Data Collection on the Informal Sector:

A Review of Concepts and Methods Used Since the Adoption of an International Definition

Towards a Better Comparability of Available Statistics

 

 

The concept of ‘informal sector’ has been extensively discussed since the beginning of the 1970s when simultaneously Keith Hart (1971) referred to informal income opportunities for the urban poor in Ghana and the ILO report on Kenya (1972) defined the informal sector by the characteristics of the economic units. Since the very beginning, the discussions on the definition by the characteristics of the job or by the characteristics of the establishment which provides the job initiated two schools of thinking which seemed impossible to reconcile. For years, the arguments continued to be disputed and inspired various methods of data collection: more qualitative for the first, more quantitative for the second.

 

The adoption of an international definition by the 15^th ICLS in 1993 (ILO, 1993a and b) did not put an end to these discussions. With the globalisation process and the extension of casual jobs, the criticisms against the concept of ‘informal sector’ seemed, on the contrary, to become more and more acute and relevant: the concept would not cover the most common situations on the labour markets where the systems of social protection are bypassed by the complexity of global value chains. These chains are the ways and means by which multinational corporations employ home-workers without having any formal link with these workers whose value added is even denied in the enterprise accounts where their remuneration is accounted for as an intermediate consumption and not as a labour cost. And yet the concept of informal sector was coined in order to facilitate the measurement of the sector contribution to GDP. The term ‘sector’ was indeed attached and merged into the concept of ‘informal’ by the 15^th ICLS in order to make of it a segment of the household institutional sector in the System of National Accounts as revised in 1993 (SNA, 1993). The definition by the characteristics of the economic unit is tightly linked to this aim. And the criticism of ‘dualism’ by the champions of an analysis in continuum is not more acceptable that the criticism of macroeconomics by microeconomics: both approaches are necessary and the definition of clear-cut categories is necessary for the sake of measurement: a continuum is only a succession of dual situations.

 

This is why the criticism of the definition based on the characteristics of the economic unit is not valid. One may consider that the concept of ‘informal sector’ does not cover the reality of the expansion of precarious jobs in the formal sector and of home-workers, but it was not its purpose. The 17^th ICLS (ILO, 2003), following the 2002 International Labour Conference (ILO, 2002a) discussed the concept of ‘informal employment’ and provided guidelines for an ‘expanded’ definition of the concept. But it should be clear that this new concept of ‘informal employment’ is not intended to replace the concept of ‘informal sector’. As a matter of fact, the ‘informal sector’, as a part of ‘informal employment’ will allow to highlight this part of informal employment which is generated by the formal sector in its attempt to cut labour costs for achieving more competitiveness in the globalisation process.

 

The first section of this report will recall the terms of the definitions for the informal sector and for informal employment, the conceptual framework in which the two concepts are reconciled and made complementary, and the methods of data collection and estimation that are currently used for their measurement. In the second section, we will review, region by region, the definitions used in the countries’ practices with special focus on scope, coverage, methods and measures. Section 3 will address specific issues for data comparability and remaining gaps in information. In conclusion, we will examine the suitability of available data to analyse time trends and regional and world estimates and make recommendations to these aims.

 

1. Definitions, conceptual framework and methods of data collection for the measurement of informal sector and informal employment.     

 

1.1.             Definitions

 

The informal sector has been defined by the 15^th International Conference of Labour Statisticians in 1993. The international definition is based on the characteristics of the economic unit in which the person is working:

 

-           the legal status is the basic characteristic: the informal sector is comprised of unincorporated enterprises belonging to the household institutional sector in the System of National Accounts: it therefore means that not only all incorporated enterprises are excluded, but also all non-profit institutions serving households and of course government institutions.

 

Among these unincorporated enterprises, two sub-categories are distinguished (which involves the status in employment as a characteristic): i) the informal enterprises of own-account workers, and ii) the enterprises of informal employers; for these two sub-categories, non-registration may be (and not must be) used a supplementary criterion of the definition:

 

-           the non-registration of the economic unit: accordingly, all economic units or only those not registered will be included in the informal sector, depending on national circumstances (consequently, the criterion of non-registration is not compulsory and some countries may have not used it at all),

 

For the enterprises of informal employers, the preceding criterion can be used alternatively or complementarily with the two following criteria

 

-           the non-registration of the permanent employees,

 

-           the size of the economic unit must be under a given threshold defined in terms of number of jobs (or number of paid employees),

 

-           and finally, at least some production must be marketed, which excludes production of goods and services exclusively carried out for own final use.

 

Furthermore, the informal enterprises are such defined whatever the permanent or temporary nature of their activities and their operation as a main or a secondary activity.

 

Cross-classifications of these criteria between them and with industrial sectors must be possible: it is important to be able to identify the informal sector without agriculture: usually non market production is concentrated in the primary sector so that the exclusion of agriculture implies the exclusion of non market production. However, some countries have been reluctant to exclude agriculture from informal sector statistics. The international definition does not recommend to exclude agriculture from the informal sector, but it recommends to clearly distinguish the agricultural informal sector (including animal husbandry, forestry and fishery) from the non-agricultural informal sector.

 

The 1993 definition raises many issues, in particular regarding the classification of domestic servants, professionals and home-workers: the later category is included depending or not whether the workers are subcontracted by an informal or a formal firm, and the two first categories are included if they meet with the broad characteristics of the informal sector that is to say: units engaged in the production of goods or services with the primary objective of generating employment and incomes to the persons concerned; these units typically operate at a low level of organisation, with little or no division between labour and capital as factors of production and on a small scale; labour relations – when they exist – are based mostly on casual employment, kinship or personal and social relations rather than contractual arrangements with formal guarantees”.

 

The 1993 definition was voluntarily an ‘umbrella’ definition that could cover the variety of existing countries’ practices and help to their convergence. This report is an attempt to look at how far this process of convergence has been achieved.

 

1.2             Conceptual framework

 

Further to the adoption of the international definition of the informal sector, there were extensive discussions which culminated at the last International Labour Conference (ILO, 2002) for an extended definition of informal employment capturing all workers working for pay or self-employed who are not covered by any form of social protection. Although informal employment is usually wider than informal sector, the former concept is not automatically inclusive of the latter, and of course the two concepts are not mutually exclusive. Ralf Hussmanns (2001) has proposed a useful and detailed framework to understand the coverage and meaning of the two concepts. To put it shortly and make it easier to understand, we can explain the difference between the two concepts by the following schema:

 

Scheme 1: Components of the informal sector and of informal employment.

 

 

The two cells in grey cover the ‘informal sector’ while the two cells in double line cover ‘informal employment’.

 

Cell (2) means that in the informal sector, some individuals may have a formal job (it may happen where the criteria of non-registration of the unit or of the employees is not used in the definition). Such a category is assumed to be small.

 

But the main category to be investigated is cell (3) which represents informal jobs outside the informal sector and in the formal sector. This category is assumed to be huge and growing up.

 

The criterion used for measuring informal employment is the absence of written contractual arrangements or the non-registration in social security funds.

 

Furthermore, persons who are registered in social security funds may well be not benefiting of social protection if the employer has not paid the social contributions or if he is not willing to apply the labour code, or also if the health system is not efficient. This is why a set of questions may be useful in order to measure the actual social protection of the workers.

 

The 17^th International Conference of labour Statisticians has recently addressed this issue (ILO, 2003).

 

1.3            Methods of data collection and estimation

 

Methods of data collection on the informal sector are necessarily using the enterprise or the establishment as the observation unit.

 

Historically, data collection on the informal sector was based on establishment surveys, and more especially on economic censuses or establishment censuses: these door-to-door enumeration operations have been undertaken on a regular basis in many major countries such as India, Indonesia, Egypt, as well as in many Latin American countries and also in Italy. Such censuses were used for the identification of micro and small enterprises, by contrast with the medium and large enterprises, on the basis of the legal status (unincorporated/incorporated) and the size (less than 5 or 10 workers, or even 50 workers). And in many countries the regular enterprise survey is carried out on an exhaustive and annual basis for the medium and large enterprises, and on a sample and 5-year basis for the micro and small enterprises.

 

A drawback of this approach is that the economic units of the informal sector which are home-based, street-based or mobile are not captured. Depending on national characteristics, the share of these non establishment-based economic units may represent from 1/4 to 1/3 of total informal sector employment.

 

This is why the 1993 ICLS recommended the ‘mixed surveys’ to capture the informal sector. It consists in a household survey (on labour force or on income-expenditures) at the first stage allowing the identification of all informal sector enterprises (main as well as secondary) operated by the household members (own-account informal enterprises and informal employers’ enterprises); then at a second stage (which can be immediate) an establishment survey is carried out for each of these pre-identified economic units. The first mixed surveys have been launched prior to the 1993 ICLS: in Mali and Mexico in 1989, and in Tanzania in 1990 for example. Since then their number has considerably increased though not so much at national level.

 

And at national level, it is the labour force surveys (or other household surveys) which have been the more numerous to collect data for the measurement of the informal sector (and more recently in parallel with informal employment): in these surveys, each occupied household member is asked a set of questions to characterise the economic unit in which he works, by the criteria of definition of the informal sector. There is however a difficulty arising from this method: paid employees may not know whether the enterprise in which they work is registered or not (usually they know the size and the legal status too).

 

Finally in those countries where such surveys have not been carried out (or have been carried out at a lower level than national), the informal sector (but rather informal employment, in the light of the recent debates) was traditionally estimated by the comparative analysis of data sources, also called the ‘residual method’, which provides an estimate of informal employment by subtracting – in each industry - the total number of registered workers (in administrative records or in enterprise surveys) from total employment as given by the labour force survey.

 

2.          Informal sector surveys: definitions and practices around the world.     

 

2.1            Attempts towards a better comparability.

 

There exists several attempts to ensure the comparability of data on employment in the informal sector and on informal employment at large.

 

The author of this report has compiled national data for more than 32 countries in various regions, using a same methodology based on the ‘residual method’, since the beginning of the 1980s (Charmes, 1999). The ILO multidisciplinary team based in Lima also compiled a systematic estimate for informal sector employment in 17 Latin American countries and regularly published in the ‘Panorama Laboral’ of ILO. But the residual method revealed to address the measurement of informal employment rather than the informal sector and the Latin American experience used a definition which did not fit with the international definition (see below).

 

In 1998, 2001 and 2003, ILO STAT launched a survey among member countries asking for the use of the concept of ‘informal sector’, the definition used and the figures obtained.  The survey questionnaire was designed to capture the complexity of the definition used for the informal sector in all its dimensions: market/non market, registration, size, legal status, branches of activity (excluded/included). Countries had to indicate what term was officially used to refer to the so-called ‘informal sector’, whether it was surveyed or estimated and if so, what criteria were used and what activities were included or excluded. In the first version of the survey (1998), emphasis was put on urban areas, assumption being made that urban surveys were generally more numerous than national surveys. But later on the questionnaire was changed and tables to be filled became more complex and covered national, urban and rural levels as well as agricultural and non-agricultural activities, main and secondary activities. Some countries have conscientiously filled the tables, others could not because it would have required a further processing of the data and they often sent the published tables or the publication of the survey itself. So doing the ILO STAT has established an exceptional set of information on data and meta data on the informal sector, even though incomplete. A compendium of this data base was presented at the International Labour Conference in 2002 (ILO, 2002c).

 

Essentially based on this source, the KILM (Key Indicators for the Labour Market, ILO Employment Sector) annually publishes a table on ‘informal employment’ which is rather confusing by the figures it compares in a unique table and by the way it defines the ‘informal economy’ in its last issue. The major criticism that can be meant for the KILM table is that not only it mixes 5 series of definitions (‘harmonised’ international, national definitions, Latin American ILO definition, small and micro-enterprises, informal employment), but also national, urban and capital city coverage. Furthermore, drawing out a quotation of the report of the ILC 2002, it stipulates that the term ‘informal economy’ is better than ‘informal sector’ because the phenomenon cuts across many sectors of economic activity (which is not the point) and adds to the confusion by using the term ‘economy’ rather than ‘employment’, thus introducing a dimension of underground and illegal activity which should be avoided. Although it is understandable that users may have problems in understanding why the term ‘sector’ was used by the 1993 definition, it should be clear that the expansion of the concept to ‘informal employment’ does not disqualify the concept of ‘informal sector’ which is now embedded in the System of National Accounts, but usefully complements it.

 

It would be a major mistake to think that the concept of ‘informal economy’ or ‘informal employment’ should lead to abandon the concept of ‘informal sector’. The new concept is much more heterogeneous that the previous and, as already mentioned in the introduction, the two concepts can highlight a complex and changing reality of the labour markets because they are complementary.

 

Also, one of the lessons drawn from countries for which data are available at national level as well as at urban and rural levels is that the non-agricultural informal sector in rural areas – far from being negligible – may be even larger than the urban informal sector: it comprises many manufacturing activities rather than tertiary activities, with more women involved, especially in secondary activities: the relative share of the informal sector in non-agricultural employment decreases progressively as coming from rural to national, urban and capital city levels, and its composition widely changes as well, becoming more tertiary, more male and also more rewarding.

 

The present report is based on the ILO STAT data base, completed with other national sources and the following sections examine the variety of concepts used by various countries, distinguishing the geographical level of coverage (national, urban, main urban, capital city), the type of data sources (mixed surveys, labour force surveys or other household surveys, economic or establishment censuses and surveys) and the regions (Africa, Asia, Latin America and transition economies), starting at the end of the 1980s. The surveys that covered only one or a few branches of activities or that were limited to household-based activities have not been taken into account (for instance, in Lithuania, only agriculture was covered for the measurement of informal sector in 1998-2000).

 

Tables A1 in annex recapitulate the definitions as they are delineated in the national survey reports and tables A2 identify the criteria and specifications of the 1993 international definition which are fulfilled by the national definitions. Countries are classified according to the type of survey implemented for capturing the informal sector, beginning with the mixed surveys (which are supposed to be the most comprehensive in this regard), followed by the labour force surveys or other types of household surveys and ending with economic or establishment censuses and surveys. As a result, a set of countries is identified which have covered the informal sector at national level with definitions and methods of data collection ensuring acceptable comparability. Among them a sub-set has complied with the basic international criteria for harmonisation. Another subset has applied definitions which diverge from the international definition but ensured a certain consistency at sub-regional level (Latin America, transition countries for instance). Tables A1A and A2A (at national levels) are doubled by the series of tables A1B, A1C and A1D for urban, main urban and capital levels). Where the results of national surveys are available disaggregated by urban/rural areas, the set of data is used to complement the series of data which are only available for urban areas.

 

Sometimes there were inconsistencies between the ILO STAT questionnaire, the presentation of the national survey report and the definition actually used: in all cases, it is this last definition that has been taken into account. What emerges from the tables in annex is the wide spectrum of definitions used: at first sight, it seems that all are different, except where a same methodology has been used. However such a variety must not be looked at as an obstacle to comparability: it is important to maintain a certain flexibility so that the data on informal sector remain consistent with other national data collected in the country.

 

Table 1 hereafter shows the distribution of types of surveys used to capture the informal sector across the regions (it should be noted that the use of administrative records has not been systematically sought after) and that where a survey has been repeated without being regular, it was counted twice or several times; regular surveys (annual, bi-annual, quarterly or every 5-year) were recorded as single surveys.

 

Table 1: Methods of data collection used across countries and regions for the measurement of informal sector at national level.

 

 

It is in Africa that the number of mixed surveys at national level is the biggest (12 out of 17) and this can be explained by the enormous needs in statistical data of all types in this region: the mixed surveys are an incomparable instrument for providing national accounts with the data required. At world level however, the labour force surveys (and the other household surveys, especially the living standards surveys) are the privileged means for such data collection (24+16=40, out of 67): this is particularly the case in countries where the labour force surveys tend to become regular. Although the number of economic censuses and surveys has tended to decrease, it must be noted that: i) the present compilation is not complete in this regard (in particular for Latin America), and ii) these types of data collection seem to be maintained even where mixed surveys have been implemented, for instance in India or in Morocco.

 

At urban level (table 2 below), 39 surveys have been enumerated (15 at capital city level): the mixed surveys are fewer then at national level, except if we take the surveys at capital level (implemented in Africa) into account (6 or 18).

 

Labour force surveys are the preferred tool for measuring the informal sector in Latin America (9 out of 10).

 

Table 2:      Methods of data collection used across countries and regions for the measurement of informal sector at urban or main urban level (or capital city level).

 

Note: Between brackets: surveys on capital cities.

 

Finally, all levels confounded, 104 surveys (excluding one use of administrative records) in 92 countries have been used for the measurement of the informal sector during the past two decades and especially during the last one, of which 89 have covered the whole country or at least the urban or main urban areas (table 3 below). 24 countries in Africa have implemented 35 surveys for capturing the informal sector.

 

Table 3: Methods of data collection used across countries and regions for the measurement of informal sector at all levels (including capital city level).

 

Note: Between brackets: surveys on capital cities. * including one use of administrative record.

 

Labour force surveys are outstanding (with 34 surveys, a majority of which in Latin America), followed by mixed surveys (22 with a majority in Africa).

 

Comparability is ensured by:

 

- the level of geographical coverage,

- the type of surveys conducted,

- the criteria of definition,

- and their combination.

 

In the following set of tables (4 to 7), we look separately at these various dimensions of comparability.

 

Regarding the geographical level at which the surveys have been conducted, Africa is far ahead the other regions for national level (with 35 surveys at national level, compared with 12 in Asia and 11 in Latin America) as well as for capital city level (10 out of 15). The reason is again the same: the lack of statistical data across the region and the existence of a large programme of data collection at capital city level in the French-speaking African countries, launched by the West African Economic and Monetary Union and supported by AFRISTAT through the National Statistical Offices.

 

Table 4: Levels and regions at which the informal sector has been measured.

 

 

Excluding establishment surveys, 46 surveys can be used at national level of which one third (14) are mixed surveys (table 5 below). Moreover, the two mixed surveys carried out at urban level in Latin America can be combined with labour force surveys at national level (for their rural coverage) to generate national figures.

 

Table 5: Levels and regions at which the informal sector has been measured, by type of surveys.

 

Note:             establishment surveys are excluded. Figures in bold refer to mixed surveys and figures between brackets refer to labour force or other household surveys.

 

Table 6 hereafter presents the distribution of surveys by level of geographical coverage and regions and by type of definition used.

 

Table 6: Levels and regions at which the informal sector has been measured, by type of definitions (criteria used).

 

Note: establishment surveys are excluded. Figures in bold refer to a set of criteria complying with the international definition and figures between brackets refer to national definitions that do not fit with the international definition.

 

At national level and without taking establishment surveys into account, 32 surveys (nearly 63%) have been conducted that used definitions fitting with the international standard: it means that, in parallel with another criterion, the legal status has been recorded (or at least the existence or not of a complete set of accounts) that allows to classify the economic unit in the household sector. Non- registration also could be a criterion, but in transition countries, not only incorporated firms must be registered, but also individual enterprises, so that the criterion may be too narrow. Among these 32 surveys, 19 were carried out in Africa, 6 in Asia, 5 in transition countries, but only 2 in Latin America. All levels confounded, it is in Africa that the international definition was the most widely applied (32 surveys out of 44)  and in Latin America that it was the least widely (7 out of 27). The reason is that in Latin America, data on informal sector are collected through regular (quarterly or annual) labour force surveys with a single question on size and neglecting the criterion of legal status. For the two countries in which the two measures exist (Mexico national and urban, and Brazil urban), a comparison between the two estimates can be made that throws light on the annual estimate prepared by the ‘Panorama Laboral’ of the ILO in Latin America and the gap with the estimate based on the international definition.

 

Table 7 hereafter lists countries by geographical level of coverage, type of survey and application of a standard international definition for the informal sector. As already noted, the requirement of the use of legal status as a necessary criterion can be achieved by the implementation of such a criterion in the survey questionnaire, but it can also be met by the use of a question on fiscal registration for VAT (incorporated firms cannot escape VAT registration so that non registration for VAT excludes incorporated firms by definition). The use of the criterion of employment status (enterprises run by own-account workers or employers) does not meet the requirement of at least one complementary criterion among three (size, registration of the enterprise, or registration of the employees) for defining the informal employers.

 

46 observations can be used that are reasonably comparable in terms of definitions, but not in terms of geographical coverage and methodologies: 25 in Africa, and 7 in each of the three other regions (Asia, Latin America and transition countries). If we decide to limit the comparisons to national coverage, the number of observations fall to 36 and the number of countries to 26 (and even 24 because the results for Algeria 2003 and Namibia 2002 are not yet available). The urban mixed survey for Brazil can be added to this sample, because the results can be extended to the whole country by using the labour force survey in rural areas. The same extension can be processed for Mexico surveys in main urban areas in 1998 and 2000. Also, the Tunisian micro-enterprise survey can be combined with the national labour force survey to provide comparable data.

 

Finally comparable estimates of size and composition of the informal sector as it is internationally defined can be made for 26 countries (13 in Africa, 4 in Asia, 3 in Latin America and 6 in transition economies). In this sample, major countries by their population are included (Nigeria, South Africa, Ethiopia for Africa; India, Pakistan and Turkey for Asia; Brazil and Mexico for Latin America; and Russia and Ukraine for transition countries).

 

At capital city level (table 7bis), 13 observations are available and comparable, among which 10 are in Africa (and 8 have been collected through a same survey methodology by AFRISTAT for the West African Economic and Monetary Union).

 

 

 

 

 

 

 

 

Table 7: Levels and regions at which the informal sector has been measured according to the international definition, by type of surveys.

 

Note: establishment surveys are excluded.

 

Table 7bis:   Regions in which the informal sector has been measured at capital city level and according to the international definition, by type of surveys.

 

Note: establishment surveys are excluded.

 

As to countries which did not use the international definition, they are the ones which are able to provide rather long time series: most Latin American countries and Thailand. Uganda, Zambia and Zimbabwe can also provide one-shot observations. In all these countries, the definition used is the size in terms of workers or employees: the difficulty lies in that the legal status has not been recorded so that the estimates for the informal sector may include some small-sized incorporated firms.

 

Tables 8 to 11 hereafter finally present the absolute figures which are necessary to compile the main indicators for measuring size and composition of the informal sector in the various regions of the world (tables 12 and 13). The variables to be made available (by sex and, where possible, by urban/rural areas) are:

 

-     total employment, 

-       agricultural employment, 

-     non agricultural employment, 

-       employment in industries,

-       employment in trade,       

-       employment in services, 

-     total paid employment (agricultural, non agricultural),  

-     total self-employment (agricultural, non agricultural),  

-     total secondary jobs (including/excluding agriculture)

 

For each of these variables, their counterpart in the informal sector must be provided so that most indicators necessary for international comparisons can be calculated. The availability of the data for urban areas makes it possible to increase the data base of countries for which a comparison is possible: however the experience shows that countries with national data cannot always provide details by urban/rural areas. It should also be noted here that the definition of urban areas may widely vary from one country to the other.

 

Table 8:            Size and composition of employment in the informal sector at national level in Africa.

 

Countries	Type of survey	Years	Total employ-ment	Non-agricultural employment	Total informal sector employ-ment	Non-agricultural informal sector employment	Self-employ-ment in the informal sector	Paid- employ-ment in the informal sector	Industrial employ-ment in the informal sector	Trade employ-ment in the informal sector	Services employ-ment in the informal sector	Women in employment in the informal sector
Kenya	Mixed	1999	12,841,607	5,165,020		1,726,743	1,456,011	279,732	285,705	1,088,463	352,575	740,533
Mali	Mixed	1989	3,329,317	870,870		745,347 779,138 sec	675,339	70,008	307,416	300,241	137,690	536,026
	Mixed	1996	3,742,576	1,249,564		1,175,840	1,045,885	129,955
Morocco	Mixed	1999-00	9,360,321	4,881,420		1,901,947	1,581,893	320,054	609,206	917,023	375,718	253,149
Niger	Mixed	1995	2,224,955			847,312	794,779	52,533
Nigeria	Mixed	1998	58,363,682	28,898,761		12,407,349
South Africa	Mixed	2001	11,712,000	10,312,000	3,010,000	2,915,000	2,482,000	433,000	428,000	1,936,000	551,000	1,617,000
Tanzania	LFS main activity	1991	10,889,205	1,725,146		942,487	796,383	146,104	344,044	571,032	27,411	338,214
	Mixed main and secondary	1991				2,133,003	1,911,333	221,670	711,408	1,213,700	207,895	789,972
	Mixed Main activity	2000-01	16,914,805	3,025,298		1,439,847* including 40,316 in urban agriculture	1,365,838	74,009	256,293	1,006,453	136,785	677,966
	Mixed Main and secondary	2000-01				2,802,858	2,660,698	142,160				1,317,339
Algeria	LFS	1992
	LFS	1997
	LFS	2001
Botswana	LFS	1995-96	345,405	313,972		55,801 60,501 sec	28,839	26,962				39,430
Ethiopia	LFS	1999	24,896,577	5,027,483	4,814,815	3,256,213						2,337,417
Ghana	GLSS	1991-92
	GLSS	1999	7,720,000	3,474,000	5,620,160	2,647,960	2,478,120	269,840				1,839,079
Guinea	LSHS	1994-95	3,395,491	814,917		1,037,075	1,005,076	31,999	350,229	640,991	45,855
South Africa	OHS	1999	10,369,000			2,705,000						1,544,000

 

 

Table 9: Size and composition of employment in the informal sector at national level in Asia.

 

 

 

Table 10: Size and composition of employment in the informal sector at national level in Latin America.

 

 

Table 11: Size and composition of employment in the informal sector at national level in Transition countries.

 

 

 

Table 12: Main indicators for the informal sector in Africa

                                   

 

 

 

Table 13: Main indicators for the informal sector in Asia, Latin America and Transition countries

 

                                   

 

Several major lessons for conceptualisation, data collection and design of indicators can be drawn from such an exercise of compilation: they concern the lack of data on total employment, the measurement of secondary activities and the inconsistencies in methods of computation of the indicators.

 

The lack of data on total employment leads to shortcomings in the calculation of the share of the informal sector in the economy: concerning the mixed surveys, it is very usual that the reports of the surveys on the informal sector do not provide the required figures for total employment and non-agricultural employment, not even at least the global figures that are necessary to compute the indicators. Such is the case for instance in Niger, Nigeria, Morocco and Tanzania. For the two latter countries, data on employment can be found in the report on the labour force survey which constitutes the first step of the mixed survey, but the two publications are independent and the users may be confused. In the case of Niger and particularly Nigeria, data on employment must be looked for in independent surveys, so that the user is not ensured that the two sources are consistent in terms of concepts, methodologies and coverage: it was even impossible to find an estimate for non-agricultural employment in Niger, and in Nigeria where absolute figures on employment are so rare (the regular household surveys only provide percentages), it was necessary to use the results of a household survey conducted for an ILO project on occupational injuries.

 

The measurement of secondary activities (multiple activities) is a must of informal sector surveys. However the ways this information is treated in the survey reports is confusing and obscuring the real size and weight of the phenomenon. It has become common – and it is right to do so – to implement the enterprise questionnaires of the second stage of mixed surveys for those activities that are undertaken as secondary activities: Mali, Tanzania, Russia, Ukraine, India have done so, among others. The issue raised by this type of measures is that they are not strictly comparable with total employment: they should be compared to the total number of jobs in the economy but still those second jobs holder may employ family workers or even paid employees for whom the job is not a secondary job. But in most cases, the secondary jobs are undertaken as own-account workers and the comparability of data would require to subtract their number (but not their employees) from total informal sector employment for comparison with total employment. If not subtracted, informal sector employment should be compared with the total number of jobs. Finally, data on employment should be comprised of the usual labour force absolute figures for main activities and the number of jobs (main and secondary) in the economy. These data are generally missing, and sometimes – rarely – provided in another report of the labour force survey (and not in the report of the informal sector survey). The indicator for employment in the informal sector, that is to say employment in the informal sector (including secondary activities) at the numerator and total employment (or non-agricultural employment) at the denominator, is therefore generally overestimated because the denominator is simply the employment  figure rather than the total number of jobs.

 

The difficulty is even greater when the indicator is calculated for non-agricultural employment because many active persons may have a secondary activity in agriculture (or in the primary sector).

 

There also may be inconsistencies in methods of computation of the indicators: secondary activities can be a cause of these inconsistencies. Another one is that sometimes the indicator is calculated by comparing informal sector employment with total employment in the same industrial sectors: such a request for comparable coverage is justified for agriculture (and the primary sector in general), but it is not for the detailed industries which are exclude from the informal sector by national definitions or even by the international definition: mining, energy, public utilities, civil service, domestic services, etc. The subtraction of these activities from total employment or non-agricultural employment is not correct and throws some misunderstanding by overestimating the relative size of the informal sector.

 

Concerning the labour force surveys as a means for measuring the informal sector, it can be observed a frequent lack of detailed cross-classification because the informal sector is then treated as a variable among many others and classification by industries, employment status, occupations are often missing: it is the case for Ethiopia for example. But a major issue in countries where the labour force survey is the first stage of a mixed survey is that the ‘simultaneous’ estimates of the informal sector in the labour force survey and in the enterprise survey can show a gap which is far from negligible between the two sources: India is a typical example of such discrepancies. In the 1999-2000 survey, the gap between the two figures was as high as 15%, not even taking into account the rectification of labour force data on the basis of population census projections, a procedure that cannot be applied to the establishment survey.

 

In the compilation of surveys presented above, the LSMS kind of surveys has been included in two cases: Ghana and Guinea. Recent changes in the design of the questionnaires make it possible to apply the international definition for the informal sector and for informal employment: it should be noted that these surveys can be assimilated to mixed surveys as a complete section of the questionnaire covers non-agricultural household enterprises (up to three or four enterprises per household are captured, including secondary activities): however the published results that can be used for our purpose are the data on employment coming from the household roster. The sample size is too small for allowing the publication of results other than distribution and percentages: for the present exercise however, we have used the basic information provided by the survey on population and activity rates to generate absolute figures allowing the calculation of the set of indicators. In the case of Guinea however, employment in the informal sector exceeds total non-agricultural employment: a result which overemphasises the issue of secondary activities already raised above, without any possibility for identifying the secondary activities separately.

 

Another striking observation emerging from this compilation of surveys is the very small number of mixed surveys and labour force surveys applying the international definition of the informal sector in Latin America. Apart from Jamaica, Mexico is the only country to have carried out  a mixed survey on the informal sector and micro-enterprises on a regular basis at urban level first, then at national level. Brazil also carried out a mixed survey in urban areas in 1997.  However there exists  a rather long time-series of estimates on informal sector in Latin America: actually the longest time-series available, prepared by the ILO team in Latin America (to be distinguished from the ILO Statistics Bureau): these estimates are annually published in the ‘Panorama Laboral’ and are presented in table 14 hereafter. They are based on the annual or quarterly labour force surveys that have been conducted in most Latin American countries since at least two decades.

 

The use of this time-series is however difficult for at least two reasons. The first reason is that these estimates do not apply the international definition of the informal sector. They do not because they cannot: most of the labour force surveys in the region collect only one information on the economic unit in which the person works: size in terms of number of workers; the legal status is not known, so that the definition of informal sector is comprised of small-size incorporated firms that can be many in emerging economies. The second reason is that the applied definition excludes professionals (which should not be systematic according to the international definition) and includes paid domestic servants: however in this second case, their number is known and can be excluded (what has been done in table 14 which consequently differs from the published tables).

 

Although the estimates are made for non-agricultural employment, some issues of the publication mentioned urban employment , which throws some ambiguity on the exact coverage of the estimates.

 

Until 1997 (1998 publication), the size limit was up to 5 or 10 workers, depending on national circumstances, but later on (in the following publications), the size was strictly limited to 5 workers: therefore there is a break in the time series or rather there are two time-series which are slightly different: the previous one is presented between brackets on table 14, and for the common years, it can be seen that the estimates are slightly higher, especially for micro-enterprises.

 

Finally the informal sector as defined in this time-series is comprised of the own-account and family workers (without professionals) and the micro-enterprises with 5 workers or less (including the incorporated firms which could not be distinguished); domestic servants are excluded.

 

Table 14:   Trends in informal sector employment according to ILO estimates. 1990-2002.

 

	Own-account workers	Micro-enterprises	Total informal sector	Workers not contributing to social security
Latin America
1990	22.2 (24.7)	14.7 (20.1)	36.9 (44.8)
1991	(25.1)	(20.6)	(45.7)
1992	(25.6)	(20.7)	(46.3)
1993	(25.4)	(21.4)	(46.8)
1994	(25.9)	(21.8)	(47.7)
1995	24.0 (26.7)	14.8 (22.2)	38.8 (48.9)
1996	(27.3)	(22.7)	(50.0)
1997	(27.1)	(23.0)	(50.1)
1998	24.7	16.3	41.0
1999	23.9	15.8	39.7
2000	24.6	15.6	40.2
2001	23.6	15.9	39.5
2002	23.9	15.8	39.7
Argentina
1990	(24.7)	(14.9)	(39.6)
1991	27.5 (25.3)	18.8 (15.4)	45.3 (40.7)
1992	(25.9)	(15.9)	(41.8)
1993	(26.6)	(16.3)	(42.9)
1994	(27.0)	(18.1)	(45.1)
1995	(27.2)	(18.5)	(45.7)
1996	(27.1)	(18.7)	(45.8)
1997	(26.5)	(19.2)	(45.7)
1998	22.7	20.3	43.0
1999
2000
2001	20.6	19.1	39.7
2002	20.6	18.6	39.2
Bolivia
1990	(37.7)	(12.8)	(50.5)
1991	(37.8)	(11.5)	(49.3)
1992	(38.2)	(12.5)	(50.7)
1993	(36.4)	(18.3)	(54.7)
1994	(37.1)	(19.0)	(56.1)
1995	(39.6)	(18.6)	(58.2)
1996	(37.7)	(19.9)	(57.6)
1997	(35.4)	(17.2)	(52.6)
Brazil
1990	20.3 (21.0)	13.5 (23.3)	33.8 (44.3)
1991	(21.7)	(23.8)	(44.5)
1992	(22.5)	(24.0)	(46.5)
1993	(21.9)	(24.7)	(46.6)
1994	(22.4)	(25.0)	(47.4)
1995	23.8 (23.0)	13.2 (25.2)	37.0 (48.2)
1996	(23.8)	(26.0)	(49.8)
1997	(24.3)	(26.3)	(50.6)
1998	23.2	14.0	37.2
1999	24.0	13.7	37.7
2000
2001	22.3	14.3	36.6

 

	Own-account workers	Micro-enterprises	Total informal sector	Not contributing to social security
Chile
1990	20.9 (23.6)	11.7 (18.3)	32.6 (41.9)
1991	(23.1)	(19.1)	(42.2)
1992	(22.7)	(19.6)	(42.3)
1993	(22.6)	(20.6)	(43.2)
1994	(24.2)	(20.6)	(44.8)
1995	(23.9)	(20.8)	(44.7)
1996	18.9 (22.7)	12.8 (21.4)	31.7 (44.1)
1997	(23.0)	(21.7)	(44.7)
1998	18.5	13.9	32.4
1999
2000	19.7	12.5	32.2
2001
2002
Colombia
1990	24.1 (23.5)	19.5 (26.3)	43.6 (49.8)
1991	(23.7)	(26.7)	(50.4)
1992	(23.6)	(27.0)	(50.6)
1993	(23.8)	(26.7)	(50.5)
1994	(23.9)	(26.5)	(50.4)
1995	(24.7)	(26.0)	(50.7)
1996	(25.6)	(25.2)	(50.8)
1997	(24.8)	(25.9)	(50.7)
1998	28.1	18.8	46.9
1999
2000	32.2	18.1	50.3
2001
2002
Costa Rica
1990	18.9 (18.1)	16.4 (18.4)	35.3 (36.5)
1991	(19.0)	(20.0)	(39.0)
1992	(17.6)	(18.6)	(36.2)
1993	(18.6)	(20.1)	(38,7)
1994	(17.8)	(23.1)	(39.9)
1995	18.5 (18.1)	19.7 (21.5)	38.2 (39.6)
1996	(17.4)	(24.7)	(42.1)
1997	(18.8)	(22.6)	(41.4)
1998	17.5	21.9	39.4
1999	18.4	21.6	40.0
2000	19.7	19.5	39.2
2001	20.4	19.3	39.7
2002

 

 

	Own-account workers	Micro-enterprises	Total informal sector	Not contributing to social security
Ecuador
1990	35.4 (33.5)	15.3 (15.0)	50.7 (48.5)
1991	(32.5)	(20.1)	(52.6)
1992	(34.3)	(19.5)	(53,8)
1993	(33.2)	(19.3)	(52.5)
1994	(31.5)	(19.5)	(51,0)
1995	33.6 (32.9)	25.0 (18.7)	58.6 (51.6)
1996	(33.0)	(18.9)	(51.9)
1997	(30.4)	(17.4)	(47.8)
1998	33.0	19.5	52.5
1999
2000	31.0	15.3	46.3
2001	34.7	17.2	51.9
2002	33.5	16.5	50.0
El Salvador
2002	32.0	14.5	46.5
Honduras
1990	37.3 (36.3)	13.3 (10.8)	50.6 (47.1)
1991	(35.0)	(9.0)	(44.0)
1992	(35.1)	(8.9)	(44.0)
1993	(27.5)	(11.6)	(39.1)
1994	(32.5)	(13.4)	(45.9)
1995	35.5 (34.0)	16.0 (15.1)	51.5 (49.1)
1996	(36.5)	(13.8)	(50.3)
1997	(38.1)	(12.7)	(50.8)
1998	37.0	15.9	52.9
1999	39.6	15.6	55.2
2000
2001
2002	37.3	23.5	60.8
Mexico
1990	19.0 (30.3)	14.8 (19.6)	33.8 (49.9)
1991	(30.5)	(19.8)	(50.3)
1992	(35.0)	(20.0)	(55.0)
1993	(30.6)	(20.9)	(51.5)
1994	(30.7)	(20.9)	(51.6)
1995	20.9 (32.3)	17.0 (21.7)	37.9 (54.0)
1996	(32.5)	(22.3)	(54.8)
1997	(31.2)	(22.6)	(53.8)
1998	24.9	19.8	44.7
1999	18.3	17.0	35.3
2000	18.3	17.2	35.5
2001	18.6	17.2	35.8
2002	19.5	17.3	36.8

 

	Own-account workers	Micro-enterprises	Total informal sector	Not contributing to social security
Nicaragua
2002	31.9	22.5	54.4
Panama
1990	(20.4)	(12.8)	(33.2)
1991	19.8 (19.7)	8.3 (13.6)	28.1 (33.3)
1992	(19.0)	(14.0)	(33.0)
1993	(18.2)	(13.7)	(31.9)
1994	(19.5)	(12.9)	(32.4)
1995	20.5 (20.5)	9.0 (13.2)	29.5 (33.7)
1996	(20.7)	(13.9)	(34.6)
1997	(21.5)	(13.0)	(34.5)
1998	21.5	10.1	31.6
1999	22.6	9.7	32.3
2000	22.2	8.3	30.5
2001
2002	24.4	11.1	35.5
Paraguay
1990	(21.2)	(29.4)	(50.6)
1991	(23.0)	(29.0)	(52.0)
1992	(22.2)	(29.0)	(51.2)
1993	(21.5)	(29.5)	(51.0)
1994	(22.3)	(34.9)	(57.2)
1995	(25.3)	(29.7)	(55.0)
1996	(26.9)	(31.0)	(57.9)
1999	27.7	20.7	48.4
2002	30.9	19.4	50.3
Venezuela
1990	22.3 (22.1)	12.4 (12.6)	34.7 (34.7)
1991	(22.2)	(12.2)	(34.4)
1992	(22.2)	(11.8)	(34.0)
1993	(24.1)	(11.1)	(35.2)
1994	(27.3)	(14.5)	(41.8)
1995	28.1 (27.0)	14.0 (17.6)	32.1 (44.6)
1996	(28.1)	(17.2)	(45.3)
1997	29.9	15.8	45.7
1998	28.9	9.4	38.3
1999	32.4	14.3	46.7
2000	34.5	13.8	48.3
2001	32.2	17.3	49.5
2002

Sources: Sources: ILO, Panorama Laboral, 1998, 1999, 2000, 2001, 2002, 2003.

Note: Figures between brackets are from the series published in Panorama Laboral 1998.

 

Since 1998, the publication also comprises a table indicating the proportion of paid employees (as domestic servants, workers of micro-enterprises and workers in the formal sector) who pay contributions to the social security funds. Adding up these numbers with the number of own-account and family workers, we can obtain an estimate of informal employment along the lines of the new definition adopted by the 17^th International Conference of labour Statisticians in 2003.

 

How far do the two concepts of informal sector developed by the ILO-Latin America and by the 15^th ICLS diverge? Table 15 below presents various series along various definitions and various methods of calculation for Mexico, the only country for which the different series are available.

 

Table 15:   Size of the informal sector according to the ILO-PREALC estimates and according to the international definition as implemented by INEGI (in % of non-agricultural employment)

 

Sources: ILO, Panorama Laboral, 1998, 1999, 2000, 2001, 2002, 2003.

Note:       figures in italics are calculated on the basis of absolute figures for non-agricultural employment.

 

Let us focus on the ILO series 1998-2003 and especially the year 1999 (because the 1998 figure seems very high and corresponds to a table referring to ‘urban employment’ and not ‘non-agricultural employment’): compared with the series from INEGI for non-agricultural employment, the difference is of 4.7 percentage points (35.3% for ILO against 40.0% for INEGI. However the indicator has been computed on the same coverage as to the industrial sectors (a cause of overestimation, as mentioned earlier): if the absolute figures for employment in the informal sector are compared to total non-agricultural employment (at the denominator), the indicator (in italics on table 15) falls down to 29.3% and the gap becomes negative by 6 percentage point (35.3% for ILO against 29.3% for INEGI), which is more logical as the ILO figures are overestimated by the inclusion of small-size incorporated firms, and the new estimate for 2000 is consistent with this latter value.

 

Consequently the proxy used by the ILO Latin America seems to overestimate the informal sector by 6 to 7 percentage point: the complete time-series could be reconstituted that would show the trends of this component of small-size incorporated firms over the years.

 

Conclusion

 

As a conclusion, it can be stressed that more than ten years after the adoption of the international definition of the informal sector by the 15^th International Conference of labour Statisticians, the compilation and calculation of harmonised indicators and estimates remain difficult and hazardous. Harmonisation is still a hard task ahead in the field of informal sector statistics. The Delhi Group should strongly recommend a list of strictly defined indicators with their precise methods of calculation and it should encourage the systematic gathering of absolute figures required for their calculation.

 

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Mauritius

 

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Planning Commission and Ministry of Labour and Youth Development (sd), Tanzania, The Informal Sector, 1991, Tanzania mainland, Dar es Salaam, 82p. + 40p.+ 81p.

 

Planning Commission and Ministry of Labour and Youth Development (sd), The Dar es Salaam Informal Sector, 1995, Vol.1 Analysis and Tabulations, Dar es Salaam, 119p. +88p.

 

National Bureau of Statistics (2002), Integrated Labour Force Survey 2000-2001, Dar es Salaam, NBS, 168p. + appendices.

 

Tunisia

 

Institut National de la Statistique (2002), Les Micro Entreprises en 1997, Analyse des Résultats de l’Enquête Nationale sur les Activités Economiques des Micro-Entreprises de 1997, INS, Tunis, 129p.

 

Zambia

 

Chinganya O. J. M. (1997), Experiences of data collection on informal sector from household budget survey, Central Statistical Office,  18p.

 

ASIA

 

India

 

Central Statistical Organisation (2001),  Economic Census 1998, All India Report, New Delhi, 144p.

 

National Sample Survey Organisation (2001a), Informal Sector in India 1999-2000, Salient Features, NSS 55^th round July 1999-June 2000, New Delhi, 51p. + 239p.

 

National Sample Survey Organisation (2001b), Non-agricultural workers in Informal Sector based on Employment-Unemployment Survey 1999-2000, NSS 55^th round July 1999-June 2000, New Delhi, 54p. + 104p.

 

Indonesia

 

BPS (1999), Contribution of the Small Scale, Medium and Large Enterprises to GDP and Labour Absorption, Final Report, Jakarta,

 

La Ode Syafiuddin (sd), Informal Sector Statistics in Indonesia, Central Bureau of Statistics,

 

Japan

 

Government of Japan, Management and Co-ordination Agency, Statistics Bureau (1996), Annual Report on the Unincorporated Enterprise Survey, 1995, Tokyo, 142p.

 

Nepal

 

Central Bureau of Statistics (1999), Report of the Nepal Labour Force Survey 1998-1999, Kathmandu, 148p.

 

Ganga Devi Dabadi (sd), Estimating the Extent of Informal Sector in the Nepalese Economy,

 

Sri Lanka

 

Department of Labour (2002), Employment Survey 2001, 46p.

 

Thailand

 

National Statistical Office (1995), Formal and Informal Labor Force Market, 1994 Labor Force Survey, Bangkok, 59p. + 55p.

 

Turkey

 

State Institute of Statistics (2003), Employment in Small and Unincorporated Enterprises 2000, Ankara, 123p.

 

LATIN AMERICA

 

Argentina

 

Pok C. (1992), Precariedad laboral: personoficaciones sociales en la frontera de la estructura del empleo, Seminario Interamericano sobre la medicion del sector informal, Lima Agosto 1992, 37p.

 

Brazil

 

IBGE (1993), Trabalho no Brasil, Vol 1: Brasil e Grandes Regioes 1989, Pesquisa Nacional por Amostra de Domicilios-PNAD, IBGE, Rio de Janeiro, 312p.

 

IBGE (1996), Economia Informal Urbana, Municipio do Rio de Janeiro 1994, IBGE, Rio de Janeiro, 62p.

 

IBGE (1994), Mapa do Mercado de Trabalho no Brasil, n°1, Rio de Janeiro, 206p.

 

IBGE (1999), Economia Informal Urbana 1997, Vol 1: Brasil e Grandes Regioes, IBGE, Rio de janeiro, 345p.

 

Colombia

 

Caro B. L. (sd), Evolucion del Sector informal en Colombia 1984-1992, Departamento Nacional de Planificacion, Santafé de Bogota, 19p. + annexes.

 

Peres Rokhas V. y Suarez River A. (1998), El sector informal en Santafé de Bogota, DC.: Empleo, productividad y condiciones legales, Departamento Administrativo Nacional de Estadistica, DANE, 98p. + anexo.

 

Mexico

 

INEGI (2000), El Empleo en el Sector Informal Urbano en Mexico en la Decada de los Noventa, Mexico, 101p.

 

INEGI (2002), Encuesta Nacional de Empleo 2000, INEGI , Secretaria del Trabajo y Prevision Social, Mexico.

 

Pollack M. and Jusidman C. (1997), El Sector Informal Urbano desde la Perspectiva de Genero. El Caso de Mexico,  Naciones Unidas, Santiago de Chile, 71p.

 

Paraguay

 

Direccion General de Estadistica, Encuestas y Censos (1997), Trabajadores en el Sector Informal Urbano, Encuesta de Hogares 1996, Paraguay.

 

Peru

 

INEI (1992), Peru: Estadisticas del Sector Informal, Resumen de resultados, Lima, 62p.

Venezuela

 

Instituto Nacional de Estadistica (2002), Indicadores de la fuerza de trabajo, Total Nacional, Primer semestre 2002, Caracas.

 

TRANSITION ECONOMIES

 

Moldova

 

Department for Statistics and Sociology (2003), Employment in the Informal Economy, Chisinau, DSS in co-operation with ILO and TACIS (EU), 33p.+ annexes. (ILO, ICLS/17/2003/RD.11).

 

Russia

 

Goskomstat (2002), Employment in the informal sector in the Russian federation, 2001, 18p. (in Russian).