1. Regional Workshop on Basic Economic Statistics
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

2. 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

3. 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

4. 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

5. 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

6. 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.

7. 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.

8. 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

9. 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

10. 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

11. 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

12. 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

13. Framework of Informal Sector Definition
Household Unincorporated Enterprises
Informal own-account enterprises
Other own-account enterprises
Own-account enterprises
Enterprises of informal employers
Other enterprises of employers
Enterprises of employers
Informal Sector

14. 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

15. 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)

16. 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)

17. 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

18. Criteria: Additional & Optional
Additional Operational
Number engaged
Specific to country
Non-registration
Optional
Kind of economic activity
Possible exclusion of:
Agriculture and related activities
Paid domestic services
Geographic area
Possible exclusion of rural areas

19. 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

20. 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.

21. 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

22. 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

23. 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

24. 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

25. 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”???

26. 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

27. 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

28. Household Unincorporated Enterprises (HUEM) as starting point
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
Services
Formal sector
Informal sector
Agriculture, forestry, fishing
Paid domestic services
Other activities
Owner occupied dwelling services
Starting point for data collection

29. 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

30. UDCS: Main Elements Scope of data collection
Survey design and organization of data collection
List of Variables
Questionnaires

31. Data collection method

32. 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

33. IS/IE Data Collection Methodologies
Survey Type
Measurement Objective
Remarks
Informal Sector Surveys
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)
Often policy-driven,
rarely for SNA purposes.
Options: Establishment
Surveys, Mixed
Household Enterprise Surveys or a combination of these.

34. 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).

35. 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 Surveys.

36. 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

37. “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

38. “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

39. “1-2” Survey Approach

40. 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

41. 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?

42. Thank You