United Nations Economic Commission for African Centre for

United Nations Economic Commission for African Centre for Statistics Informal Sector and Informal Employment Measurement in African Countries Workshop on Household Surveys and Measurement of Labour Force 14 -18 April 2008, Maseru, Lesotho Dimitri Sanga, Ph. D. Senior Statistician

l Background Outline l Objectives l Definition and concepts: practices in African countries l Surveys on the informal sector l Keys content and questions to capture the informal sector/employment l The way forward 2

Background 3

Background l The informal sector plays an important role in economies of developing countries including African economies: Ø Production ØIncome distribution ØEmployment creation 4

Background (Cont’d) l The lack of information on the informal economy in official statistics limits the assessment of the real economy: ØMeasurement of GDP ØWomen participation in the economy ØWomen participation in the labour force l Multiplicity of measurement methods: ØLimits international comparability 5

Background (Cont’d) l ACS resolved to contribute to ongoing discussions on the development of an integrated methodology for measuring the informal sector/employment that: ØComplies with internationally recognized concepts and definitions ØReflects African realities ØBuilds on ongoing efforts: Delhi Group and the UN Development Account on the Informal Sector 6

Objectives 7

Overall objective To present an overview of current practices and methodologies for measuring the informal sector and employment in African countries 8

Specific objectives l Review the definitions and concepts used by African countries l Review methodologies used to survey the informal sector and informal employment in Africa l Suggest a way forward in terms of “harmonizing of the measurement of the informal sector and employment in African countries” 9

Concepts and definitions: practices in African countries 10

Various definitions Several definitions for the informal sector l Most important: l ØThe 15 th International Conference of Labour Statisticians ØThe recommendation of the Delhi Group in Rev. 1 of the SNA 1993 ØThe OECD definitions of the non-observed economy l These various definitions include the following criteria : ØSize of the unit below a specified level of employment ØNon-registration of the enterprise or its employees ØLack of bookkeeping ØAbsence of a contract or social security 11

Various definitions Essentials l Legal organization No separate legal entity from the owner l Type of accounts No complete set of accounts l Product destination At least some market output (for sale or barter) 12

Various definitions Additional: Scope l Employment size Specific to country l Non-registration Specific to country Optional l Kind of economic activity Possible exclusion of: Ø Agriculture and related activities Ø Paid domestic services 13

Review of practices in African countries Variability in the definition of the informal sector and informal employment l Difficulties in international comparisons of corresponding statistical survey results l Variability based on: l ØSurvey methodology (surveyed units) ØSize in terms of employment ØInclusion of the agriculture sector ØRegistration criteria ØMinimum age of the potential active individual 14

Variability: Survey methodology l Botswana, Tanzania and Namibia ØMixed household-enterprise surveys ØDefinition based on the informal production unit (IPU) (similar to that of the 15 th ICLS) l In South Africa: ØOctober Household Survey: HS with an employment and an informal sector segment Ø Partially captures informal employment (as defined by the 17 th ICLS) and informal production units l 1 -2 -3 surveys (many FR speaking countries) ØA three phases survey that measure the informal economy differently in each of them ØDef. includes those of both the 15 th and the 17 th ICLS 15

Variability: Size l Namibia, Botswana, Zambia and Tanzania: ØMinimum threshold: 5 employees (increased to 11 in Dar-es-Salaam for manufacturing) l 1 -2 -3 surveys or the OHS in South Africa: no size criterion l Five-employee threshold: ØRecommendation of the Delhi Group 16

Variability: Agriculture sector l Tanzania and Namibia include agriculture in the informal sector if: ØThe activity is for barter ØAnd if the other criteria of the informal sector definition are met 17

Variability: Registration 1 -2 -3 surveys, Botswana: formal bookkeeping to define informal production units l Zambia: employment is informal if it is not covered by social security l South Africa: registration for the purpose of paying VAT l Madagascar (1 -2 -3 survey): an enterprise is considered registered if it has a statistical identification number l Kenya: l ØAdministrative procedures ØAnd the possession of a license that guarantees the exercise of a professional activity 18

Variability: minimum age Tanzania : 5 years l Zambia: 10 years l South Africa (OHS): 15 years l ILO minimum age of employment: l Ø 15 in general Ø 18 for hazardous work ØAge lower than the legal minimum impacts on the number of informal jobs for comparison purposes ØInternational comparisons should be made for a specific age group, such as the 16 -64 age group 19

Variability: Others l Botswana limits the definition of the informal sector to units that do not have a fixed location or whose activity is temporary l Namibia and Tanzania: exclude professionals such as physicians, notaries and lawyers from the informal sector 20

Surveys on the informal sector 21

Direct methods of measuring the informal sector Sampling surveys: direct methods to measure the informal sector/employment l Units of observation: enterprise, establishment, individual or household l Main surveys: l ØLabour force or employment surveys ØHousehold surveys ØEstablishment surveys ØMixed household-enterprise survey Ø 1 -2 -3 surveys 22

Employment or labour force surveys l Some typical examples in Africa: ØThe employment segment of Living Standards Surveys (LSS) of the LSMS (WB): Cote d’Ivoire, Ghana, Madagascar, Morocco, Malawi, and Tanzania ØPhase 1 of the 1 -2 -3 survey 23

Establishment surveys l l Collect information on the operation of the informal production unit, its characteristics and its operating accounts Provide information on: Ø Formal bookkeeping, registration. . . Ø Production, added value, intermediate consumption, sales figures, work remuneration, income taxes and other taxes paid to public authorities. . l Widely used by national accountants : Ø Added value, intermediate consumption and technical coefficients l Criticized for its weak coverage of all economic activities that may be undertaken informally 24

Mixed household-enterprise surveys Collect additional information: other sociodemographic characteristics of the heads of IPUs l Typical example: l ØPhase 2 of the 1 -2 -3 survey: survey of IPUs v Gross operating surplus v Number of employees v Relationship between employees and the head of the IPU v Socio-demographic characteristics of employees… 25

The consumption surveys l Measure the share of the informal economy in household supplies l Typical example: Phase 3 of the 1 -2 -3 Surveys ØCollects data on household consumption 26

Key content and questions to capture the informal sector and employment 27

l Key questions: employment surveys To capture informal employment or serve as the sampling frame for the mixed household – enterprise survey , LFS or employment segments of HS should: ØContain filter questions to find out who has a job, in the ILO sense, during the reference period v Even for those who worked for one hour during the reference period v If negative response: over the past seven days, has the individual carried out an activity included in given list of economic activities v If the response is still negative: is the person on leave, on sick leave, on maternity leave, temporarily out of work, and so on ØThis series of questions ensures to include all persons who are actively employed 28

l Key questions: employment survey (Cont’d) For those considered to be actively employed: Ø Socio-professional category Ø Type of entity they work for Ø Work schedule during the week l In the case of a private enterprise: Ø Workforce of the entity that the individual is working for Ø Whether the entity is registered l For leaders of enterprises: Ø Do they formal bookkeeping for the payment of duties and taxes? l For employees and other independent workers: Ø Written work contract Ø Entitled to paid leave, sick leave Ø Employer pays an employer’s contribution for their 29

Key content: mixed householdenterprise surveys l For the purpose of preparing national accounts, the survey should collect information on: ØProduction and intermediate consumption: sales of products processed, stocks, services delivery… ØExpenses by category: energy, transport, telecommunications… ØComposition of the labour force according to socio-professional category ØThe branch of activity of the unit 30

The way forward 31

Stat. Com-Africa Working Group l l l Fist meeting of the Statistical Commission for Africa: 21 -23 January 2008 Setting up of six working groups including one on the measurement of the informal sector Composition during the first meeting: Ø Ghana, South Africa, Uganda, AFRISTAT and UNECA 32

Stat. Com-Africa Working Groups l Recommendations: Ø Real need for harmonization of definitions and methodologies within the region Ø Necessity to revisit existing methodologies carried out by South Africa, India, Ghana, AFRISTAT, etc. Ø Need to deepen the discussions on the informal sector by the working group under the leadership of AFRISTAT Ø Called upon other countries to join the group to reinforce the pertinence of the discussions since the informal sector is very important in the region Ø Called upon Stat. Com-Africa to earmark funds to support the informal sector the working group to 33

Thank you! African Centre for Statistics Visit us at http: www. uneca. org/statistics/ 34