International Labour Office

1
Informal employment Review of concepts and
methods

• Elisa M. Benes
• Department of Statistics
• International Labour Office

2
Background

• Recognition that
• Informalisation of employment goes far beyond the
  informal sector
• Rise in various forms of informal (or
  non-standard, atypical, alternative, irregular,
  precarious, etc.) employment in most countries
• Broad concern with social and legal protection of
  employment

3
Delhi Group(5th Meeting, 2001)

•  The definition and measurement of employment in
  the informal sector needs to be complemented
• with a definition and measurement of informal
  employment 

4
International standards

• Guidelines concerning a statistical definition of
  informal employment (17th ICLS, 2003)

5
Conceptual frameworkEmployment in the informal
economy
Production units Informal jobs Formal jobs
Informal sector enterprises A B
Other units of production C D
Employment in the informal sector A
B Informal employment A C Informal
employment outside the informal sector C
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Conceptual framework for informal employment
(17th ICLS)

• Objective Relate enterprise-based concept of
  employment in the IS in coherent consistent
  manner with 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

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Conceptual framework for informal employment
(17th ICLS)

• Observation unit for employment Jobs rather than
  employed persons (reason existence of multiple
  jobholding)
• Approach Total employment classified by
• (i) type of production unit
• and
• (ii) type of job

8
Production units by type Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment
Production units by type OAW OAW Employers Employers CFW Employees Employees MPC MPC
Production units by type I F I F I I F I F
Formal Sector Enterp. 1 2
Informal Sector Enterp. 3 4 5 6 7 8
Households 9 10
9
Production units by type

• Formal sector enterprises corporations (incl.
  quasi-corporate enterprises), non-profit
  institutions, government units including
  unincorporated enterprises own by governments,
  and those private unincorporated enterprises
  producing goods or services for sale or barter
  which are not part of the IS
• Informal sector enterprises as defined by 15th
  ICLS, excluding households employing paid
  domestic workers (as recommended by Delhi Group)
• Households households producing goods
  exclusively for their own final use, and
  households employing paid domestic workers

10
Production units by type Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment
Production units by type OAW OAW Employers Employers CFW Employees Employees MPC MPC
Production units by type I F I F I I F I F
Formal Sector Enterp. 1 2
Informal Sector Enterp. 3 4 5 6 7 8
Households 9 10
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Jobs by type

• Status in employment (ICSE-93)
• own-account workers, employers, contributing
  family workers, employees, and members of
  producers cooperatives.
• Needed for definitional purposes and considered
  useful for analytical and policy-making purposes
• Nature of job
• informal vs. formal

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Production units by type Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment
Production units by type OAW OAW Employers Employers CFW Employees Employees MPC MPC
Production units by type I F I F I I F I F
Formal Sector Enterp. 1 2
Informal Sector Enterp. 3 4 5 6 7 8
Households 9 10
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Type of cells

• Dark
• Jobs that, by definition, do not exist (e.g.
  contributing family workers in household
  non-market production units)
• Light
• Formal jobs (e.g. employees holding formal jobs
  in formal sector enterprises)
• Unshaded
• Informal jobs

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Definition of informal employment (17th ICLS)

• Total number of informal jobs, whether carried
  out in formal sector enterprises, informal sector
  enterprises, or households, during a given
  reference period

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Production units by type Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment
Production units by type OAW OAW Employers Employers CFW Employees Employees MPC MPC
Production units by type I F I F I I F I F
Formal Sector Enterp. 1 2
Informal Sector Enterp. 3 4 5 6 7 8
Hholds 9 10
Informal Employment Cells 1 2 3 4 5
6 8 9 10
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Components of informal employment
Production units by type Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment
Production units by type OAW OAW Employers Employers CFW Employees Employees MPC MPC
Production units by type I F I F I I F I F
FS entr 1 2
IS entr 3 4 5 6 7 8
Hholds 9 10

• Cells 3 4 Own-account workers and employers
  employed in their own informal sector enterprises
• Informal nature of jobs determined by
  characteristics of the enterprise

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Components of informal employment
Production units by type Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment
Production units by type OAW OAW Employers Employers CFW Employees Employees MPC MPC
Production units by type I F I F I I F I F
FS entr 1 2
IS entr 3 4 5 6 7 8
Hholds 9 10

• Cell 8 Members of informal producers
  cooperatives
• Informal nature of jobs determined by
  characteristics of the cooperative

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Components of informal employment
Production units by type Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment
Production units by type OAW OAW Employers Employers CFW Employees Employees MPC MPC
Production units by type I F I F I I F I F
FS entr 1 2
IS entr 3 4 5 6 7 8
Hholds 9 10

• Cell 9 Own-account workers engaged in production
  of goods exclusively for own final use by their
  household
• If considered employed (13th ICLS)

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Components of informal employment
Production units by type Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment
Production units by type OAW OAW Employers Employers CFW Employees Employees MPC MPC
Production units by type I F I F I I F I F
FS entr 1 2
IS entr 3 4 5 6 7 8
Hholds 9 10

• Cells 1 5 Contributing family workers working
  in formal or informal sector enterprises
• No written employment contracts employment not
  subject to labour legislation, social security
  regulations, collective agreements, etc.

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Components of Informal employment
Production units by type Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment
Production units by type OAW OAW Employers Employers CFW Employees Employees MPC MPC
Production units by type I F I F I I F I F
FS entr 1 2
IS entr 3 4 5 6 7 8
Hholds 9 10

• Cells 2, 6 10 Employees holding informal jobs,
  whether employed by formal sector enterprises,
  informal sector enterprises, or as paid domestic
  workers by households.

NEW element
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Definition of informal jobs of employees

• Employees are considered to have informal jobs if
  their employment relationship is, in law or in
  practice, not subject to national labour
  legislation, income taxation, social protection
  or entitlement to certain employment benefits
  (advance notice of dismissal, severance pay, paid
  annual or sick leave, etc.)

Note Definition covers (i) de jure informal jobs
and (ii) de facto informal jobs.
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Reasons for informal jobs of employees

• Non-declaration of the jobs or the employees
• Casual jobs or jobs of a limited short duration
• Jobs with hours of work or wages below a
  specified threshold (e.g. for social security)
• Employment by unincorporated enterprises or by
  persons in households
• Employees place of work is outside the premises
  of the employers enterprise (e.g. outworkers
  without employment contract)
• Jobs, for which labour regulations are not
  applied, not enforced, or not complied with for
  other reasons

23
Informal jobs of employees Operational criteria

• Due to large diversity of informal employment
• To be determined by countries in accordance with
  national circumstances and data availability
• Impact on the international comparability of
  informal employment statistics recognized by 17th
  ICLS

24
Informal jobs of employees Operational criteria

• Lack of coverage by social security system
• Lack of entitlement to paid annual or sick leave
• Lack of written employment contract
• Casual/temporary nature of work

Not sufficient
25
Production units by type Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment
Production units by type OAW OAW Employers Employers CFW Employees Employees MPC MPC
Production units by type I F I F I I F I F
Formal Sector Enterp. 1 2
Informal Sector Enterp. 3 4 5 6 7 8
Hholds 9 10
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Employees holding formal jobs in informal sector
enterprises
Production units by type Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment
Production units by type OAW OAW Employers Employers CFW Employees Employees MPC MPC
Production units by type I F I F I I F I F
FS entr 1 2
IS entr 3 4 5 6 7 8
Hholds 9 10

• Included in employment in the informal sector
• But excluded from informal employment
• Significance varies among countries, depending
  upon informal sector definitions used

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Indicators

• Framework allows computation of indicators for IS
  and IE
• Employment in the informal sector
• Informal employment
• Informal employment outside the informal sector

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Indicators Employment in the IS
Production units by type Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment
Production units by type OAW OAW Employers Employers CFW Employees Employees MPC MPC
Production units by type I F I F I I F I F
FS entr 1 2
IS entr 3 4 5 6 7 8
Hholds 9 10

• Employment in the informal sector
• Sum of Cells 3 to 8.

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Indicators Informal employment
Production units by type Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment
Production units by type OAW OAW Employers Employers CFW Employees Employees MPC MPC
Production units by type I F I F I I F I F
FS entr 1 2
IS entr 3 4 5 6 7 8
Hholds 9 10

• Informal employment
• Sum of Cells 1 to 6 and 8 to 10.

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Indicators Informal employment outside the IS
Production units by type Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment Jobs by status in employment
Production units by type OAW OAW Employers Employers CFW Employees Employees MPC MPC
Production units by type I F I F I I F I F
FS entr 1 2
IS entr 3 4 5 6 7 8
Hholds 9 10

• Informal employment outside the informal sector
• Sum of cells 1, 2, 9 and 10

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Example South Africa QLFS, (April-June, 2009)
Indicator size
Informal Sector Employment 2.1 million
Informal Employment outside of the Informal Sector 2.0 million
Informal Employment 4.1 million
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(No Transcript)
33
Informal Employment by Sex and Employment in the
Informal Sector by Sex
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Issues to consider

• Potential classification errors
• borderline of status-in-employment categories
  (own-account workers vs. employees vs.
  contributing family workers)
• Where agriculture is excluded from IS employment
• Need to define informal jobs for Employers, OAW
  and MPC in agriculture
• Heterogeneity of informal employment within
  status-in-employment categories
• Need to develop appropriate sub-classifications

35
Measurement of Informal employment

• Best source Household surveys (LFS)
• Questions needed
• Questions to identify IS are included
• Questions to identify of informal jobs of
  employees
• All others Classification of jobs as informal
  follows directly from the status in employment of
  the job and/or the characteristics of the
  enterprise

Note Questions also needed for informal jobs
held by OAW, employers and MPC in agriculture
36
LFS Questions on informal jobs of employees
(tested in 2003)

• Q11 Permanent vs. temporary employment
• Q12 Existence of written employment contract
• Q13 Payment of social security (pension fund)
  contributions for the employee by the employer
• Q14 Possibility to benefit from paid annual
  leave or compensation for it
• Q15 Possibility to benefit from paid sick leave
• Q16 Possibility to benefit from maternity leave
• Q17 Risk of arbitrary dismissal without advance
  notice by the employer
• Q18 Possibility to receive legal benefits and
  compensation in case of dismissal

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Informal jobs of employees Questions used in LFS

• Q13 Payment of social security (pension fund)
  contributions for the employee by the employer
• Q14 Possibility to benefit from paid annual
  leave or compensation for it
• Q15 Possibility to benefit from paid sick leave

Employees are considered to have informal jobs if
the answer to any of the questions Q13, Q14 or
Q15 is  no .
Principle No work, no pay