WUNRN
WIEGO – Women in Informal Employment: Globalizing & Organizing
Six Myths about Informal Economy Statistics
By
Joann Vanek - May 4, 2015
Myth #1: There are no statistics on the informal economy.
Statistics on the informal economy is a relatively new
area for data collection by national statistical offices. But substantial
progress has been made in the development of these statistics since 1993 when
the International Conference of Labour Statisticians (ICLS) recommended a
statistical definition of the “informal sector,” and since 2003 when it added a
statistical definition of “informal employment” covering employment both inside
and outside the informal sector.
Increasingly,
national statistical offices are including data collection on informal
employment, so defined, in their labour force surveys and are doing so as an
input to policy-making. Perhaps most noteworthy is Mexico’s release of
information on informal employment and its contribution to the GDP on a routine
basis as key economic indicators. In 2011, the International Labour Office
(ILO) and WIEGO prepared a database on
informal employment and employment in the informal sector with
nearly 50 countries. Data on informal employment and the informal sector are
also available from these and additional countries through national statistical
offices. The ILO and WIEGO have jointly published two editions (2002 and 2013) of Women and Men in the Informal Economy: A
Statistical Picture, which report these statistics; and WIEGO has also
published a working paper with
updated regional averages.
To
assist countries in planning surveys on informal employment, the ILO, the
International Expert Group on Informal Statistics (known as the Delhi Group),
and WIEGO published a manual, Measuring Informality: a Statistical Manual on the Informal Sector and
Informal Employment.
Myth #2: The ‘informal sector’ refers to employment that
is not formal.
In the international statistical definition, the informal
sector is only one part of employment that is not formal; the other is
informal employment outside the informal sector.
The 1993 ICLS definition of informal sector captures
one type of informal employment: employment that takes place in unincorporated
enterprises that are unregistered or small. However, there is also informal
employment outside informal sector enterprises: notably, all persons who are
not covered by social protection through their work, including some employees
in formal enterprises as well as many domestic workers, most
casual day labourers and all unpaid contributing family workers. The 2003 ICLS
definition includes informal wage employment outside informal enterprises as
well as employment in the informal sector. This broader concept is
referred to as informal employment and comprises all
employment that is not formal.
Myth #3: Informal economic activities are so diverse and
vary so much across countries that it is impossible to have a statistical
definition that would apply to all countries.
The international standards or definitions described
above reflect the diversity of situations across countries. On the one hand,
they are sufficiently comprehensive to cover all countries; on the other hand,
they provide flexibility in applying the definitions in different
national settings. These definitions have been successfully applied in many
developing countries and efforts are now underway to apply them also in
developed countries (see Myth #5). It is important that researchers use these
internationally agreed definitions in their work rather than ad hoc
formulations. Only with widespread adoption of the definitions will a
comprehensive body of international data be produced.
Myth #4: National employment statistics do not include
people who work as domestic workers, home-based workers, street vendors or
waste pickers.
Employment statistics—for example, the number of women in
the labour force overall—do pick up people who work as domestic workers,
home-based workers, street vendors, and waste pickers, although often as an
underestimation. The statistical challenge is not so much to capture these
workers as employed, but to identify the specific category of work in
which they are employed. Only one of them—domestic workers—is routinely
identified as an occupational category in official national statistics, and
this group is often under-estimated and misclassified.
In part, the challenge arises because informal employment
arrangements are generally more difficult to measure than formal. More than one
question is often required and countries may not include all needed questions.
For example, some countries do not include questions on place of work, which is
a key indicator in distinguishing domestic workers (“employer’s home”),
home-based workers (“own home”), and street vendors (“public spaces”).
Challenges also stem from the need to ask enough questions and to have
sufficient response categories to identify these groups. Response categories are
based on international and national classifications of industries and
occupations that may not be sufficiently detailed to specify these categories.
And even with a detailed classification, the tabulations produced may not reach
down to the level of detail required to specify these worker categories.
As countries are pressed to produce data more frequently
or to undertake multi-purpose surveys rather than a dedicated labour force
survey, questionnaires are shortened and sample size is reduced. This further
limits the possibility of data on categories of informal workers. All users and
potential users of these statistics should press national statistical offices
to produce these data.
Myth #5: Informal employment applies only to developing
countries.
Initially, the statistical definition of informal
employment was applied to developing countries only. Yet it is increasingly
recognized that there are employment arrangements in developed countries that
fit this definition and would be identified as informal employment in
developing countries. A substantial share of the labour force in developed
countries works under arrangements which provide reduced benefits and limited
access to social protection: in own- account self-employment; temporary (or
fixed-term) employment including temporary agency work, on-call, or contract
company work; and some forms of part-time work.
Many developed countries are collecting data to better
understand these changes in employment arrangements and their impact on
workers. However, there are major differences across countries in the types of
employment arrangements that are covered in national surveys, and few countries
collect data on the full set of employment arrangements. To advance informal
employment statistics and to understand ongoing changes in employment globally,
it is important to have a comprehensive picture of work arrangements across
both developed and developing countries.
In
2008 WIEGO launched an initiative to provide for the classification and
analysis of the full set of employment situations in both developed and
developing countries. WIEGO continues this work through participation in the
ILO Expert Group on the Quality of Employment and through participation in the
ILO Working Group to revise the International Classification of Status in
Employment.
Myth #6: Informal employment is so unproductive that
there is little need to measure its contribution to GDP.
Just as the concept of the informal sector is relatively
new in labour statistics, it also is new to the field of national accounting.
The most recent manuals containing guidelines for the preparation of national
accounts, System of National Accounts 1993 and the 2008 System of National
Accounts, recommend that countries prepare estimates of the contribution of the
informal sector to Gross Domestic Product (GDP) or Gross Value Added (GVA).
Many countries now do so.
The following statistics give an example:
·
The contribution is
the highest in West African countries. For example, in Benin, Niger and Togo,
the informal sector, excluding agriculture, accounts for more than 50 per cent
of non-agricultural GVA.
·
In India, the contribution
of the informal sector to the economy is 46 per cent of non-agricultural GVA in
2008.
·
In Guatemala and
Colombia, it is over 30 per cent of non-agricultural GVA.
Recently, Mexico estimated
the contribution of total informal employment—both inside and outside the
informal sector—to the national economy. In July 2014, the National Institute
of Statistics and Geography (INEGI) made available the first estimates of the contribution of the informal
economy to the Mexican economy for the years 2003-2012. During that period, the
share of the GVA contributed by the informal economy dropped slightly from
around 27 per cent to a still significant 25 per cent.