1. THE INFORMAL SECTOR in the 1993 SNA, Rev.1
AEG
IVO HAVINGA, UN Statistics Division
CAROL CARSON, Project Manager
AEG Meeting
Frankfurt, 30 January – 8 February 2006 1

2. Plan of the presentation
1. Context: Why is the informal sector an important issue for the update of the 1993 SNA?
- policy relevance
- calls for statistical guidelines
- substantial developments since 1993
2. Definition of the informal sector: differences between the ICLS (ILO) concepts of employment in the informal sector/informal employment and the SNA framework
3. Draft annotated outline of a chapter on the informal sector in the 1993 SNA, Rev.1
4. Work plan to prepare the recommendations on the informal sector
--with sections 3 and 4 “for information”

3. Thus far in the update process
Conclusions of the AEG December 2004 meeting
confirmed the importance of the informal sector
noted that coverage needs to be closely defined
advised that extended text should be added to 1993 SNA
Feedback from regional meetings in 2005
UNESCAP (April), UNECLAC (October), UNECA (November)
Consultations with ILO and the Delhi Group

4. Context: Policy relevance of measurement of the informal sector
Links to development objectives on…
income generation,
employment creation and
poverty reduction
and to the design and monitoring of targeted support programs
Informal sector’s contribution to non-agricultural GDP
27 percent in northern Africa
41 percent in Sub-Saharan Africa
29 percent in Latin America
31 percent in Asia

5. Context: Selected developments in methods and practice since 1993
Papers of Delhi Group on Informal Sector Statistics
UN handbook Household Accounting: Experience in Concepts and Compilation, Volume 1: Household Sector Accounts
Measuring the Non-observed Economy: A Handbook by OECD, IMF, ILO and CISSTAT
UNECE manual Non-observed Economy in National Accounts

6. Context: Calls for guidelines
Issue in the work on the 1993 SNA; placed on the research agenda
Statistical Commission 2004 reiterated collaboration between UNSD and the Delhi Group on informal sector
Forthcoming publication Surveys of Informal Sector and Informal Employment
Collaborative effort of ILO and members of Delhi Group
Chapter on uses of informal sector data for national accounts purposes

7. Questions
1. … confirm that there are strong reasons why guidance on the treatment of the informal sector should be added to the updated SNA?
2. … agree that there seems to be a substantial body of methodological literature and of practical experience available to serve as a foundation on which to prepare guidance on the treatment of the informal sector within the national accounts framework?
3. …recommend any other sources to be consulted, or do they commend any in particular of those mentioned?

8. Definition of the informal sector
Differences between ICLS and SNA:
in terminology
in segmenting the economy
in the use of enterprise-based criteria
in the universe of household enterprises
--key points, with questions on each

9. Terminology
The ICLS use of “sector” does not match the definition in the SNA.
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.

10. Terminology (cont.)
The ICLS use of “households” is narrower than the meaning in the national accounts framework.
National accountants consider the “formal” segment of enterprises to be confined to institutional sectors other than the household sector.

11. Question
4. Should the different meanings of “sector,” “informal,” “households,” and “formal” be clarified and explained in the updated SNA?

12. Segmenting the economy
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.

13. Question
5. … agree that the updated SNA should describe the differences between the ICLS and SNA definitions of the types of production units and where possible reconcile the differences?

14. Use of enterprise-based criteria
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”.
Conceptual and practical advantage of “some or all” criterion.

15. Use of enterprise-based criteria
Possible grouping for macroeconomic statistics on the informal sector:
Household enterprises with employment
Enterprises with market production
Informal sector enterprises
Other household enterprises
Enterprises with only production for own final use
Household enterprises without employment

16. Questions
6. …agree that there are advantages to the ICLS “some or all” criterion in identifying market producers? If so, could it be developed as an application for analytical and policy oriented purposes? Which option is preferred—in the core household production account or in a supplementary presentation?
7. …views … on the question of comparability? Should further attempts be made … to identify groupings of household enterprises, including the informal sector, in the SNA household production account that have a greater degree of international comparability, especially to facilitate the preparation of macroeconomic indicators on household production that are internationally comparable and consistent with the SNA?

17. Universes of household enterprises
With and without labor input (SNA) versus with labor inputs (ICLS) (noted above)
All economic activities (SNA) versus non-agricultural activities (ICLS) …

18. Question
8. Should a bridge table be developed, in coordination with the ILO and Delhi Group, between the informal sector special cases and their SNA counterparts for inclusion in the updated SNA?

19. Draft outline of chapter
Introduction
The informal sector: a broad statistical perspective
Definition of the informal sector
Other concepts
Measurement

20. Questions
9. Are there relevant topics that are missing from the outline?
10. …views … about the approach of tracing with broad brush strokes the evolution of the subject as a frame within which to explain differences in terminology and differing analytical needs?
11. …views … about the balance struck between being too much and too little?

21. Work plan, 2006: key elements
AEG sub-group
Collaboration with ILO and Delhi Group
Forums to test preliminary drafts (e.g., UNECE April, Delhi Group, regional meetings)

22. Questions
12. Are there AEG members who would like to volunteer for the sub-group to be set up to provide advice and review progress on the development of a recommendation on the informal sector?
13. Are there forums—groups or meetings—in addition to the Delhi Group whose views should be sought or that can be used to test preliminary proposals?

23. Thank You