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Elements of the proposed unified data collection strategy

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. Background

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Elements of the proposed unified data collection strategy

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  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. 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 Objectives of presentation

  3. 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 Background (1)

  4. Background (2) Source: ILO (2002), Women and Men in the Informal Sector: A Statistical Picture

  5. 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 Background (3)

  6. 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 Unifying definitionof IS (1)

  7. 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) Unifying definitionof IS (2)

  8. § 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.” Unifying definitionof IS (3)

  9. § 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 Unifying definitionof IS (4)

  10. 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 Unifying definitionof IS (5)

  11. 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

  12. 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 Unifying definitionof IS (7)

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

  14. 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.) Unifying definitionof IS (9)

  15. 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 Unifying definitionof IS (10)

  16. Unifying definitionof IS (11) Household Unincorporated Enterprises with some Market Production (HUEMs)

  17. 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 Unifying definitionof IS (12)

  18. Unifying definitionof IS (13) Informal own-account enterprises Other own-account enterprises Own-account enterprises (1) Enterprises of employers Enterprises of informal employers Other enterprises of employers Informal sector Criteria: size, registration (2)

  19. 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 Elements of theUDCS (1)

  20. 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 Elements of theUDCS (2)

  21. 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 Elements of theUDCS (3)

  22. 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 Elements of theUDCS (4)

  23. 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 Unifying definitionof IS (a)

  24. 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 Unifying definitionof IS (a)

  25. 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 Unifying definitionof IS (a)

  26. Unifying definitionof IS (a) 15th ICLS Resolution: Framework for informal sector definition

  27. 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 Unifying definitionof IS (a)

  28. 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 Unifying definitionof IS (a)

  29. 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 Unifying definitionof IS (a)

  30. 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, wherepossible, reconcile the differences (via bridge tables) Unifying definitionof IS (a)

  31. 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 Unifying definitionof IS (a)

  32. 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) Unifying definitionof IS (a)

  33. 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 Unifying definitionof IS (a)

  34. 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 Unifying definitionof IS (a)

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