international labour office department of statistics informal employment: review of concepts and...

International Labour OfficeDepartment of Statistics

Informal employment: Review of concepts and

methodsElisa M. Benes

Department of StatisticsInternational Labour Office


BackgroundRecognition 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


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 »


International standards

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


Conceptual framework:Employment in the informal

economy

Production units

Informal jobs Formal jobs

Informal sector enterprises

A B

Other units of production C DEmployment in the informal sector: A + B

Informal employment: A + C

Informal employment outside the informal sector: C


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


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


Productio

nunits by

type

Jobs by status in employment OAW Employers CFW Employees MPC

I F I F I I F I F

FormalSectorEnterp.

1 2

InformalSectorEnterp.

3 4 5 6 7 8

Households 9 10


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


Productio

nunits by

type


I F I F I I F I F

FormalSectorEnterp.

1 2


3 4 5 6 7 8

Households 9 10


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


Productio

nunits by

type


I F I F I I F I F

FormalSectorEnterp.

1 2


3 4 5 6 7 8

Households 9 10


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


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


Productio

nunits by

type


I F I F I I F I F

FormalSectorEnterp.

1 2


3 4 5 6 7 8

Hholds 9 10Informal Employment=

Cells 1 + 2 + 3 + 4 + 5 + 6 + 8 + 9 + 10


Components of informal employment

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

Productio

nunits by

type


I F I F I I F I F

FS entr 1 2IS entr 3 4 5 6 7 8Hholds 9 10



• Cell 8: Members of informal producers’ cooperatives– Informal nature of jobs determined by

characteristics of the cooperative

Productio

nunits by

type


I F I F I I F I F




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

Productio

nunits by

type


I F I F I I F I F




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.

Productio

nunits by

type


I F I F I I F I F



Components of Informal employment

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

Productio

nunits by

type


I F I F I I F I F



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.


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• Employee’s place of work is outside the premises of

the employer’s enterprise (e.g. outworkers without employment contract)

• Jobs, for which labour regulations are not applied, not enforced, or not complied with for other reasons


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


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


Productio

nunits by

type


I F I F I I F I F

FormalSectorEnterp.

1 2


3 4 5 6 7 8

Hholds 9 10


Employees holding formal jobs in informal sector

enterprises

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

informal sector definitions used

Productio

nunits by

type


I F I F I I F I F



IndicatorsFramework allows computation of indicators

for IS and IE – Employment in the informal sector

– Informal employment

– Informal employment outside the informal sector


Indicators: Employment in the IS

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

Productio

nunits by

type


I F I F I I F I F



Indicators: Informal employment

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

Productio

nunits by

type


I F I F I I F I F



Indicators: Informal employment outside the IS

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

Productio

nunits by

type


I F I F I I F I F



Example: South Africa QLFS, (April-June, 2009)

Indicator sizeInformal Sector Employment

2.1 million

Informal Employment outside of the Informal Sector

2.0 million

Informal Employment 4.1 million


Source: ILO. In Brazil, estimates based on official data from various sources. In Colombia, Ecuador, Mali, Mexico, Panama, Peru

and South Africa: ILO estimates computed from labour force survey micro data. In Moldova and Turkey, labour force survey data.

a/ In Brazil, 2003 data. In Mali, South Africa, Moldova and Turkey, 2004 data. In Colombia, Ecuador, Mexico, Panama and Peru, 2007 data.

b/ In Brazil, Mali, Moldova, South Africa and Turkey, estimates are provided as a percent of total non-agricultural employment. In all

other countries, data are provided as a percent of total employment in urban areas.

(Percent of total non-agricultural employment) b/

Figure 1. Informal Employment and Employment in the Informal Sector in Ten

Selected Countries, latest year available a/

0102030405060708090

Informal employment Employment in the informal sector


(Percent of total male or female non-agricultural employment) b/

Informal Employment by Sex Among Ten Selected Countries, latest year available a/

Figure 2.

0 20 40 60 80 100

Brazil Colombia

Ecuador Mali

MexicoMoldovaPanama

PeruSouth Africa

Turkey

Women Men

Employment in the Informal Sector by Sex Among Nine Selected Countries, latest year available a/

Figure 3.

(Percent of total male or female non-agricultural employment) b/

0 20 40 60 80 100

Brazil

Colombia

Ecuador

Mali

Mexico

Moldova

Panama

Peru

South Africa

Women Men

Source: ILO. In Brazil, estimates based on official data from various sources. In Colombia, Ecuador, Mali, Mexico, Panama, Peru

and South Africa: ILO estimates computed from labour force survey micro data. In Moldova and Turkey, labour force survey data.

a/ In Brazil, 2003 data. In Mali, South Africa, Moldova and Turkey, 2004 data. In Colombia, Ecuador, Mexico, Panama and Peru, 2007 data.

b/ In Brazil, Mali, Moldova, South Africa and Turkey, estimates are provided as a percent of total non-agricultural employment by sex. In all

other countries, data are provided as a percent of total employment in urban areas by sex.

Informal Employment by Sex and Employment in the Informal Sector by Sex


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


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 enterpriseNote: Questions also needed for informal jobs held by OAW, employers and MPC in agriculture


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


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’

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