Informal employment:
Review of concepts and methods
Elisa M. Benes
Department of Statistics
International Labour Office
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 nonstandard, 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
(5th 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 units
Informal jobs
Formal jobs
Informal sector
enterprises
A
B
Other units of
production
C
D
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 (17th 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 (17th 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
Jobs by status in employment
Production
units by
type
OAW
I
F
Employers
I
Formal
Sector
Enterp.
Informal
Sector
Enterp.
3
Households
9
4
F
CFW
Employees
I
I
1
2
5
6
MPC
F
I
7
8
10
International Labour Office
Department of Statistics
F
Production units by type
• Formal sector enterprises: corporations (incl. quasicorporate 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
Jobs by status in employment
Production
units by
type
OAW
I
F
Employers
I
Formal
Sector
Enterp.
Informal
Sector
Enterp.
3
Households
9
4
F
CFW
Employees
I
I
1
2
5
6
MPC
F
I
7
8
10
International Labour Office
Department of Statistics
F
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
Jobs by status in employment
Production
units by
type
OAW
I
F
Employers
I
Formal
Sector
Enterp.
Informal
Sector
Enterp.
3
Households
9
4
F
CFW
Employees
I
I
1
2
5
6
MPC
F
I
7
8
10
International Labour Office
Department of Statistics
F
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 (17th 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
OAW
I
F
Employers
I
Formal
Sector
Enterp.
Informal
Sector
Enterp.
3
Hholds
9
4
F
CFW
Employees
I
I
1
2
5
6
MPC
F
I
7
8
10
Informal Employment=
Cells 1 + 2 + 3 + 4 + 5 + 6International
+ 8 +Labour
9 + Office
10
Department of Statistics
F
Components of informal
employment
Production
units by
type
OAW
I
F
Jobs by status in employment
Employers CFW Employees
I
F
I
I
F
I
1
5
8
FS entr
IS entr
Hholds
3
9
4
2
6
10
7
MPC
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
International Labour Office
Department of Statistics
F
Components of informal
employment
Production
units by
type
OAW
I
F
Jobs by status in employment
Employers CFW Employees
I
F
I
I
F
I
1
5
8
FS entr
IS entr
Hholds
3
9
4
2
6
10
7
MPC
• Cell 8: Members of informal producers’
cooperatives
– Informal nature of jobs determined by characteristics
of the cooperative
International Labour Office
Department of Statistics
F
Components of informal
employment
Production
units by
type
OAW
I
F
Jobs by status in employment
Employers CFW Employees
I
F
I
I
F
I
1
5
8
FS entr
IS entr
Hholds
3
9
4
2
6
10
7
MPC
• Cell 9: Own-account workers engaged in
production of goods exclusively for own final use
by their household
– If considered employed (13th ICLS)
International Labour Office
Department of Statistics
F
Components of informal
employment
Production
units by
type
OAW
I
F
Jobs by status in employment
Employers CFW Employees
I
F
I
I
F
I
1
5
8
FS entr
IS entr
Hholds
3
9
4
2
6
10
7
MPC
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.
International Labour Office
Department of Statistics
F
Components of Informal
employment
Production
units by
type
OAW
I
F
Jobs by status in employment
Employers CFW Employees
I
F
I
I
F
I
1
5
8
FS entr
IS entr
Hholds
3
9
4
2
6
10
7
MPC
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
International Labour Office
Department of Statistics
F
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
Jobs by status in employment
Production
units by
type
OAW
I
F
Employers
I
Formal
Sector
Enterp.
Informal
Sector
Enterp.
3
Hholds
9
4
F
CFW
Employees
I
I
1
2
5
6
MPC
F
I
7
8
10
International Labour Office
Department of Statistics
F
Employees holding formal jobs
in informal sector enterprises
Production
units by
type
OAW
I
F
Jobs by status in employment
Employers CFW Employees
I
F
I
I
F
I
1
5
8
FS entr
IS entr
Hholds
3
9
4
2
6
10
7
MPC
• Included in employment in the informal sector
• But excluded from informal employment
• Significance varies among countries, depending upon
informal sector definitions used
International Labour Office
Department of Statistics
F
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
Production
units by
type
OAW
I
F
Jobs by status in employment
Employers CFW Employees
I
F
I
I
F
I
1
5
8
FS entr
IS entr
Hholds
3
9
4
2
6
10
7
MPC
• Employment in the informal sector
– Sum of Cells 3 to 8.
International Labour Office
Department of Statistics
F
Indicators:
Informal employment
Production
units by
type
OAW
I
F
Jobs by status in employment
Employers CFW Employees
I
F
I
I
F
I
1
5
8
FS entr
IS entr
Hholds
3
9
4
2
6
10
7
MPC
• Informal employment
– Sum of Cells 1 to 6 and 8 to 10.
International Labour Office
Department of Statistics
F
Indicators: Informal employment
outside the IS
Production
units by
type
OAW
I
F
Jobs by status in employment
Employers CFW Employees
I
F
I
I
F
I
1
5
8
FS entr
IS entr
Hholds
3
9
4
2
6
10
7
MPC
• Informal employment outside the informal sector
– Sum of cells 1, 2, 9 and 10
International Labour Office
Department of Statistics
F
Example: South Africa QLFS,
(April-June, 2009)
Indicator
Informal Sector Employment
Informal Employment outside
of the Informal Sector
Informal Employment
size
2.1 million
2.0 million
4.1 million
International Labour Office
Department of Statistics
Figure 1.
Informal Employment and Employment in the Informal Sector in Ten
Selected Countries, latest year available a/
(Percent of total non-agricultural employment) b/
90
80
70
60
50
40
30
20
10
0
Informal employment
Employment in the informal sector
Source: ILO. In Brazil, estimates based on official data from various sources. In Colombia, Ecuador, Mali, Mexico, Panama, Peru
and South Africa: ILO estimates computed from labour force survey micro data. In Moldova and Turkey, labour force survey data.
a/ In Brazil, 2003 data. In Mali, South Africa, Moldova and Turkey, 2004 data. In Colombia, Ecuador, Mexico, Panama and Peru, 2007 data.
b/ In Brazil, Mali, Moldova, South Africa and Turkey, estimates are provided as a percent of total non-agricultural employment. In all
other countries, data are provided as a percent of total employment in urban areas.
International Labour Office
Department of Statistics
Informal Employment by Sex and Employment in the Informal Sector by Sex
Figure 2.
Informal Employment by Sex Among
Ten Selected Countries, latest year available a/
(Percent of total male or female non-agricultural employment) b/
Figure 3.
Employment in the Informal Sector by Sex
Among Nine Selected Countries, latest year available a/
(Percent of total male or female non-agricultural employment) b/
Turkey
South Africa
South Africa
Peru
Panama
Moldova
Mexico
Mali
Peru
Moldova
Ecuador
Colombia
Brazil
Colombia
Panama
Mexico
Mali
Ecuador
Brazil
0
20
40
Women
60
80
100
Men
0
20
40
Women
60
Men
Source: ILO. In Brazil, estimates based on official data from various sources. In Colombia, Ecuador, Mali, Mexico, Panama, Peru
and South Africa: ILO estimates computed from labour force survey micro data. In Moldova and Turkey, labour force survey data.
a/ In Brazil, 2003 data. In Mali, South Africa, Moldova and Turkey, 2004 data. In Colombia, Ecuador, Mexico, Panama and Peru, 2007 data.
b/ In Brazil, Mali, Moldova, South Africa and Turkey, estimates are provided as a percent of total non-agricultural employment by sex. In all
other countries, data are provided as a percent of total employment in urban areas by sex.
International Labour Office
Department of Statistics
80
100
Issues to consider
• Potential classification errors
– borderline of status-in-employment categories (ownaccount 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’
International Labour Office
Department of Statistics