Unified Data Collection Strategy for
Measuring the Informal Sector and
Informal Employment
UNECA
Andry Andriantseheno
Regional Workshop on Basic Economic
Statistics
Addis-Ababa
16-19 October 2007
1
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
2
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
3
Statistical concept
th
(15
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
4
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
5
Statistical concept
th
(15
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.
6
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.
7
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
8
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
9
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 enterprisebased criteria to legal status and market
production
10
Problem: No unified definition
of the informal sector
Needed—
To produce comparable data across
countries
To respond to countries’ request of clear
guidelines
To promote the adoption of international
standards
11
Guidelines
15th ICLS:
Informal sector enterprises are a subset of
household unincorporated enterprises with
some or all production for the market
Size limit and/or registration criterion
17th ICLS
Employment in IS and informal employment
definition
The 1993 SNA revised is harmonized with IRIS
and IRTDS and coverage of household enterprises
12
Framework of Informal Sector
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
13
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
14
Enterprises of Informal
Employers
Owned and operated by employers, either alone or
in partnership with members of same or other
households, and 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)
15
Informal Own-Account Enterprises
Owned and operated by employers, either alone
or in partnership with members of same or other
households, and 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)
16
Criteria for Identifying IS
Enterprise
Essential
• Legal organization
Unincorporated enterprise
•
Ownership
Household
•
•
Type of accounts
Product destination
No complete set of accounts
At least some market output
17
Criteria: Additional &
Optional
Additional Operational
•
Number engaged
Specific to country
•
Non-registration
Specific to country
Optional
•
Kind of economic
activity
•
Geographic area
Possible exclusion of:
• Agriculture and related
activities
• Paid domestic services
Possible exclusion of rural areas
18
Harmonized definition SNA
• For international comparability-- narrower definition
based on the largest common denominator of currently
used national definitions.
• 2 essential criteria + additional criteria to be applied
simultaneously:
• Productive units not registered, and
• Exclusion of households employing paid domestic
employees
• (Productive units with less than five paid
employees) Removed
19
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.
20
Conceptual Framework (17th ICLS
Guidelines)
 Establish an integrated national system (INS) for the data
collection on companies, in collaboration with central
banks, tax revenue and line ministries, the INS contains
financial statements, labor forces and other information,
this will avoid the duplication of efforts such as collect of
financial statement and industrial surveys.
 Update of the business register through cross checking
with tax registration, social security, the population
censuses(for formal companies owned by household), and
ultimately censuses enumeration of enterprises and
production units
 Include an informal sector module in the existing
household surveys or labour force surveys
21
Problem: No unified definition
of the informal sector
Systematically, find answers to WHY?—
 Analyze metadata on country practices
contained in the ILO database
 Analyze differences in implementing
the size and the registration criterion
22
Results: Limited Convergence
 Divergence in concepts, definitions, coverage and
data sources in implementation
 No analysis on why these differences occur–
need further information from countries
 Some commonalities at sub-regional level
 Attributed to donor influence
 Difficulty in harmonizing the criteria of—
 Non-registration
 Employment size
23
Problems: Registration
Criterion
 Registration requirements vary widely across countries
 Registration requirements can change over time within the
same country
 Not clear with which institution the production unit should
be registered (factories or commercial acts, tax authorities,
social protection institutions, etc.)
 Partial overlap with the book-keeping practice criterion
 In some countries all production units are required to be
registered and to pay taxes -lump sum- even if they lack
a complete set of accounts
 Information difficult to collect, both in household and
establishment surveys
24
Problems: Size criterion
 Variations in threshold value distinguishing small
from medium and large enterprises
 Sometimes set by national legislation for
industrial policy purposes
 Issue: statistical versus policy needs
 Variations across industries within the same
country
 Small unincorporated enterprises can be very
dynamic and endowed with very advanced
technology– “informal”???
25
Unifying data collection
strategy on the informal sector
• Cover all household unincorporated enterprises with at
least some market production
• Collect information on these production units
• Identify informal sector enterprises from among these
production units on the basis of their characteristics
26
Required Characteristics
 Coherent with 15th ICLS definition of the informal sector
and employment in the informal sector
 Coherent with recommendations of 3rd Delhi Group
Meeting on international comparability
 Coherent with 1993 SNA concept of household
unincorporated enterprises producing at least some goods
& services for the market
 Independent from national circumstances yet …
encompasses national definitions
 Independent from data collection tool
 Comprehensive: covers all industries and locations
27
Household Unincorporated
Enterprises (HUEM) as starting
Market
Non-market
point
(all or most of output marketed)
Producing at least some goods & services
for market
Non-agricultural
Formal
sector
Agricultural
Informal Formal
sector
sector
Informal
sector
Producing goods & services
for own final use
Goods
Agriculture,
forestry,
fishing
Services
Paid domestic
services
Other activities Owner
occupied
dwelling
services
Starting point for data collection
28
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
29
UDCS: Main Elements
Scope of data collection
Survey design and organization of data
collection
List of Variables
Questionnaires
30
Data collection method
31
IS/IE Data Collection
Methodologies
Survey Type
Measurement Objective
Remarks
Labor Force
Survey
Monitor evolution of
informal sector employment
(# and characteristics of
employees, employment
conditions)
Seasonality, existence
of business
partnerships, effect of
sample size and design
on desegregation
Household
Income and
Expenditure
Surveys
Household demand for
informal sector
products/services
Information on demand
is limited to final
household
consumption
32
IS/IE Data Collection
Methodologies
Survey Type
Informal Sector
Surveys
Measurement Objective
Detailed structural
information on composition
of informal sector (# and
characteristics of businesses,
production, employment,
income generation, capital
equipment of ISEs,
conditions/constraints of
operation, relation to formal
sector/public authorities)
Remarks
Often policy-driven,
rarely for SNA
purposes.
Options:
Establishment
Surveys, Mixed
Household Enterprise
Surveys or a
combination of these.
33
Informal Sector Surveys
Establishment Surveys
 Possible where there is an IS/Establishment/Economic
Census to provide an area sampling frame.
 Problems: high cost, difficulty of complete coverage
without omissions or duplications.
Some countries solved coverage problems by conducting
economic census together with the house listing
operation for population census).
34
Informal Sector Surveys
Mixed Household Enterprise Surveys
Independent IS Survey: Sampling frame obtained through household
listing in the first phase and then all or a sample of these households are
surveyed. Complex survey operations, sample weighting and estimation
procedures, e.g. Sri Lanka and Philippines.
Modular approach: IS survey sample is a sub-sample of the base survey.
The sample size can be increased in order to derive industry-level
estimates
Integrated Surveys: Special type of modular approach. Designed to
collect information on multiple subjects, e.g. labor force, household
income and expenditure, etc. They incorporate IS sample design
requirements into the survey design, e.g. 1-2-3 Surveys.
35
Optimal Conditions Utilize existing data collection vehicles
 Introduce modifications
 Inclusion of data items on household unincorporated
enterprise characteristics and informal employment
 Survey design
 To account for seasonality
 Survey operations– data collection on
employment and on enterprises
 Sample design considerations for enterprise units
 Integrate modifications into regular data collection system
36
“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
37
“1-2-” Approach: Survey Design
• First phase—
Use labour force survey (LFS) as base hh survey
• Integrate questions in LFS to collect data on
informal employment
• Integrate questions in LFS to identify
household unincorporated enterprises
• Second phase—
• Conduct HUEM survey
38
“1-2” Survey Approach
39
Issues
 Coverage of HUEMs may be limited if ‘usual’ labour force
survey sample design is utilized
Modify LFS sample design
Expand listing of sample PSUs to identify HUEMs
Apply coverage adjustments in estimation stage using
additional information on distribution of HUEMs
Use employee information
 Accuracy of data provided by LFS respondents on
enterprises: legal status, accounting practices, size,
registration
40
In Summary
• We talked about—
• Issues related to the need for a unifying
definition of the informal sector
• Project approaches and strategies
• Methodological approaches
• What can be learned from your experiences?
41
Thank You
42