and value added
Three Recommendations



Reinforce the exclusion of quasi-corporations
(enterprise maintaining complete sets of
accounts) from the household sector in 1993
SNA
Redefine market producers of unincorporated
household enterprises to those producers that
sell some or all of their production on the
market at economic significant prices in 1993
SNA
Supplementary definition restricting
enterprise-based criteria to legal status and
market production