Workshop on National Accounts, New Delhi, 6 – 9 July 2009 Prepared by Sharita Serrao Presented by Artur Andrysiak Statistics Development and Analysis Section ESCAP Interregional Cooperation on the Measurement of Informal Sector & Informal Employment: The 1-2 Survey Approach

2 Structure of the Presentation  Project background – ‘Interregional Cooperation on the Measurement of the Informal Sector & Informal Employment’  Data Collection Methodology: The 1-2 Survey Approach  The Concept of H ousehold Unincorporated Enterprises with at least some Market Production (HUEMs) & Informal Sector (IS)  Compilation of Output & Value added for HUEMs

3 Project Background

4 Project Facts  Development Account Project: Interregional Cooperation on the Measurement of Informal Sector and Informal Employment  Duration:  Leading agency: ESCAP  Implementing agencies: ECLAC, ESCAP, ESCWA  Steering Committee: UNSD, Regional Commissions, ILO, ADB, Delhi Group and WIEGO  Country Partners:  ECLAC: Saint Lucia  ESCAP: Mongolia, Philippines, Sri Lanka  ESCWA: Palestine (West Bank and Gaza Strip) All these countries have existing quarterly labour force survey programmes

5 Project Objectives  Improve availability of sound & internationally comparable informal sector & informal employment data  Strengthen analysis for evidence-based socio-economic policies at national & international levels:  Social policies (poverty reduction, promotion of gender equality, elimination of child labor, etc.)  Employment generation policies  Industrial policies in favour of SMEs (marketing support, technology transfer support, reduction of capital and/or labour costs, etc.)

6 Project Activities  Statistical capacity building: training; advisory missions; production of guidelines; data collection through the 1-2 Survey; data analysis  Data dissemination & advocacy: tabulation plans; databases; workshops – regional & interregional level  Knowledge management: project website; production of training materials; collection of best practices

7 Expected Outputs – Project Countries  Internationally comparable data on HUEMs, IS & informal employment  Estimations of output & value-added of HUEMs and IS to GDP  Country Reports covering:  1-2 Survey: methodology; implementation; data analysis for dissemination  Estimation methodology and estimates of informal employment and employment in the IS  Estimation of output & value-added of HUEMs & IS  Dissemination of results & advocacy for further data collection (in-country workshops)

8 Expected Outputs—Project Level  Capacity building of NSOs – training workshops; interregional & regional workshops  The 1-2 Survey - data collection strategy paper  Technical paper on informal employment  Technical paper on developing a harmonized definition of HUEMs based on the data collection strategy  Guidelines for data dissemination with tabulation plan and a list of key indicators  Guidelines for estimating HUEM and IS value added using 1-2 Survey data  Project report: cross-country comparative analysis & substantive evaluation of the methodology

9 Data Collection Methodology

10 The 1-2 Survey Approach Data is collected in two phases:  First phase – rides on the Labour Force Survey  Identify HUEMs through household LFS by including data items on HUEMs, IS & informal employment  Second phase - HUEM Survey  Option 1: Survey all HUEMs identified through Phase I  Option 2: Select sub-sample of HUEMs & collect data  Ultimately: Integrate these into regular data collection system

11 The1-2 Survey Approach HUEM/IS Value added

12 Objectives of Phase I Questionnaire 1. Measurement Objectives 2. Sampling Frame Objectives (for Phase II) Informal employment Employment in the informal sector Identify HUEMs Identify informal sector enterprises

13 Phase I Questionnaire Prerequisites: Standard questions to classify:  persons as employed, unemployed, not in labour force  all jobs of employed persons: status in employment; main activity (ISIC) of enterprise where employed HUEM Module:  Place of work : fixed premises; non-fixed premises  Legal organization of enterprise  Type of accounts (proxy for employees)  Product destination Only HUEMs identified through own-account workers & employers will be surveyed in Phase II Informal Sector Module: To be preceded by HUEM module questions. Refers to enterprise in which person has a job:  Employment size  Registration Informal Employment Module: For employees :  Whether or not employee enjoys specific types of benefits (8 items included in generic questionnaire; parameters vary in different countries)  Data collected for main & secondary jobs

14 Adaptation of Phase I Questionnaire in Project Countries  Mongolia, Palestine, Saint Lucia:  HUEM /informal sector and informal employment questions inserted in the regular LFS  Philippines:  HUEM /informal sector and informal employment questions in a separate questionnaire module  Sri Lanka:  Informal employment questions already included in the regular LFS  HUEM /informal sector questions in a separate questionnaire module

15 Measurement Objectives of the HUEM Survey HUEM Survey – Phase II 1. HUEM Characteristics: a. Organization/Structure 2. National Accounts: a. HUEM GDP b. Informal Sector GDP 3. Policy-related variables (optional) a. Business environment b. Finance

16 Phase II Questionnaire Core Questions:  Business organization: main activity; place of work; registration; type of accounts etc  Employment & compensation  Production & sales  Expenditure  Capital formation Additional Components:  Business environment  Financing  Problems and prospects  Social Protection

17 Adaptation of Phase II Survey in Project Countries  HUEM questionnaire designed as a separate survey questionnaire in all 5 countries  Mongolia & Palestine conducted the two phases of the survey without any time lag  The Philippines was the only project country to create a sub-sample of HUEMs for Phase II  Philippines & Palestine included agricultural HUEMs in Phase II

18 Scope of the Project’s Data Collection Methodology  Statistical unit is the HUEM  Data collected on HUEMs, regardless of location, industry & employment size  Collect a broad range of data items from HUEMs: including IS criteria such as registration, employment size etc.  Comparative analysis of the data across countries to identify commonalities

19 The Concept of HUEMs & the IS

20 The Concept of HUEMs & IS  15 th ICLS Resolution: IS enterprises are a subset of HUEMs Relationship between HUEMs, other Household Unincorporated Enterprises and the Informal Sector Household Enterprises Producing at least some goods & services for market Producing goods & services for own final use Non-agricultural Agricultural GoodsServices Formal sector Informal sector Formal sector Informal sector Agriculture, forestry, fishing Paid domestic services Other activitiesOwner occupied dwelling services Household Unincorporated Enterprises with at least some Market Production (HUEMs) Criteria: Legal Organization Book – Keeping Practice Product Destination

21 The Concept of HUEMs & IS Additional Criteria for Identifying Informal Sector Enterprises Universe of HUEMS Informal own-account enterprises Other own-account enterprises Other enterprises of employers Informal Sector How is this boundary defined? Additional criteria: size; non- registration etc Enterprises of informal employers Own- account HUEMs HUEM of Employers

22 The Concept of HUEMs & IS Some Challenges: Harmonizing Definition of IS Criteria reflect national considerations & circumstances e.g.:  Diversity of registration procedures, difficulties in gathering information, and flexibility in applying the criterion  Scope of size criterion & ‘cut-off’ size differs in countries Other considerations:  Optional inclusion of agricultural production units in the scope of data collection – exclusion can result in incomplete measure of the IS across industries & geographical areas  Discrepancies in the use of terminology & concepts between 15 th ICLS, 2008 SNA etc: conceptual differences in terms like sector, households & enterprises

23 Refined Definition of HUEMs Project countries have agreed that (conclusions at ESCAP workshops in May 2009):  The concept of HUEMs should be recommended as an international standard to facilitate the study of the informal sector  The definition of HUEMs should be narrowed to exclude units that produce output for the market incidentally, and therefore, refers to units selling or bartering a ‘significant part’ of their produce on a ‘regular’ basis, and excludes subsistence farmers, and non-agricultural households which have incidental sales  It was agreed that the criteria to select household unincorporated enterprises for interviewing during Phase II of the 1-2 Survey should be: a.Employer or own-account worker b.Legal status: unincorporated c.At least selling or bartering some goods and services in the market  It was recognized that these criteria imply that the coverage of Phase II, in addition to HUEMs, should be broadened to include quasi-corporations

24 Refined Definition of HUEMs  It was recognized that countries may have their own national definitions for informal sector (related to registration, size etc.) and for informal employment (related to benefits, type of contract etc.) based on national regulations/practices It would be for countries to decide if they want to bifurcate HUEMs into informal HUEMs (i.e. informal sector) and formal HUEMs  Agriculture is a part of the HUEM sector, even though it may be excluded by definition from the informal sector in some countries. Countries should, therefore, collect information on the output and value added of agricultural HUEMs for national accounts to be exhaustive

25 Refined Definition of HUEMs

26 Refined Definition of HUEMs Therefore, HUEMs which are broader in scope, are defined at a level higher than the informal sector:  To create a broader grouping in the household sector that is internationally comparable  To allow for more systematic & exhaustive data collection for national accounting purposes

27 Compilation of Output & Value Added for HUEMs

28 Gross Output Destination Total value Export Sales to others Own intermediate consumption Own final consumpt ion Own gross capital formation I. Products sold after transformation N° Product name 1... …. 3* Imputed own production goods produced for own use as intermediate consumption 4* Imputed own production of goods produced for own use as capital formation 5* Imputed own production of goods produced for own use as final consumption II. Total trade margins = Products sold without transformation – cost of products purchased for resale III. Services offered (taken from 4.4, GQ) N° Product name 1... ….. 3 Imputed owner-occupied housing services 4 Imputed domestic services with paid staff 5 Imputed services on money lending

29 Gross Value Added Total value Gross outputTotal Total value of output of goods and services produced (G+TM+S) Less ICTTotal Total intermediate consumption (IC1+IC2) = GVATotal Gross value added (Gross output less ICT) Less15 Other taxes on production (item 15 from 5.3, GQ) Less01Wages and salaries (from 3.2, GQ) Less02Social insurance (from 3.3.1, GQ) Less03Bonuses & allowances (from 3.3.2, GQ) Less Consumption of fixed capital (for owner- occupied dwellings and premises and other capital assets) EqualNet mixed income Employment Total working hours (taken from 3.2, GQ)

30 Intermediate Consumption Origin N° Expenditures on raw material and stocks (taken from 5.1, GQ) Total value Import Other enterprises and households Own production 1Name of product... IC1 Sum of expenditure on raw materials ( ) Origin N° Other business expenses (taken from 5.3, GQ) Total value Import Other enterprises and households Own production 07Water 08Electricity 09Rental payments (machinery, structures) 13 Repair & maintenance of facilities & equipment *16 Imputed insurance services charged on the establishment (service charges only)* **17Licenses, other fees ***19 Imputed service charges on interest payment (only FISIM)** Origin Total value Import Other enterprises and households Own production IC2 Sum of expenditure on other business expenses (=( ) ICT Total intermediate consumption (IC1+IC2)

31 Thank You