Concepts, Definitions & Methods
This section of the website provides interested users of statistics on informal employment with information to maximize the use of available data and to begin discussions with producers of these statistics to better meet their data needs. Dialogue and collaboration between statisticians and users of statistics is key to producing timely data that informs policy. (See, for example, "Improving statistics on informal employment in India: the role of users.")
Basic Concepts & Definitions
In 1993, the 15th International Conference of Labour Statisticians (ICLS) adopted a Resolution containing an international statistical definition of the informal sector that later was included in the revised United National System of National Accounts (1993 SNA). This definition was based on characteristics of the production units (enterprises) in which activities take place, rather than on persons or jobs. The purpose of an enterprise-based definition was to provide for the separate identification of the contribution of the informal sector to gross domestic product in national accounts.
The informal sector captures one type of activity in informal employment – work that takes place in unincorporated enterprises that are unregistered or small. However, there are additional types of informal employment outside informal enterprises: for example, persons working in formal enterprises who are not covered by social protection through their work, as well as domestic workers, casual day labourers, and contributing family workers who are not covered by social protection through their work.
In the mid 1990s, the International Labour Office (ILO), the International Expert Group on Informal Sector Statistics (called the Delhi Group) and the WIEGO network together began to broaden the concept and definition to incorporate certain types of informal employment that had not been included in the earlier definition. In 2003, the ICLS adopted an international statistical definition which includes informal wage employment outside informal enterprises. The larger concept is referred to as informal employment. See the ICLS 2003 “Guidelines concerning a statistical definition of informal employment.” (For more information, see The Informal Sector and Informal Employment from the United Nations Publication, The World's Women 2010: Trends and Statistics.)
In this definition of informal employment, workers are classified by their status in employment. The five employment status categories of the International Classification of Status in Employment (ICSE) are employers, employees, own account workers, contributing family workers, and members of producer cooperatives (see the 1993 ICLS resolution). The key dimensions underlying this classification are 1) the economic risk involved in the work and 2) the type of authority over establishments and other workers. These dimensions are basic aspects of the structure and arrangements of the labour market and are important in distinguishing formal and informal employment and informal employment both outside and inside the informal sector. (For more information, see Status in Employment: A Brief on Statistical Concepts from the United Nations Publication, The World's Women 2010: Trends and Statistics.) A two dimensional matrix based on the status in employment categories provides a framework for mapping formal and informal employment; see Conceptual Framework: Informal Economy.
To summarize, the status in employment categories comprising informal employment include both those under employment within the informal sector and those in informal employment outside the informal sector, as follows:
Persons employed within the informal sector (including those rare persons who are formally employed in the informal sector):
- own-account (self-employed) workers in their own informal enterprises
- employers in informal enterprises
- employees of informal enterprises
- contributing family workers working in informal enterprises
members of informal producers’ cooperatives
Persons in informal employment outside the informal sector:
- employees in formal enterprises not covered by national labour legislation, social protection or entitlement to certain employment benefits such as paid annual or sick leave
- paid domestic workers not covered by national labour legislation, social protection or entitlement to certain employment benefits such as paid annual or sick leave
- contributing family workers working in formal enterprises
In 2013 The Conference of Labour Statisticians asked the ILO to revise the Classification of Sstatus in Employment (ICSE) to better reflect the latest development in the labour market. WIEGO is a member of the ILO Expert Group with the responsibility to propose revisions to the classification. WIEGO 's background paper for this group, Considerations for Revision of the ICSE-93 co-authored with R. Negrete of INEGI, Mexico explains significant issues, conceptual challenges, and examples of ambiguous employment arrangements.
The concept of informal employment has been applied widely in developing countries where informal employment accounts for a large proportion of employment. The need to apply it also to developed countries is increasingly recognized as production and employment are being reorganized into more decentralized, flexible and specialized units. However, various concepts or definitions are used in developed countries to refer to workers whose work arrangements deviate from the so-called “standard” norm, including:
- those whose employment is arranged through an employment intermediary: temporary agency workers and contract workers
- those whose employment is not full-time: part-time workers
- those whose employment is not long-term: contingent workers
- those whose employment is not protected: precarious workers
The most common concept or term is “non-standard” workers. As commonly used, the term “non-standard” work includes a) wage employment without a contract or for only an explicitly short term, or with an insecure contract and/or without worker benefits or social protection for formal enterprises; and b) self-employment without employees. The common categories of non-standard wage work are temporary work, fixed-term work, and part-time work. Increasingly, inter-firm sub-contracted work in the service sector (such as janitorial services and home care) is also included.
In consultation with the ILO, WIEGO launched efforts to stimulate discussion and research on the definition and measurement of informal employment in developed countries in a meeting held at Harvard University in October 2008. The main document for this meeting has been revised based on these discussions and was released in 2013 as WIEGO Working Paper 26,Toward a Common Framework for Informal Employment across Developed and Developing Countries (Françoise Carré and James Heintz).
The application of the concept of informal employment to developed countries is being furthered by WIEGO's participation in the UNECE expert group on the Measurment of the Quality of Employment. (see Relating Quality of Employment to Informal Employment). Informal employment is recommended by the group as an experimental indicator to measure quality of employment.
National accountants and labour statisticians are collaborating on the use of data on informal sector and informal employment in the system of national accounts (SNA). The 1993 System of National Accounts highlighted the importance for developing countries of distinguishing between formal and informal sectors of the economy to show the sources of GDP growth and the relative susceptibility of the informal sector to various economic policies. The 2008 System of National Accounts further stresses the importance of collecting data on the informal sector and informal employment by devoting a chapter to the topic, specifically chapter 25 on “Informal Aspects of the Economy.” See 2008 System of National Accounts.
National accountants and labour statisticians have also worked to dispel the view – generally attributed to transition and developed countries – of the informal sector as illegal or hidden/underground production (see, for example, Measuring the Non-Observed Economy). Any type of production unit (formal sector enterprise, informal sector enterprise, or household) can be engaged in any type of activity (legal, not underground; legal underground; or illegal). Nevertheless, in developing and transition countries most informal sector activities are not underground or illegal: rather, they represent a survival strategy for the persons and households involved in them and, therefore, can be captured in surveys of the informal sector.
Technical Guidance on Data Collection and Tabulation
The ILO, working with an international team of statisticians, prepared Measuring Informality: A Statistical Manual on the Informal Sector and Informal Employment. The manual is a technical and operational guide for national statisticians interested in developing data on employment and production in the informal sector and on informal employment outside the informal sector. It provides practical guidance on the technical issues involved with the development and administration of the surveys; on the tabulation and dissemination of the resulting statistics, and on the use of these statistics in the preparation of national accounts. The manual also gives users a better understanding of the concepts underlying the data, as well as the constraints statisticians face in supplying data to meet their needs.
The Statistical Annex of an ILO publication on Moldova provides a good example of the detailed tabulations that may be prepared relating to data on informal employment and employment in the informal sector. See Employment in the Informal Economy in the Republic of Moldova.
WIEGO has prepared guides to improve the identification of categories of informal workers – especially on domestic workers, home-based workers, street vendors and waste pickers – in survey questionnaires and in tabulations plans. For examples, see
- A Guide to Obtaining Data on Types of Informal Workers in Official Statistics, WIEGO Working Paper No. 8 (Vanek et al. 2012)
- Definition of Home-Based Workers
- Challenges of Measuring Domestic Workers
A report reviewing the history of data collection on informal sector and informal employment, “Measuring Informal Employment 40 Years Later,” provides important insights on past developments and future needs.
Labour Market Indicators
Labour economists often focus narrowly on the supply and demand of wage labour only. Self-employment is ignored and it is assumed that those who are willing to work and cannot find employment in the formal economy are seamlessly absorbed into the informal economy. WIEGO proposes a new, broader approach to the labour force to better reflect today’s realities.
The WIEGO framework models the labour force as segmented into formal and informal, each of which is further segmented by the status in employment categories. Rather than the traditional indicators of wage employment, non-agricultural wage employment and unemployment, this model frames the structure of the labour market through a cross classification of formal/ informal employment and status in employment. For example, WIEGO and ILO have recommended a background indicator for monitoring Millennium Goal 3 on gender equality and the empowerment of women. (See the specific indicator Gender Differences in the Structure of Employment and the September 2005 Meeting Report of the Sub-Group on Gender Indicators of the Inter-Agency and Expert Group (IAEG) on MDG Indicators.) The Gender and Structure of Employment indicator is based on a cross classification of formal/informal employment, agricultural and non-agricultural, and status in employment for women and men.