Elements of the proposed unified data collection strategy

1
Elements of the proposed unified data collection
strategy

• Pietro GENNARI and Giovanni SAVIO
• UN-ESCAP UN-ESCWA
• Workshop on Informal Employment and Informal
  Sector Data Collection Strategy, Tools and
  Advocacy
• Amman, 13-15 April 2008

2
Objectives of presentation

• Background
• A unifying definition of the informal sector (IS)
• Elements of the unified data collection strategy
  (UDCS) and instruments for the measurement of the
  IS

3
Background (1)

• Main challenges and problems at
  national/international level
• Availability of statistical information on IS and
  its contribution to level/growth of GDP and
  employment
• When data are available, coverage, coherency over
  time and international comparability are relevant
  quality issues
• Main reasons for problems
• No unified definition of IS
• Limited experience in applying data collection
  methodologies
• High costs
• Excessive confidence in exhaustivity of
  traditional data collection instruments

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Background (2)
REGION Contributions of informal sector as of non-agricultural Contributions of informal sector as of non-agricultural
Employment GDP
Northern Africa 48 27
Sub-Saharan Africa 72 41
Latin America 51 29
Asia 65 31
Source ILO (2002), Women and Men in the Informal
Sector A Statistical Picture
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Background (3)

• Objectives of the DA project
• Develop a unifying definition of the IS
• Formulate an integrated data collection
  methodology on household unincorporated
  enterprises (HUE)
• Design implementation strategy and tools for data
  collection, processing and analysis

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Unifying definitionof IS (1)

• Start with existing international recommendations
  and definitions on IS
• Resolution on statistics on employment in the
  informal sector (15th ICLS, 1993)
• Guidelines concerning a statistical definition of
  informal employment (17th ICLS, 2003)
• Harmonized definition of the informal sector (3rd
  Delhi Group meeting, 1999)
• IRIS and IRTDS, UNSD

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Unifying definitionof IS (2)

• Definition of IS given in the framework of the
  15th International Conference of Labour
  Statisticians (ICLS) Resolution on Statistics of
  Employment in the Informal Sector, Jan. 1993, and
  included as annex in 1993 SNA, Ch. 4
• It has been considered for
• the benefit of those countries that wish to
  introduce the distinction between formal and
  informal sectors into their sub-sectoring of the
  household sector (1993 SNA, 4.159)

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Unifying definitionof IS (3)

• 5.1, 5.2 of the Resolution state that
• The informal sector may be broadly
  characterized as consisting of 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 where they exist are
  based mostly on casual employment, kinship or
  personal and social relations rather than
  contractual arrangements with formal guarantees.
  Production units of the informal sector have the
  characteristic features of household
  enterprises.

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Unifying definitionof IS (4)

• 6.1, 6.2 establish an operational definition of
  IS
• For statistical purposes, the informal sector
  is regarded as a group of production units which,
  , form part of the household sector as household
  enterprises or, equivalently, unincorporated
  enterprises owned by households. Within the
  household sector, the informal sector comprises
  (i) "informal own-account enterprises" and (ii)
  the additional component consisting of
  "enterprises of informal employers.
• (i) Household enterprises owned by own-account
  workers employing contributing family workers and
  employees on an occasional basis
• (ii) Household enterprises owned by employers
  employing one or more employees on a continuous
  basis

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Unifying definitionof IS (5)

• Informal own-account enterprises comprise,
  depending on national circumstances, either all
  own-account enterprises or only those which are
  not registered under specific forms of national
  legislation
• Enterprises of informal employers defined,
  depending on national circumstances, in terms of
  one or more of the following criteria
• Size of the unit below a specified level of
  employment
• Non-registration of the enterprise or its
  employees

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Unifying definitionof IS (6)
1. Household Sector
2. Unincorporated enterprises owned by households
3.a Own-account enterprises 3.b Enterprises of
employers

• 1. Size
• 2. Registration
• 3. Others

4. Informal sector enterprises
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Unifying definitionof IS (7)

• Concretely, how to go from step 3 to 4?
• Problems undermining comparability/coherence of
  IS estimates due, among other things, to
• Registration requirements change over time,
  across countries and registration with multiple
  entities
• Registration Illegal in some countries (?)
• Registration of enterprise vs employees
• Cut-off size of employees changes over time, and
  across countries (i.e. different levels of
  technology), and may depend on legislation and
  statistical considerations

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Unifying definitionof IS (8)
UNDERGROUND
ILLEGAL
INFORMAL
For statistical reasons
For economic reasons
Non- response
Not registered
Not updated
Under reporting
Not registered
Not registered
Not registered
T1
T2
T3
T4
T5
T6
T7
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Unifying definitionof IS (9)

• Main features of the unified data collection
  strategy for the IS (UDCS-IS)
• Expanded scope of data collection and greater
  flexibility
• Coherence with international recommendations
• Comprehensiveness (all units, areas, activities
  etc.)

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Unifying definitionof IS (10)

• HUEM1 Legal organization
• Production units that are not constituted as
  separate legal entities independently of their
  owners
• HUEM2 Book-keeping or accounting practice
• Production units that do not keep a complete set
  of accounts
• HUEM3 Product destination
• At least some of the products are sold/bartered
  in the market

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Unifying definitionof IS (11)
Household Enterprises Household Enterprises Household Enterprises Household Enterprises Household Enterprises Household Enterprises
Producing at least some goods services for market (HUEMs) Producing at least some goods services for market (HUEMs) Producing at least some goods services for market (HUEMs) Producing at least some goods services for market (HUEMs) Producing goods services only for own final use Producing goods services only for own final use
Non-agricultural Non-agricultural Agricultural Agricultural Goods Services
Formal sector Informal sector Formal sector Informal sector Agriculture, forestry, fishing Paid domestic services
Formal sector Informal sector Formal sector Informal sector Other activities Owner occupied dwelling services
Household Unincorporated Enterprises with some
Market Production (HUEMs)
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Unifying definitionof IS (12)

• IS enterprises are then differentiated from
  non-IS enterprises following the 15th ICLS
  operational definition
• First step classifying them as own-account
  enterprises and enterprises of employers
• Second step applying the two criteria of size
  and registration

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Unifying definitionof IS (13)

Informal own-account enterprises
Other own-account enterprises
Own-account enterprises
(1)
Enterprises of employers
Other enterprises of employers
Enterprises of informal employers
Informal sector
Criteria size, registration
(2)
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Elements of theUDCS (1)

• Start data collection with the HUEM as the
  statistical unit, applying the three criteria
  HUEM1-HUEM3
• Obtain data from HUEM on
• All forms of registration, according to country
  laws and regulations
• Employment size, disaggregated by owner, partner
  and paid employees
• Characteristics commonly associated with informal
  sector activities

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Elements of theUDCS (2)

• Starting point of data collection HUEM
• Cover all HUEMs
• Collect data, including IS-criterion related
  variables, on HUEMs
• Cover all relevant economic activities
• Including agriculture, forestry, fishing
• Cover whole country
• Including urban and rural

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Elements of theUDCS (3)

• Data colleted through variant of mixed
  household-enterprise survey called 1-2 Survey
• First phase Household survey, on which the
  sampling frame for the second phase is made
• Possibly build upon existing surveys with small
  changes, preferably LFS extended
• Second phase Enterprise survey
• Designed as a household-enterprise independent
  module based on outcomes of the enhanced LFS

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Elements of theUDCS (4)

• Objectives of Phase 1
• Estimate employment in the IS
• Identify HUEMs and their location
• Construct a sampling frame for the second phase
• Objectives of Phase 2
• Collect information on a range of statistics of
  the enterprise, including structural ones, in
  line with international recommendations

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Unifying definitionof IS (a)

• From a statistical/operational point of view, the
  Resolution considered three criteria to define
  the informal sector
• Legal status (selective, enterprise-based
  criterion)
• Type of employment (instrumental)
• Additional enterprise-based criteria (selective)
• According to the legal status, ICLS states that
  the informal sector is a sub-sector of the
  household sector. To be considered as part of the
  informal sector, the household enterprise would
  not be independent of its owner, and would not
  have a complete set of accounts. This criterion
  is thus consistent with the SNA concept of
  unincorporated enterprise in the household sector

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Unifying definitionof IS (a)

• The ICLS then separates household enterprises
  with employment by two types of employment
• Own-account enterprises household unincorporated
  enterprises that do not employ employees on a
  continuous basis
• Enterprises of informal employers household
  unincorporated enterprises that employ one or
  more employees on a continuous basis

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Unifying definitionof IS (a)

• Finally, to define the informal sector
  enterprises within household enterprises with
  employment, the ICLS uses two additional
  enterprise-based criteria
• Market production All or at least some of the
  goods or services produced are meant for sale and
  barter and thereby excluding production
  exclusively carried out for own final use
• Size and/or registration Size of employment
  should be under a 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

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Unifying definitionof IS (a)
15th ICLS Resolution Framework for informal
sector definition
Informal own-account enterprises Other own-account enterprises Own-account enterprises
Enterprises of informal employers Other enterprises of employers Enterprises of employers
Informal sector enterprises Other household unincorporated enterprises
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Unifying definitionof IS (a)

• Non-registration and lack of updated information
  (T2-T3, T5-T7) Due to missing or incorrect
  updating information from statistical and
  administrative sources
• Non-response (T1) Response implies wasting time,
  or units are afraid that information is used for
  administrative purposes, or because the
  questionnaire is badly designed or burdensome
• Underreporting (T4) Even if all units are
  included in the survey frame and the
  questionnaires have been completed there may
  still be a problem of misreporting. The
  respondent is understating income for tax
  purposes, either by overstating costs or
  understating revenues, and decides to make the
  same false declarations to NSO

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Unifying definitionof IS (a)

• The ICLS use of sector does not match the
  definition of 1993 SNA
• ICLS enterprise-based concept, built around
  production, income and employment and thereby
  mainly on the elements of the production account
• SNA refers to the presentation of a complete set
  of accounts of production, income, accumulation
  and balance sheets
• The word informal has several meanings
• may imply a formal-informal sector distinction
  between household enterprises
• can refer to exhaustiveness of data collection
  practices as well as a production unit with
  specific characteristics

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Unifying definitionof IS (a)

• ICLS use of households is narrower than the
  meaning in the national accounts framework. In NA
  the term not only refers to households as
  producers, but also as consumers, lenders and
  borrowers
• Then, the different meanings of sector, informal,
  households and formal will be clarified and
  explained in the updated SNA

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Unifying definitionof IS (a)

• ICLS uses non-registration to identify informal
  enterprises within household enterprises in many
  countries this may coincide with lack of legal
  status and of accounts
• ICLS refers only to production units that engage
  labor as input national accounts refer also to
  those that do not use labor inputs such as
  owner-occupied dwellings, trusts and other funds
• Then, the updated SNA will describe the
  differences between the ICLS and SNA definitions
  of the types of production units and, where
  possible, reconcile the differences (via bridge
  tables)

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Unifying definitionof IS (a)

• Criterion for market production
• SNA market producers are those that sell most
  or all of their production on the market at
  economically significant prices
• ICLS uses the phrase some or all
• The ICLS definition of market producers broadens
  the universe of household enterprises with market
  production as compared to the SNA. If the SNA
  definition of market production had been applied,
  a large segment of the household enterprises in
  many countries should be classified as producers
  for own final use and therefore excluded from the
  informal sector

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Unifying definitionof IS (a)

• ICLS refers to the universe of household
  unincorporated enterprises that use labor inputs.
  Consequently, household enterprises in the SNA
  universe that have no labor inputs in the
  production process (mainly owner-occupied
  dwellings producing housing services for own
  final use) are excluded from ICLS
• All economic activities (SNA) versus
  non-agricultural activities (ICLS)

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Unifying definitionof IS (a)

• Introduction
• The informal sector a broad statistical
  perspective (terminology, importance, statistical
  challenges, etc.)
• Definition of informal sector
• Other concepts (including other forms of NOE)
• Measurement issues

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Unifying definitionof IS (a)

• Direct methods for estimation of the informal
  sector include
• Labour Force Surveys
• Household Income and Expenditure Surveys
• Informal Sector Enterprise Surveys
• Informal Sector Mixed Household-Enterprise Surveys