1. May 2014

2. Contents Objective Theoretical and Conceptual Framework A measurement for the Mexican case Methodological Framework Sources of Statistical Information

3.  Obtain an explicit measurement of the Informal Economy value, in the framework of the System of National Accounts of Mexico 2008 (SCNM08) aligned with the set the International Organizations guidelines: Informality index Production account informal main components Occupied personnel in Informality Classification used is The North American Industrial Classification System 2007 (NAICS07) for 56 subsectors of the Mexican economy. Objective

4. Statistical Information Sources Statistical Information Sources Statistical Information :  2009 Economic Censuses (CE, Censos Económicos 2009  National Survey of Households Income and Expenditure (ENIGH, Encuesta Nacional de Ingreso – Gasto de los Hogares)  National Survey of Occupation and Employment (ENOE, Encuesta Nacional de Ocupación y Empleo)  National Survey of Micro-business (ENAMIN, Encuesta Nacional de Micronegocios)

5. EXPENSES AND INCOME OF THE INFORMAL SECTOR K200 Consumed materials for service providing K431 Energy consumption for the production process K833Payments for toll and infrastructure uses K310 Own Raw materials and auxiliaries consumed K521 Construction machinery and equipment rental payments K910Bottling and packages consumption K311Stationery and office articles K531 Transport equipment rental payments K921 Goods and services insurance payments (65%) K321 Consumed construction materials as main contractor K590Other properties rental payments K950 Repairs and spare parts for current operation K331 Explosives, reagents and similar inputs consumed K620 Commissions payment without base wage K961Sold products freights K332 Minerals bought to 3 rd parties, processed by mining unit K630Professional services payments K976Water consumption payment K411 How much did you spend in fuels and oils? K700 How much did you pay for maquila or outsourcing? K999 Other expenses for goods and services consumption K412Electric power consumption K810Payments for advertising How much you paid last month? K421 Fuels and oils consumption for transport equipment K820 Payments for communications services How many hours did you work last week? Statistical Information Sources Statistical Information Sources

6. For the subject of informality phenomena the statistical measurement, the norms and recommendations have been settled by the international agencies considering the following:  International Conferences of Labor Statisticians (ICLS XV and ICLS XVII).  The Non-Observed Economy Manual (NOE) 2002 chapter 12 section 12.4.  The 2008 System of National Accounts (2008 SNA) chapter 25. Theoretical and Conceptual Framework

7. ICLS XV (1993) Informal Sector Units engaged in the production of goods and/or services. Employment and income generator. Non incorporated as legal entities. Lack of capital accounting. ICLS XVII (2003) Informal Employment Distinguishing:  Informal economy employment,  Informal employment,  Employment in the informal sector  And Informal employment out of the informal sector and the informal employment. Disaggregation of informal employment by type production unit. Theoretical and Conceptual Framework

8. Starting from the recommendations expressed in the XV ICLS and XVII ICLS, and experience in the measurement of informality in different countries an expanded concept of informality is defined. Now not only includes employment in informal economic units, but it incorporates the entire work does not registered with the social security, which is operating in the informal sector economic units. The unprotected work of agricultural activity. Paid domestic service of households. Subordinate workers, although they work for formal production units do so on modalities in which production units do not recognize a formal employment relationship and obligations that this entails. Is added to the definition of informal employment other types of informal employment:

9. Matriz Hussmanns: México * Producers' co-operatives, witch are not formally established as legal entities, are treated as private unincorporated enterprises. Persons working in such informal co-operatives are included in one of the other categories of status in employment, and their jobs classified accordingly. ILO: Informal Sector and Informal Employment

10. Sector Nbr. Of Subsectors Description 211Mining, excluding oil and gas extraction 220Water and gas supply by pipeline, excluding electricity 233Construction 31-3316Manufacturing Industries 43-4612Trade 48 - 495Transports, Mail and Storage, excluding Pipeline Transportation 513Mass Media Information 521Financial and Insurance Services, excluding Central Banking 532Real Estate and Property Rental and Intangibles 541Professional,, Scientific and Technical Services 562Business Support Services and Waste Management 61 1 Educational Services 622Health Care and Social Assistance Services 712Leisure, Cultural, Sports and Recreational Services 722Temporary Lodging, Food and Beverages preparation Services 813Other Services except Government Activities Total 56 Source: Self prepared with SCNM 2008 data Theoretical and Conceptual Framework

11. Sector 11. Agriculture, Animal Breeding and Farming, Forestry, Fishing and Hunting. It is important to emphasize that in this study about informality are considered implicitly the following:.  Jobs estimated in function of required labor days by product without distinguishing employment features.  In Mexico, the agricultural property is assigned to peasants as private property socially named Ejido. Meaning that Mexican peasants have assets that they can sell, transform or extinguish. Theoretical and Conceptual Framework

12. The current method in INEGI is the Direct Method for measuring total Informal Economy, from direct sources such as the Surveys of Employment and Micro-business. Methodological Framework The statistical technique for obtaining the explicit measurement by subsectors of the Informal Economy is the “Method of the Latent Variable”, characterized by an unobserved variable explained from known indicators. Such technique reduces the dimensionality of the set of observations keeping the major part of the feasible information of the study set.

13. METHODS FOR ESTIMATING THE GROSS VALUE ADDED THE INFORMAL SECTOR (GVAIS)  Latent Variable Method applied to income of the matrix of employment for position in the occupation.  Vector (56X1) = Multiplication Index Informality by the level of Gross Value Added. Methodological Framework

14. Measurement for Mexico in 2008 The GDP of informal activity, incorporating the informal sector and informal employment, contributed to the national GDP to 25.49% in 2008.

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