Estimation and Survey methods for the Informal Sector

The adoption of a new international definition for the informal sector has given a great impetus to methods of estimation and surveys of this sector in the various regions of the world. Global figures on size (in terms of numbers involved and share of labour force) and contribution (in terms of output, value added, income and share of GDP) have by now been made available for a number of countries, eventually for time series and at least for several years in the past two decades; and it is hoped from recent concern and progress that more and more data will be disaggregated by sub-sector, industries, status in employment and above all by sex. The new definition set forth four main criteria: legal status and accountancy (excluding incorporated and quasi-incorporated firms accordingly), employment size or registration alternatively. In addition, primary activities and non market activities are out of the scope of informal sector, even when some countries continue to include subsistence agriculture in their estimates of informal sector. Within the informal sector so defined, the criterion of status in employment allows to distinguish two sub-categories: own-account enterprises which do not employ permanent employees but may employ casual or family workers, informal employers’ enterprises which do employ permanent employees, with respect to the already mentioned alternative criteria. In practice, these criteria are very operational in that population censuses and labour force surveys usually collect information on status in employment and sector of industry (and agriculture is inclusive of non market activities) and as such allow the identification of the own-account workers and more broadly the self-employed, that is a good proxy for the first sub-category of the informal sector (i.e. the own-account and the family workers). However this type of estimate leaves the second component (the informal permanent employees) out and overall estimates of the informal sector need the availability of at least one of the mentioned criteria for identifying the formal employees: yet the criteria of legal status, accountancy, employment size and registration, are commonly used to define the scope of the surveys which intend to cover the formal sector and are usually available in these surveys and sources; they are generally recorded in the surveys of formal enterprises, so as the indirect estimates of the informal sector rely on the comparison of various sources. Furthermore, these criteria are easy to collect from the employers and own-account workers in household surveys and are actually more and more often collected in these surveys. But it is more questionable as to the other members of the labour force (employees, family workers who may not be fully aware of these characteristics of the enterprise in which they work). Despite their shortcomings and weaknesses, indirect estimates remain a current, widely-used and useful means of obtaining macro and sectoral indicators on the informal sector. However, the availability of informal sector surveys, especially of the type "mixed survey", is the best source for measuring the informal sector. Pros and Cons of these two approaches, which are more complementary than in competition, will be presented.