International Labour Office Department of Statistics Informal employment: Review of concepts and methods Elisa M. Benes Department of Statistics International Labour Office

Department of Statistics 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

International Labour Office Department of Statistics Delhi Group (5 th 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 Labour Office Department of Statistics International standards Guidelines concerning a statistical definition of informal employment (17th ICLS, 2003)

International Labour Office Department of Statistics Conceptual framework: Employment in the informal economy Production unitsInformal jobsFormal jobs Informal sector enterprises AB Other units of production CD Employment in the informal sector:A + B Informal employment: A + C Informal employment outside the informal sector:C Employment in the informal sector:A + B Informal employment: A + C Informal employment outside the informal sector:C

International Labour Office Department of Statistics Conceptual framework for informal employment (17 th 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

International Labour Office Department of Statistics Conceptual framework for informal employment (17 th 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

International Labour Office Department of Statistics Production units by type Jobs by status in employment OAWEmployersCFWEmployeesMPC IFIFIIFIF Formal Sector Enterp. 12 Informal Sector Enterp Households 910

International Labour Office Department of Statistics 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

International Labour Office Department of Statistics Production units by type Jobs by status in employment OAWEmployersCFWEmployeesMPC IFIFIIFIF Formal Sector Enterp. 12 Informal Sector Enterp Households 910

International Labour Office Department of Statistics 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

International Labour Office Department of Statistics Production units by type Jobs by status in employment OAWEmployersCFWEmployeesMPC IFIFIIFIF Formal Sector Enterp. 12 Informal Sector Enterp Households 910

International Labour Office Department of Statistics 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

International Labour Office Department of Statistics Definition of informal employment (17 th ICLS) Total number of informal jobs, whether carried out in formal sector enterprises, informal sector enterprises, or households, during a given reference period

International Labour Office Department of Statistics Production units by type Jobs by status in employment OAWEmployersCFWEmployeesMPC IFIFIIFIF Formal Sector Enterp. 12 Informal Sector Enterp Hholds 910 Informal Employment= Cells

International Labour Office Department of Statistics 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 Production units by type Jobs by status in employment OAWEmployersCFWEmployeesMPC IFIFIIFIF FS entr 12 IS entr Hholds 910

International Labour Office Department of Statistics Components of informal employment Cell 8: Members of informal producers’ cooperatives –Informal nature of jobs determined by characteristics of the cooperative Production units by type Jobs by status in employment OAWEmployersCFWEmployeesMPC IFIFIIFIF FS entr 12 IS entr Hholds 910

International Labour Office Department of Statistics Components of informal employment Cell 9: Own-account workers engaged in production of goods exclusively for own final use by their household –If considered employed (13th ICLS) Production units by type Jobs by status in employment OAWEmployersCFWEmployeesMPC IFIFIIFIF FS entr 12 IS entr Hholds 910

International Labour Office Department of Statistics Components of informal employment 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. Production units by type Jobs by status in employment OAWEmployersCFWEmployeesMPC IFIFIIFIF FS entr 12 IS entr Hholds 910

International Labour Office Department of Statistics 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 Production units by type Jobs by status in employment OAWEmployersCFWEmployeesMPC IFIFIIFIF FS entr 12 IS entr Hholds 910

International Labour Office Department of Statistics 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.

International Labour Office Department of Statistics 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

International Labour Office Department of Statistics 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

International Labour Office Department of Statistics 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

International Labour Office Department of Statistics Production units by type Jobs by status in employment OAWEmployersCFWEmployeesMPC IFIFIIFIF Formal Sector Enterp. 12 Informal Sector Enterp Hholds 910

International Labour Office Department of Statistics 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 Production units by type Jobs by status in employment OAWEmployersCFWEmployeesMPC IFIFIIFIF FS entr 12 IS entr Hholds 910

International Labour Office Department of Statistics Indicators Framework allows computation of indicators for IS and IE –Employment in the informal sector –Informal employment –Informal employment outside the informal sector

International Labour Office Department of Statistics Indicators: Employment in the IS Employment in the informal sector –Sum of Cells 3 to 8. Production units by type Jobs by status in employment OAWEmployersCFWEmployeesMPC IFIFIIFIF FS entr 12 IS entr Hholds 910

International Labour Office Department of Statistics Indicators: Informal employment Informal employment –Sum of Cells 1 to 6 and 8 to 10. Production units by type Jobs by status in employment OAWEmployersCFWEmployeesMPC IFIFIIFIF FS entr 12 IS entr Hholds 910

International Labour Office Department of Statistics Indicators: Informal employment outside the IS Informal employment outside the informal sector –Sum of cells 1, 2, 9 and 10 Production units by type Jobs by status in employment OAWEmployersCFWEmployeesMPC IFIFIIFIF FS entr 12 IS entr Hholds 910

International Labour Office Department of Statistics Example: South Africa QLFS, (April-June, 2009) Indicator size Informal Sector Employment2.1 million Informal Employment outside of the Informal Sector 2.0 million Informal Employment4.1 million

International Labour Office Department of Statistics

International Labour Office Department of Statistics Informal Employment by Sex and Employment in the Informal Sector by Sex

International Labour Office Department of Statistics 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

International Labour Office Department of Statistics 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

International Labour Office Department of Statistics 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

International Labour Office Department of Statistics 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’