Workshop on National Accounts, New Delhi, 6 – 9 July 2009

Prepared by Sharita SerraoPresented by Artur Andrysiak

Statistics Development and Analysis SectionESCAP

E-mail: andrysiak@un.org

Interregional Cooperation on the Measurement of Informal Sector &

Informal Employment: The 1-2 Survey Approach

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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 Household Unincorporated Enterprises with at least some Market Production (HUEMs) & Informal Sector (IS)

Compilation of Output & Value added for HUEMs

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Project Background

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Project Facts

Development Account Project: Interregional Cooperation on the Measurement of Informal Sector and Informal Employment

Duration: 2006-2009 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

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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.)

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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

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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)

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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

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Data Collection Methodology

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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

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The1-2 Survey Approach

HUEM/IS Value added

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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

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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

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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

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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

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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

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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

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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

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The Concept of HUEMs & the IS

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The Concept of HUEMs & IS

15th ICLS Resolution: IS enterprises are a subset of HUEMs

Relationship between HUEMs, other Household Unincorporated Enterprises

and the Informal SectorHousehold Enterprises

Producing at least some goods & services for market

Producing goods & services for own final use

Non-agricultural Agricultural Goods Services

Formal sector

Informal sector

Formal sector

Informal sector

Agriculture, forestry, fishing

Paid domestic services

Other activities Owner occupied dwelling services

Household Unincorporated Enterprises with at least some Market Production (HUEMs)

Criteria:

Legal Organization

Book – Keeping Practice

Product Destination

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The Concept of HUEMs & IS

Additional Criteria for Identifying Informal Sector Enterprises

Universe of HUEMSInformal own-

account enterprises Other own-account

enterprises

Other enterprises of employers

Informal SectorHow is this boundary defined?

Additional criteria: size; non-registration etc

Enterprises of informal employers

Own-account HUEMs

HUEM of Employers

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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 criterionScope 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 areasDiscrepancies in the use of terminology & concepts between 15th ICLS, 2008 SNA etc: conceptual differences in terms like sector, households & enterprises

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Refined Definition of HUEMsProject 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 workerb. Legal status: unincorporatedc. 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

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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

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Refined Definition of HUEMs

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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

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Compilation of Output & Value Added for HUEMs

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Gross Output Destination

Total value

ExportSales

to others

Own intermediate consumption

Own final consumpt

ion

Own gross capital

formation

I.Products sold after transformation

N° Product name1... ….

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 name1... …..

3Imputed owner-occupied housing services

4Imputed domestic services with paid staff

5 Imputed services on money lending

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Gross Value AddedTotal value

Gross output TotalTotal value of output of goods and services produced (G+TM+S)

Less ICT TotalTotal intermediate consumption (IC1+IC2)

= GVA TotalGross value added (Gross output less ICT)

Less 15Other taxes on production (item 15 from 5.3, GQ)

Less 01 Wages and salaries (from 3.2, GQ)Less 02 Social insurance (from 3.3.1, GQ)

Less 03Bonuses & allowances (from 3.3.2, GQ)

Less Consumption of fixed capital (for owner-occupied dwellings and premises and other capital assets)

Equal Net mixed income

EmploymentTotal working hours (taken from 3.2, GQ)

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Intermediate ConsumptionOrigin

N°Expenditures on raw material and stocks (taken from 5.1, GQ)

Total value

ImportOther enterprises and households

Own production

1 Name of product...

IC1Sum of expenditure on raw materials (1+2+3+4+...)

Origin

N°Other business expenses (taken from 5.3, GQ)

Total value

ImportOther enterprises and households

Own production

07 Water08 Electricity09 Rental payments (machinery, structures)

13Repair & maintenance of facilities & equipment

* 16Imputed insurance services charged on the establishment (service charges only)*

** 17 Licenses, other fees

*** 19Imputed service charges on interest payment (only FISIM)**

OriginTotal value

ImportOther enterprises and households

Own production

IC2Sum of expenditure on other business expenses (=(6+7+...18)

ICT Total intermediate consumption (IC1+IC2)

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Thank You