United Nations Economic Commission for Africa
African Centre for
Statistics
Use of Data on Informal Sector
and Informal Employment in
National Accounts
Seminar on International Standards in
Economic Statistics
6-9 July 2010, Antananarivo, Madagascar
Gerard OSBERT,
Senior Regional Advisor on Household surveys
Content
Chapter 1: Introduction
Chapter 2: Measuring Informal Economy
Chapter 3: Surveys implemented in African
countries
Chapter 4: Using data in National
Accounts
Chapter 5: Proposed Plan of Action
2
Chapter 1: Introducing informal economy
The informal economy is taking up an increasingly
larger share in developing countries:


Production : from 25 to 45% of GDP
Employment : > 80% of urban new created jobs
Statistical surveys on the informal economy give
precious indication of its measurement but
its actual share can only be quantified
through NA using integration method
I.2 Recent developments on Informal
Economy Measurement
1. The IWC on SNA-2008 has produced a full
chapter on including informal sector in NA
2. The Delhi Group publicizes a manual on surveys
on informal sector and employment in 2010
3. ESCAP + ESCWA + ECLAC DA-Project
“Inter-regional Cooperation on the Measurement
of Informal Sector and Informal Employment”
ACS intends to strengthen the capacity of African
National Statistical Systems in that direction
Chapter 2: Measuring informal
economy
Definitions and concepts : reports on 15th &
17th ICLS by ILO; content of the informal
economy concept
II. Efficiency of LFS and mixed surveys on
households & enterprises in African
III. Including the surveys’ results in national
accounts: integration steps
I.
I: Definitions and concepts
A. 1993, 15th ICLS : Informal sector = set of all
households establishments or IPUs
B. 2003, 17th ICLS : Informal Employment = Total
employment by households + IPUs + non
registered jobs in formal sector
C. From informal Economy to non observed
economy (NOE)
NB: Each country should precise these definitions according to
its local context
A1. The informal sector according
to the 15th ICLS


All units engaged in the production to generate
employment/incomes to persons concerned
Fixed & other assets do not belong to IPUs but to
their owners ; expenditure for production not
separate from household’s.
NB: IPUs are not deliberately evading taxes or
social contributions => the informal sector to
be distinguished from the hidden or
underground economy
A2. Operational arrangements


The informal sector = group of IPUs which is
part of the household sector, comprising:
 IPUs owned and operated by own-account
workers, which may employ contributing
family workers
 informal employers, alone or in partnership
with members of the same household, with >
1 employees on a continuous basis
According to the SNA, IPUs differ from formal
enterprises on: legal organization of the unit, and
type of accounts kept
A3. Special cases and exclusions


Informal sector includes household enterprises
in both urban/rural areas, but not IPUs engaged
in agricultural activities
IPUs exclusively engaged in non-market
production, for own final consumption or fixed
capital formation, are excluded
NB: The informal sector is itself a component of
informal employment
B1. Informal Employment
17th ICLS considered 3 entities at the origin of
informal employment: enterprises of the
informal/formal sector and the household
Labour statisticians & national accountants argue on:
 ICLS revolve around the production account,
SNA basis include all accounts and balance.
 For ICLS: households are producers of goods +
employers of domestic workers; for SNA
household are also lenders and borrowers
 For SNA, a barter producer sells all his
production at a significant price; for ICLS,
producer needs only to sell a portion of it.
B2. Conceptual Framework
Jobs by status in employment
Production
units by type
Ownaccount
workers
Inf
For
Employers
Inf
Formal
sector
enterprises
Informal
sector
enterprises
3
Households
9
4
For
Contributing
family
workers
Employees
Inf
Inf
1
2
5
6
10
Members of
producers’
cooperatives
For
Inf
7
8
For
C. From informal sector to NOE
OECD introduced the NOE-concept:
1)
2)
3)
4)
Underground economy = activities concealed to
avoid paying taxes (VAT) social contributions, etc.
Illegal economy = activities that contravene the
criminal code or carried out by unauthorized
persons (illegal medical practice).
Informal sector production refers to activities that
are not concealed but that are poorly registered due
to the inability of public authorities.
Production for own final use is a significant nonbarter component of the production.
Chapter 3: Most relevant African
experiences
A. Direct measurement of employment
 Employment surveys (LFS) on households
 Examples: LSMS and Phase 1 of 1-2-3 survey
B. Establishments and mixed surveys
 Households-enterprise mixed surveys ;
 Using consumption survey to measure IS
C. Choice and proposal for an integrated survey
 Complementarities between LFS and mixed survey
 Questions to insert in the employment survey
 Content of the mixed survey
A.1: Direct methods of measurement
Those are sample surveys on establishment, individual
or household. They include mixed survey (1-2-3).
Objectives of the Labour Force survey
 To collect information on the distribution of the
population based on position in the labour market.
 To identify those who work in the informal
economy - in IPU or holding an informal job
Sampling methodology and type of survey
 Household sample built from a multi-level
selection, from the most recent P&H census data
 Rotating panel reduces error in temporal
comparison; permits individual’s follow-up
A.2: Typical examples in Africa
Employment segment of Living Standards Survey
 LSS is one of the 3 components of the LSMS
program undertaken by the World Bank.
 60 surveys conducted in Africa (CIV, Ghana,
Madagascar, Morocco, Malawi Tanzania).
 A questionnaire, subdivided into 20 sections:
demography, credit, food expenditures, etc.
 In the economic section, the working-age
population is analysed, primary + secondary jobs.
 LSS’ results are first presented for the country as a
whole, then by community (rural/urban) province.
A.3: the 1-2-3 mixed surveys
Phase 1: Employment survey of the 1-2 system
 Two questionnaires: Q1 on household sociodemo-economic characteristics ;
 Q2 : individual question. covering all member of
the labour force, classified by institutional sector
 Phase 1 = best instrument for measuring informal
employment, including precarious jobs.
 Phase 1 identifies IPUs’ chiefs among employed
persons to be surveyed in phase 2
 Phase 3: on household’s informal consumption:
the demand side
B. Direct measure of establishments
B1. Objectives of the establishment surveys
 To collect information on IPUs’ accounts:
 Composition of the work force by status
 Data to be used by national accountants to get
technical coefficients and VA breakdown
Direct survey are empirical, no sampling framework.
Selected units face constraints: size; activities etc.
In the absence of a sampling frame, indicators cannot
be extrapolated nationally.
Hence, this tool should be replaced by the mixed
household-enterprise survey
B2. Objectives of the mixed
household-enterprise survey
Additional analysis can be launched using sociodemographic characteristics of IPUs’ heads,
collected during Phase 1.
Preliminary operation for locating IPUs:
 A labour force survey to determine IPUs’ heads,
whether as a main or secondary activity;
 A household survey or a household consumption
budget survey;
 A listing of households established during an
enumeration operation in the primary survey units.
B.3: Mixed survey based on an
employment survey
Phase 2 is surveying IPUs, from a stratified sample
obtained from the list of IPUs’ heads in phase 1
Key criteria are: activity branch; status of IPUs’ head
(self-employed, boss, with at least one employee).
Building IPUs’ production account gives technical
coefficients, ratio wages/production; gross
operating surplus and detailed breakdown of sales
The 1-2 survey has been implemented in Cameroon
(1993, 2005), Madagascar (1995, 2004), 7 capitals
of WAEMU (2002), Morocco (2007), DRC (2006)
and Burundi (rotating panel 2006-2008)
C.1 Complementarities between LFS
& mixed survey
1. Only LFS can capture the 9 cases of informal
employment categories listed by ILO.
2. Direct interview of IPUs’ heads necessary to get a
real picture of informal production/distribution
3. Employment is better estimated thru direct
informal sector surveys, provided that the IPUs
sample is representative.
C.2 Key questions to be included in LFS
LFS questionnaire to find out all jobs in the reference
period, including persons temporarily out of work
 Active persons asked on their category; type of
unit they work for, work schedule per week
 In private enterprise: total workforce; whether the
entity is registered.
 For IPUs’ heads: formal bookkeeping kept for
payment of duties and taxes.
 For employees & dependent workers: written
work contract; paid leave, retirement pension
C.3 Content of the mixed survey
To prepare NA, the survey should elicit on:
 Production and intermediate consumption;
 Composition of the labour force by category, work
schedule during reference period, remuneration etc.
 Main activity branch of the unit and secondary
activities.
For policy makers (poverty, gender approach):
 gender of members of the IPU;
 financing of the unit, and its credit access;
 date of creation  IPUs’ demography
Chapter 4: Measuring Informal
Economy through National Accounts
A. Concepts of the informal economy and SNA
B. Ways of developing the central framework to
measure the Informal economy
C. African examples of the incorporation of
survey results into the SNA
D. Using integrated method (LIM) and specific
informal production function
A.1. Informal economy concepts & SNA
SNA-08/chapter 25 “Informal Aspects of the
Economy” proposes how to measure IS:
 IS includes unincorporated individual
enterprises: production/operation accounts
 Households can include other merchant or
non-merchant establishments
 The informal sector present in all economic
activities, albeit thru merchant establishments
 IS depends on legal/social conditions unique
to each country and that may change over time
A.2 Effective definition of informal econom
Three different fields to be considered:
1.
The statistically non-registered economy due to
non-surveyed areas/activities, etc.
2. The informal sector among difficult areas to
access, but accessible to statistics.
3. Illegal activities/underground economy not
surveyed, due to under-reporting.
M. SERUZIER operational definition (2008):
IE includes merchant production units owned by
households, recognized by public authorities
even when they do not meet required standards
for carrying out a legal activity
B.1: NA objective: to measure the
entire national economy
1st step: Mapping the national economy
 SNA partitions on merchant/non-merchant
by sector, economic activity to be reconciled
2nd step: measuring IE through employment
 Listing of enterprises by administration,
 Economic censuses and other statistics on
establishments;
 Employed workforce from censuses & LFS
B.2: Proposed Methods and
Overview of the Process
 Building the production accounts of the economy
using available partitioning of the production
 Initiate the iterative process, using SUT and Labour
Input Matrix (LIM), developed in 3 steps:
(a) Gauging the employed workforce: LFS more
rigorous than census, depend on the sampling
(b) Comparison of employment data: EWF is
compared to the economic matrix:
(c) Employment, compensation and amount of work:
NA estimate production of non economic jobs,
based on average productivity by activity
B.3 Description of development process
 LIM to be developed from fresh Benchmark;
 Definition of informal sector to fit local situation:
economic, sociological, administrative & statistical;
 Economy mapped before partitioning sector by
production mode (formal/informal)
 Developing 2 matrices on employed workforce:
1. Labour supply matrix: from census & LFS
including secondary jobs
2. Labour demand matrix: built from economic
census, professional and administrative sources
=> Estimate undeclared employees in formal sector
or in units escaping economic statistics
C1: The Reconciliation process
Demographic and economic matrices have the
same structure to generate a unique LIM:
1. By status in employment (wage earners,
bosses, self accounts, family helpers)
2. By economic detailed activity, by status
and if possible by occupation
3. M1 – M2 = non registered economy: IPUs
+ non declared employees of formal units
A six-step-elaboration process
1.
2.
3.
4.
5.
6.
Setting available items from IPUs => Jobs
matrix by branch & status ;
Jobs associated to partition are attributed;
other belong to “non observed zone”;
All production modes are defined, including
informal ;
Setting data according to classifications: jobs
matrix by branch, status, production mode
Primary elaboration of branch accounts =>
supply and use of IC;
Iteration within SUT framework.
C.2: Satellite account on Informal
Satellite accounts (SA) allow economic
analysis of specific SNA sub-sets
In the case of informal economy:
 Quite consequent: 25 to 45% of GDP
 Its measurement is a part of the central
SNA framework elaboration;
 It can only be estimated thru indirect
ways, using all statistical sources within
specific partitions (production mode)
C.3: Proposed content of SA Informal
1/ A differentiated measurement:
IPUs (merchant units belonging to
households)
informal employment (including non
declared formal employees)
2/ Placing informal economy in the whole
national economy:
The formal economy;
Underground/illegal economy;
C.3: Proposed content of SA Informal
3/ Various classification of informal sector:
 With or without employees
 urban/rural
 By revenue groups (of IPUs)
4/ Main Recommendations from Delhi group:
 To isolate agriculture
 Outside liberal or highly technical activities
 To put aside domestic servants
Proposed analysis from SA Informal
1/ Analysis within the households’ sector
 A same person might have several jobs, among
which one only is informal
 Criteria must focus on jobs diversity, including
revenues generated
2/ Which on links between poverty & informality
3/ Etc.
Conclusion: Requesting statisticians
to implement satellite account
SA on Informal Economy  a double objective:
 To convey survey statisticians and national
accountants on a coordination frame
 To share the same approach, thru LIM, which
requires:
A specific production mode dedicated to
informal sector
To locate the IPUs among other formal small
size units, via updated business registry
To collect data allowing monitoring evolution
of the IE, via annual LFS (households’ panel)
Thank you!
African Centre for Statistics
Visit us at
http://knowledge.uneca.org
Annex 1: How to build the Satellite
Account on Informal economy
Scheme No 1: Matching Labor Supply
and Demand Matrices
Scheme No 2: Informal jobs by status in
employment and type of production units
Scheme No 3: Statistical mapping by
institutional sector and survey coverage
Scheme No 4: Reconciliation iterative
process to produce the LIM
1: Matching Labor Supply/demand Matrices
SECTOR
INFORMAL
Economic
Difference
LFS: Labor Supply
survey: Labor between Supply &
(*)
Demand
Demand
IS Employment
Informal
Employment
FORMAL
IS Employment
Informal
Employment (1)
COMMENTS
Bias on specific
activities to be
checked and
corrected
6,000
40.0%
+
700
4.7%
7,000
46.6%
1,300
8.7%
15,000
100.0%
Final Formal
Formal Employment
Formal
Employment = Sup -S
Employment - D
(S, D)'
Non declared
employment in
formal sector
Columbia
If S > D : (S - D) = Informal
Employment (2)'
'If S < D : This means that some formal employers are
declaring all their employees (even without contract) or LFS
is wrongly coded for this activity or some IPUs are in fact
formal production units (Pus)'
(*): All Employment components to include secondary jobs
2: Informal jobs by status & units type
Formal + informal
units
Contributing family workers
D
C
Employees
D
C
Own account workers
C
Member of producers cooperatives
C
Employers
C
Categories
Households
B
COMMENTS
A
A: Production for own use at 100%
B
B: Domestic servants
C
C: Employment in Informal sector
D: Informal employment outside informal sector
NB: Categories A and B contend informal employment but only categories C
and D are to be taken into account for informal GDP
3: Statistical mapping by institutional
sector and survey coverage
Industry by activity branches
Industries with survey
Agriculture
Industries without survey
Corporations with balance
sheet but escaping economic
A: Corporations covered by survey with survey (possibly self employed
+ undeclared workers)
balance sheet
Corporations not covered by the survey
FORMAL
UNITS
B: Corp., covered by survey without
balance sheet
Other units not considered as
formal by workers (i.e. subcontractors)
C: Informal Production Units (IPUs) covered by the mixed survey
INFORMAL
UNITS
Jobs not covered by the phase 2 of the mixed survey (i.e. not declared
secondary jobs or rural seasonal activities)
Illegal / hidden Economy
NB: Category B is considered as formal because its units are registered
4: Reconciliation iterative process to
produce the LIM
A: % of
units
escaping
survey
FORMAL
UNITS
B: Informal
units
surveyed in
economic
census
INFORMAL
UNITS
HOUSEHOLDS +
AGRICULTURE
Labor Demand
Mode 1 : Jobs observed in
economic census
Mode 2 :Jobs non declared by
responding units in economic
census
Labor Supply
Formal employment in
formal production units
Informal employment in
formal sector
Mode 4: Jobs observed in
phase 2 of mixed survey
(including declared secondary
jobs)
Total employment in
informal sector
Mode 3 : Jobs observed in
LFS but not to be included
Households employment
not elsewhere counted
Economic matrix
C: UNDERGROUND
ECONOMY
NB: Employment in mode 4 is the largest and corresponds to market
outputs jobs not registered by economic statistics
Demographic
Matrix