measuring the informal economy: from employment in the informal sector to informal employment

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  • 1. Measuring the informal economy: From employment in theinformal sector to informal employmentWorking Paper No. 53Ralf HussmannsPolicy Integration DepartmentBureau of StatisticsInternational Labour OfficeGenevaDecember 2004Working papers are preliminary documents circulatedto stimulate discussion and obtain comments

2. Copyright International Labour Organization 2005Publications of the International Labour Office enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, shortexcerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights of reproduction ortranslation, application should be made to the Publications Bureau (Rights and Permissions), International Labour Office, CH-1211 Geneva22, Switzerland. The International Labour Office welcomes such applications.Libraries, institutions and other users registered in the United Kingdom with the Copyright Licensing Agency, 90 Tottenham Court Road,London W1T 4LP [Fax: (+44) (0)20 7631 5500; email: cla@cla.co.uk], in the United States with the Copyright Clearance Center, 222Rosewood Drive, Danvers, MA 01923 [Fax: (+1) (978) 750 4470; email: info@copyright.com] or in other countries with associatedReproduction Rights Organizations, may make photocopies in accordance with the licences issued to them for this purpose.ISBN 92-2-116985-5 (printed version)ISBN 92-2-116986-3 (web version)First published 2005Cover:The designations employed in ILO publications, which are in conformity with United Nations practice, and the presentation of materialtherein do not imply the expression of any opinion whatsoever on the part of the International Labour Office concerning the legal status ofany country, area or territory or of its authorities, or concerning the delimitation of its frontiers.The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publicationdoes not constitute an endorsement by the International Labour Office of the opinions expressed in them.Reference to names of firms and commercial products and processes does not imply their endorsement by the International Labour Office,and any failure to mention a particular firm, commercial product or process is not a sign of disapproval.ILO publications can be obtained through major booksellers or ILO local offices in many countries, or direct from ILO Publications,International Labour Office, CH-1211 Geneva 22, Switzerland. Catalogues or lists of new publications are available free of charge from theabove address, or by email: pubvente@ilo.orgVisit our website: www.ilo.org/publnsPrinted by the International Labour Office, Geneva, Switzerland 3. Measuring the informal economy: From employment in theinformal sector to informal employmentContentsPagePreface iii1. Introduction........................................................................................................................... 12. Definitions.............................................................................................................................. 32.1 International statistical definition of employment in the informal sector..................... 32.2 International statistical definition of informal employment ......................................... 42.3 Related issues................................................................................................................ 72.3.1 Jobs at the borderline of status-in-employment categories................................. 72.3.2 Further sub-divisions of informal jobs ............................................................... 82.3.3 Statistics on informal employment in the absence of dataon informal sector employment.......................................................................... 82.3.4 Informal jobs in agriculture ................................................................................ 82.3.5 Informal sector/employment vs. underground/illegal production ...................... 93. Measurement ......................................................................................................................... 113.1 Labour force surveys as a source of data on informal sector employment/informal employment.................................................................................................... 113.2 Survey questions........................................................................................................... 133.2.1 Employment in the informal sector .................................................................... 133.2.2 Informal employment ......................................................................................... 16References ......................................................................................................................................... 19Annex I.............................................................................................................................................. 21Annex II............................................................................................................................................. 25Working paper No. 53 i 4. Working paper No. 53 i 5. ii Working paper No. 53 6. PrefaceThe development of statistics on the informal economy helps to improve labour statisticsand national accounts. The informal economy plays an important role for employmentcreation, income generation and poverty reduction in many countries, especiallydeveloping and transition countries. Statistics on the informal economy are needed as anevidence-based tool for research and policy-making. They enhance the visibility of themany workers in the informal economy and of their economic contribution.The purpose of the present working paper is (i) to explain the international statisticaldefinitions of employment in the informal sector and of informal employment, which wereadopted by the Fifteenth and Seventeenth International Conferences of Labour Statisticians(ICLS) in January 1993 and December 2003, and (ii) to illustrate the practical applicationin household surveys of these definitions in providing examples of their translation intosurvey questions.This Working Paper contributes to follow-up being given across the International LabourOffice to conclusions on Decent Work and the Informal Economy, adopted by theInternational Labour Conference at its 90th Session in June 2002. These conclusions calledupon the ILO to assist member States to collect, analyse and disseminate consistent,disaggregated statistics on the size, composition and contribution of the informal economythat will help enable identification of specific groups of workers and economic units andtheir problems in the informal economy. (International Labour Conference, 90th Session,2002, Provisional Record No. 25, paragraph 37(n)). The aim is to have statistics that willinform the formulation of appropriate policies and programmes. An informal WorkingGroup on the Informal Economy, chaired by Anne Trebilcock, Deputy Director of thePolicy Integration Department, encourages analysis across the various technicalspecialities of the ILO, including statistics.Prepared by Ralf Hsmanns, Senior Statistician and Head of Employment and WagesStatistics of the ILO Bureau of Statistics, this working paper builds on papers presented bythe author to the Seventh Meeting of the Expert Group on Informal Sector Statistics (DelhiGroup), which was held in New Delhi from 2-4 February 2004, and to the Seminar Non-observedEconomy: Issues of Measurement, which was organised jointly by the FederalService of State Statistics of the Russian Federation and the Central Statistical Office ofPoland and held in Saint Petersburg from 23-25 June 2004.Working papers of the Policy Integration Department are meant to stimulate discussion.The ILO will therefore welcome all comments and suggestions concerning the contents ofthis paper. They should be addressed to the Director, Bureau of Statistics, InternationalLabour Office, CH-1211 Geneva 22, Switzerland, fax. no. + 41 22 799 6957,e-mail: sat(at)ilo(dot)orgA. Sylvester YoungDirectorBureau of StatisticsPolicy Integration DepartmentInternational Labour OfficeDecember 2004Working paper No. 53 iii 7. iv Working paper No. 53 8. 1. IntroductionIn January 1993, the Fifteenth International Conference of Labour Statisticians (15th ICLS)adopted an international statistical definition of the informal sector, which wassubsequently included in the revised international System of National Accounts (SNA1993). Inclusion in the SNA of the informal sector definition was considered essential as itwould make it possible to identify the informal sector separately in the accounts and,hence, to quantify the contribution of the informal sector to the gross domestic product. Inorder to obtain an internationally agreed definition of the informal sector, which wasacceptable to labour statisticians as well as national accountants, the informal sector had tobe defined in terms of characteristics of the production units (enterprises) in which theactivities take place (enterprise approach), rather than in terms of the characteristics of thepersons involved or of their jobs (labour approach).A criticism sometimes made of the informal sector definition adopted by the 15th ICLS isthat persons engaged in very small-scale or casual self-employment activities may notreport in statistical surveys that they are self-employed, or employed at all, although theiractivity falls within the enterprise-based definition. Another criticism is that informalsector statistics may be affected by errors in classifying certain groups of employedpersons by status in employment, such as outworkers, subcontractors, free-lancers or otherworkers whose activity is at the borderline between self-employment and wageemployment. Women are more likely than men to be engaged in such a

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