ESA/STAT/AC.78/10

18 June 2001

 

UNITED NATIONS

DEPARTMENT OF ECONOMIC AND SOCIAL AFFAIRS

STATISTICS DIVISION

Meeting of the Expert Group on International Economic

and Social Classifications

New York, 18- 20 June 2001

 

 

 


Proposal for an alternative structure
of ISIC, Revision 3 for the informal sector

Ralf Hussmanns

International Labour Office

1. Introduction

The informal sector encompasses a wide range of different activities. In order to recognise the heterogeneity of the informal sector, analyse the differences between various segments of the informal sector regarding their income-generating potential, constraints and other characteristics, and devise appropriate actions for each segment, policy-makers and analysts need data revealing the structure and composition of the informal sector. While kind of economic activity (or industry) is not a criterion to define the informal sector, it is an important variable to describe the characteristics of informal sector activities. It is thus used as one of the standard variables for the tabulation of informal sector data. It is also often used as a variable for the stratification of informal sector survey samples.

Since the adoption of a resolution on statistics of the informal sector by the 15th International Conference of Labour Statisticians (ICLS) in 1993, the ILO Bureau of Statistics has executed, or provided technical advice to, a considerable number of technical cooperation projects which were aimed at assisting countries in various parts of the world (Latin America, Caribbean, Former Soviet Union, Middle East, Africa, Asia) in the design, conduct and evaluation of informal sector surveys.

During these projects, a number of shortcomings were identified regarding the use of ISIC, Rev. 3 for the classification of informal sector activities by kind of economic activity (industry). These problems can be grouped in three categories:

(1) excessively large number of groups at the highest level of aggregation (tabulation categories);
(2) heterogeneity of activities at the level of tabulation categories and divisions;
(3) insufficient detail at the lowest level of classification (classes).


The problems were described in more detail in a note prepared by the ILO for a meeting of the UN Technical Subgroup (TSG) of the Expert Group on International Classifications, which was held in Luxembourg from 22-25 May 2000. The TSG recognised that the issues raised in the ILO note fulfilled the conditions for an alternative structure of ISIC, Rev. 3 for the informal sector, and recommended that the subject be placed on the agenda of the next meeting of the TSG (New York, 16-20 October 2000) for full debate. At its Fourth Meeting (Geneva, 28-30 August 2000), the Expert Group on Informal Sector Statistics (Delhi Group) supported the idea of developing alternative aggregations and sub-divisions of ISIC, Rev. 3 groupings for the tabulation and analysis of data on the informal sector. Subsequently, the TSG requested the ILO to formulate a concrete proposal for an alternative structure of ISIC, Rev. 3 for the informal sector. The proposal is submitted herewith . It includes (i) an alternative aggregation at the level of ISIC tabulation categories and divisions, and (ii) more detail at the level of classes, if necessary.


2. Alternative aggregation

At the highest level of aggregation, ISIC consists of 17 tabulation categories. The number of tabulation categories appears to be too large for the classification of informal sector activities by kind of economic activity, especially for tables where kind of economic activity is used as an explanatory variable and cross-classified with other variables. In such tables, the number of sample units per table cell frequently remains under the minimum number required for estimates to be made with a reasonable degree of precision. The problem is compounded by the fact that the distribution of informal sector activities over the ISIC tabulation categories is very uneven. Informal sector activities tend to be concentrated heavily in the following tabulation categories: A (if agriculture is included in the scope of the informal sector), D, F, G, H, I and O.

For the purposes of informal sector statistics, it is suggested that an alternative highest level of aggregation be introduced, with a smaller number of categories obtained by and large through the aggregation of the existing tabulation categories. To this end, use of the nine aggregate categories of ISIC Rev. 3 used by the SNA and the UN questionnaire on national accounts is not a satisfactory solution, as category 5 (wholesale and retail trade, repair of motor vehicles and household goods, hotels and restaurants) groups together activities that represent the vast majority of informal sector units in many countries, while category 7 (financial intermediation, real estate and other business services) and category 9 (public administration, defence, compulsory social security and other public services) refer to activities that are quite irrelevant to an industrial classification of informal sector activities.


A specific problem arises in respect of tabulation category G which groups together (i) the repair of motor vehicles, motorcycles and personal and household groups and (ii) wholesale and retail trade. The problem results from division 50, which groups together (i) the sale of motor vehicles, motorcycles and related parts and accessories and the retail sale of automotive fuel with (ii) the maintenance and repair of motor vehicles and motorcycles; and from division 52, which groups together (i) retail trade (except of motor vehicles and motorcycles) and (ii) the repair of personal and household goods.

In the case of the informal sector, repair services and trade are both groups of activities that are numerically so important that they should not be grouped together at any level when presenting statistics for the informal sector by industry. Moreover, these two groups of activities are undertaken in the informal sector of developing countries by different units, which differ significantly in terms of the characteristics of the persons engaged in them, including sex. While the majority of women in the informal sector is engaged in trade activities, repair services are almost exclusively rendered by men. The situation is different from that in developed countries where cars, personal and household goods are often repaired by the same units which sell them.

The solution adopted in the present proposal is to create a division 54 entitled "Repair of motor vehicles, motorcycles and personal and household goods". It is proposed to divide the division into three groups:

541

5410

Maintenance and repair of motor vehicles (corresponding to group 502/class 5020 of the standard ISIC, Rev. 3);

542

5420

Maintenance and repair of motorcycles (corresponding to that part of group 504/class 5040 of the standard ISIC, Rev. 3 which refers to maintenance and repair);

543

 

Repair of personal and household goods (corresponding to group 526/class 5260 of the standard ISIC, Rev. 3).

It is further suggested to break group 543 down into several classes (see section 3 below).

Division 50 would then be renamed as "Sale of motor vehicles and motorcycles; retail sale of automotive fuel" and consist of the following groups/classes:

501

5010

Sale of motor vehicles;

502

5020

void;

503

5030

Sale of motor vehicle parts and accessories;

504

5040

void;

505

5050

Retail sale of automotive fuel;

506

5060

Sale of motorcycles and related parts and accessories (corresponding to that part of group 504/class 5040 of the standard ISIC, Rev. 3 which refers to sale).

Given the large number of street vendors, market vendors, hawkers, etc. in many countries, there should be as much detail in the classification for retail trade not in stores as there is for retail trade in stores. To this end, it is proposed to create a division 53 which is entitled "Retail trade, except of motor vehicles and motorcycles, not in stores" and which replaces group 525 of the standard ISIC, Rev. 3. It is further suggested to divide division 53 into the following three groups:

531

5310

Retail sale via mail order houses (corresponding to class 5251 of the standard ISIC, Rev. 3);

532

 

Retail sale via stalls and markets (corresponding to class 5252 of the standard ISIC, Rev. 3);

539

 

Other non-store retail sale (corresponding to class 5259 of the standard ISIC, Rev. 3).

Division 52 would then be renamed as "Retail trade, except of motor vehicles and motorcycles, in stores" and consist of the standard ISIC, Rev. 3 groups 521, 522, 523 and 524.

At the most aggregate level, the alternative structure of ISIC, Rev. 3 proposed for the informal sector consists of the following nine categories:

 

Tabulation categories

Divisions

I. Agriculture, hunting, forestry and fishing

A, B

01, 02, 05

II. Mining and quarrying, manufacturing,
electricity, gas and water supply

C, D, E

10-37, 40, 41

III. Construction

F

45

IV. Wholesale and retail trade

G

50 (rev.), 51,
52 (rev.), 53 (new)

V. Repair of motor vehicles, motorcycles
and personal and household goods

G

54 (new)

VI. Hotels and restaurants

H

55

VII. Transport, storage and communication

I

60-64

VIII. Education, health and other social and
personal services

M, N, O, P

80, 85, 90-93, 95

IX. Other services

J, K, L, Q

65-67, 70-75, 99


3. More detail at the class level

A number of classes in ISIC, Rev. 3 are too broad and, hence, too heterogeneous for a classification of informal sector activities. They lump together activities which are numerically quite important for the informal sector. Moreover, the activities grouped together often differ quite substantially in terms of capital requirements and the characteristics of the persons engaged in them (e.g. men/women, adults/children). To better reflect such diversity, and at the same time maintain consistency and comparability with other statistics using ISIC, Rev. 3 as industrial classification, the solution proposed is to add new classes to the classification whenever possible. This possibility existed when the last digit of an existing ISIC class was "0" (meaning that there was in fact no distinction at the class level). In such cases, the corresponding group was sub-divided in two or more classes ending with "1" to "9". New classes could also be added in cases where it was possible to bring an existing ISIC class up to the group level and to sub-divide the group, that was created in this way, into classes. In cases, where it was not possible to create new classes in either of these two ways, the existing ISIC classes were broken down in sub-classes in adding a fifth digit to the classification. The approach chosen ensures that the alternative structure developed for the informal sector can be converted to the standard ISIC, Rev. 3 groupings without cutting across their boundaries.

The problem of broadness and heterogeneity arises in respect of the following classes, in particular:

2029 (Manufacture of other products of wood; manufacture of articles of cork, straw and plaiting materials): The solution proposed is to divide this class into two sub-classes:

20291 Manufacture of other products of wood;
20292 Manufacture of articles of cork, straw and plaiting materials.

2899 (Manufacture of other fabricated metal products n.e.c.): It is proposed to change the class title to "Manufacture of metal cooking utensils; manufacture of other fabricated metal products n.e.c.". (The change in title does not affect the content of the class.) It is further proposed to divide the class into two sub-classes:

28991 Manufacture of metal cooking utensils (i.e. hollow-ware, dinnerware, flat ware, fry-pans, sauce-pans and other metal cooking utensils);
28999 Manufacture of other fabricated metal products n.e.c.


453/4530 (Building installation): It is proposed to divide Group 453 into three classes:

453 Building installation;

4531 Plumbing;
4532 Electrical installation;
4539 Other building installation.



454/4540 (Building completion): It is suggested to divide Group 454 into six classes:

454 Building completion;

4541 Glazing;
4542 Plastering;
4543 Painting, decorating and wall papering;
4544 Floor and wall tiling;
4545 Parqueting and carpentry finishing;
4549 Other building completion.


5232 (Retail sale of textiles, clothing, footwear and leather goods): It is proposed to divide this class into two sub-classes:

52321 Retail sale of textiles and clothing;
52322 Retail sale of footwear and leather goods.


5252 (Retail sale via stalls and markets): As mentioned in Section 2, it is proposed to replace class 5252 by a newly created group 532 (Retail sale via stalls and markets). It is suggested to divide group 532 into the following classes and sub-classes:

5321 Non-specialised retail sale via stalls and markets;
53211 Non-specialised retail sale via stalls and markets with food, beverages or tobacco predominating;
53219 Other non-specialised retail sale via stalls and markets;

5322 Specialised retail sale of food beverages and tobacco via stalls and markets;

5323 Other specialised retail trade of new goods via stalls and markets;
53231 Retail sale of pharmaceutical and medical goods, cosmetic and toilet articles;
53232 Retail sale of textiles and clothing;
53233 Retail sale of footwear and leather goods;
53234 Retail sale of household appliances, articles and equipment;
53235 Retail sale of hardware, paints and glass;
53236 Retail sale of printed or recorded media products;
53239 Other specialised retail sale via stalls and markets;

5324 Retail sale of second-hand goods via stalls and markets.


5259 (Other non-store retail sale): As mentioned in Section 2, it is suggested that class 5259 be replaced by a newly created group 539 (Other non-store retail sale). It is proposed to divide group 539 into the following classes:

5391 Retail sale of food, beverages and tobacco;
5392 Retail sale of flowers;

5393 Retail sale of newspapers and magazines;
5394 Retail sale of postcards and souvenirs;
5395 Retail sale of lottery tickets;
5396 Retail sale of plastic and paper bags;
5397 Retail sale of household, cosmetic and toilet articles;
5398 Retail sale of textiles and clothing;
5399 Non-store retail sale of other goods.


526/5260 (Repair of personal and household goods): As mentioned in Section 2, it is proposed to replace group 526 by a newly created group 543. The group title remains unchanged. Group 543 should be broken down in several classes according to the type of goods repaired. The following breakdown is suggested:

5431 Repair of bicycles and other non-mechanised transport equipment;
5432 Repair and alteration of clothing;
5433 Repair of footwear and leather goods;
5434 Repair of household appliances, articles and equipment;
5435 Repair of watches and jewellery;
5436 Repair of optical frames, dentures and artificial limbs;
5439 Repair of other personal and household goods.


552/5520 (Restaurants, bars and canteens): It is proposed to divide Group 552 into three classes:

552 Restaurants, bars and canteens

5521 In-door restaurants, canteens, cafés, bars, etc.;
5522 Kiosks, refreshment stands and other out-door eating and drinking places (excluding terraces and beer gardens connected with in-door restaurants, canteens, cafés, bars, etc.);
5523 Catering activities; sale of prepared meals and drinks to take away by customers.


6022 (Other non-scheduled passenger land transport): It is suggested to divide this class into two sub-classes:

60221 Mechanised non-scheduled passenger land transport;
60222 Non-mechanised non-scheduled passenger land transport.

6023 (Freight transport by road): It is suggested to divide this class into two sub-classes:

60231 Mechanised freight transport by road;
60232 Non-mechanised freight transport by road.



612/6120 (Inland water transport): It is proposed to divide Group 612 into two classes:

612 Inland water transport;

6121 Mechanised inland water transport;
6122 Non-mechanised inland water transport.


9309 (Other service activities n.e.c.): This class is rather meaningless for the informal sector unless it is sub-divided. To introduce further detail, it is proposed to re-structure Division 93 in moving classes 9301, 9302, 9303 and 9309 up to the group level and dividing the Group 939 thus created into seven classes. The result is the following structure:

93 Other service activities;

931/9310 Washing and (dry-) cleaning of textile and fur products;

932/9320 Hairdressing and other beauty treatment;

933/9330 Funeral and related activities;

939 Other service activities n.e.c.

9391 Shoe shining;
9392 Luggage porting;
9393 Car washing and windshield cleaning;
9394 Car watching;
9395 Escort services, prostitution and erotic massage;
9396 Astrological advice, spiritual activities and fortune telling;
9399 Other services.

The detailed alternative structure of ISIC, Rev. 3 for the informal sector, which incorporates all the above-mentioned proposals, is presented as an annex to this paper. All modifications to the standard classification are highlighted in bold.

29.11.00