IV. INSTITUTIONAL UNITS AND SECTORS
F. The households sectors and its sub-sectors
1. Introduction: households as institutional units
| 4.132. | For purposes of the System, a household may be defined as:
a small group of persons who share the same living accommodation, who pool some, or all, of their income and wealth and who consume certain types of goods and services collectively, mainly housing and food. |
| 4.133. | In general, each member of a household should have some claim upon the collective resources of the household. At least some decisions affecting consumption or other economic activities must be taken for the household as a whole. |
| 4.134. | Households often coincide with families, but members of the same household do not necessarily have to belong to the same family so long as there is some sharing of resources and consumption. Households may be of any size and take a wide variety of different forms in different societies or cultures depending on tradition, religion, education, climate, geography, history and other socio-economic factors. The definition of a household which is adopted by survey statisticians familiar with the socio-economic conditions within a given country is likely to approximate closely to the concept of a household as defined in the System, although survey statisticians may add more precise, or operational, criteria within a particular country. |
| 4.135. | Servants or other paid domestic employees who live on the same premises as their employer do not form part of their employer's household even though they may be provided with accommodation and meals as remuneration in kind. Paid domestic employees have no claim upon the collective resources of their employers' households and the accommodation and food they consume are not included with their employer's consumption. They should therefore be treated as belonging to separate households from their employers. |
| 4.136. | Persons living permanently in an institution, or who may be expected to reside in an institution for a very long, or indefinite, period of time are treated as belonging to a single institutional household when they have little or no autonomy of action or decision in economic matters. Some examples of persons belonging to institutional households are the following:
(a) Members of religious orders living in monasteries, convents or similar institutions;
(b) Long-term patients in hospitals, including mental hospitals;
(c) Prisoners serving long sentences;
(d) Old persons living permanently in retirement homes. |
| 4.137. | On the other hand, persons who enter hospitals, clinics, convalescent homes, religious retreats, or similar institutions for short periods, who attend residential schools, colleges or universities, or who serve short prison sentences should be treated as members of the individual households to which they normally belong. |
| 4.138. | Households may engage in any kind of economic activity and not merely consumption. In this respect, their economic behaviour may be more varied than that of legal entities whose activities may be restricted to the purposes for which they are created. In particular, members of households play a major role in production either by operating their own unincorporated enterprises or by supplying labour to other unincorporated or corporate enterprises by working as employees. They lend and borrow funds, and so on. When individual members of households engage in economic activities, they are treated as acting on behalf of the households to which they belong and not as separate entities. Thus, when a member of a household owns his or her own enterprise, which is not a corporation or quasi-corporation, that enterprise forms an integral part of the household itself. |
2. Households as producers
| 4.139. | Production within the household sector takes place within enterprises that are directly owned and controlled by members of households, either individually or in partnership with others. When members of households work as employees for corporations, quasi-corporations or government, the production to which they contribute takes place outside the household sector. |
| 4.140. | Producer units within the household sector are all "unincorporated enterprises", even though this terminology is admittedly cumbersome when applied to some of the smaller, or highly specialized, producer units. Nevertheless, the term "unincorporated enterprise" emphasizes the fact that the producer unit is not incorporated as a separate legal entity from the household itself. |
| 4.141. | The fixed and other assets used in unincorporated enterprises do not belong to the enterprises but to their owners. The enterprises as such cannot engage in transactions with other economic units. They cannot enter into contractual relationships with other units nor incur liabilities on their own behalf. Their owners are personally liable, without limit, for any debts or obligations incurred in the course of production. |
| 4.142. | The owner of a household unincorporated enterprise usually has a dual role to play: first as the entrepreneur who is responsible for the creation and management of the enterprise and second as a worker who contributes labour inputs of a kind which could be provided by paid employees. The establishment of an unincorporated enterprise requires initiative, enterprise and capital equipment. Owners, in their capacity as entrepreneurs, have to raise the necessary finance at their own risk and on their own personal security; they have to find suitable premises and purchase, or lease, whatever capital equipment or materials are needed; and they may also have to engage and supervise paid employees. In some cases, the principal role of an owner is to act in this way as entrepreneur, innovator and risk-taker, in which case the surplus from production which eventually accrues to the owner represents primarily a return to entrepreneurship. In other cases, the principal function of an owner may be to provide labour, often highly skilled professional labour, in which case most of the surplus may, in effect, represent remuneration for work done. |
| 4.143. | Thus, the surplus arising from the productive activities of a household unincorporated enterprise usually represents a mixture of two very different kinds of income, and is, therefore, described as "mixed income" instead of "operating surplus" (except for the surplus arising from the production of own-account housing services). The balance between the return to entrepreneurship and remuneration for work done may vary greatly between different kinds of household unincorporated enterprises but it can be very difficult to make a clear separation even conceptually in many cases. |
Household unincorporated market enterprises
| 4.144. | Household unincorporated market enterprises are created for the purpose of producing goods or services for sale or barter on the market. They can be engaged in virtually any kind of productive activity - agriculture, mining, manufacturing, construction, retail distribution or the production of other kinds of services. They can range from single persons working as street traders or shoe cleaners with virtually no capital or premises of their own through to large manufacturing, construction or service enterprises with many employees. |
| 4.145. | Household unincorporated market enterprises also include unincorporated partnerships that are engaged in producing goods or services for sale or barter on the market. The partners may belong to different households. The liability of the partners for the debts of the businesses must be unlimited for the partnerships to be treated as unincorporated enterprises. However, unincorporated partnerships with many partners, such as some large legal, accounting or architectural firms, are likely to behave like corporations and should be treated as quasi-corporations assuming complete sets of accounts are available for the partnerships. Partnerships whose partners enjoy limited liability are effectively separate legal entities and should be treated as corporations. |
| 4.146. | Some of the outputs of these market producers may be retained for consumption by members of the household to which the owner belongs. Such goods or services are included in the outputs of the enterprises and in the final consumption of the households, although it may be difficult to obtain the requisite data especially if taxes are being evaded in the process. Similarly, buildings or capital equipment may be used partly for production and partly for consumption. This underlines the extreme difficulty of separating unincorporated enterprises from their owners who are perfectly entitled to use such assets in any way they choose. |
Household enterprises producing for own final use
| 4.147. | These are household enterprises operated primarily for the purpose of producing goods or certain services for own final consumption or own gross fixed capital formation. The value of their output has to be imputed on the basis of the prices of similar goods or services sold on the market. |
Producers of goods for own final use
| 4.148. | Household unincorporated enterprises engaged in the production of goods for own final use may consist of:
(a) Subsistence farmers or others engaged in the production of agricultural goods for their own final consumption;
(b) Households engaged in the construction of their own dwellings or other structures for their own use, or on structural improvements or extensions to existing dwellings or structures;
(c) Households engaged in the production of other goods for their own consumption such as cloth, clothing, furniture, other household goods, foodstuffs (other than meals for immediate consumption), etc.
Such enterprises may sell any output that is surplus to their own requirements, but if they regularly sell most of their output they should be treated as market enterprises. Groups of households that engage in the communal construction of buildings, roads, bridges, etc., for their own individual or community use should be treated as informal partnerships engaged in non-market production. |
Producers of services for own final use
| 4.149. | As explained in chapter VI, section 2, only two categories of services produced by households for own final consumption are included within the production boundary of the System:
(a) Services of owner-occupied dwellings: owner-occupiers are deemed to own household unincorporated enterprises that produce housing services for their own consumption;
(b) Domestic services produced by employing paid staff: households are deemed to own household unincorporated enterprises in which they employ paid staff - servants, cooks, gardeners, etc. - to produce services for their own consumption. |
| 4.150. | The production of these services does not generate mixed income. There is no labour input into the production of the services of owner-occupied dwellings so that any surplus arising is operating surplus. There is no surplus generated by employing paid staff as, by convention, the value of the output produced is assumed to be equal to the value of the compensation of employees paid to the domestic staff, no other inputs being recognized. |
3. The household sector and its sub-sectors (S.14)
| 4.151. | The household sector consists of all resident households. Defined as institutional units, households include unincorporated enterprises owned by households, whether market producers or producing for own final use, as integral parts of those households. Only those household unincorporated market enterprises that constitute quasi-corporations are treated as separate institutional units. |
| 4.152. | The households sector may be divided into sub-sectors on the basis of the type of income that is the largest source of income for each household or, alternatively, on the basis of other criteria of an economic, socio-economic or geographical nature. Different methods of sub-sectoring may be appropriate for different economies and may be needed for different kinds of analysis and policy-making. While one method of sub-sectoring is recommended here that is considered to be useful for many purposes, statistical authorities are not necessarily expected always to choose this particular method and are advised to implement the System flexibly with respect to sub-sectoring the households sector. |
| 4.153. | Households may be grouped into sub-sectors according to the nature of their largest source of income. For this purpose, the following types of household income need to be distinguished:
(a) Employers' mixed incomes: these consist of the mixed incomes accruing to the owners of household unincorporated enterprises with paid employees;
(b) Own-account workers' mixed incomes: these consist of mixed incomes accruing to the owners of household unincorporated enterprises without paid employees;
(c) Compensation of employees;
(d) Property and transfer incomes.
Households are allocated to sub-sectors according to which of the four categories of income listed above is the largest for the household as a whole, even if it does not always account for more than half of total household income. When more than one income of a given category is received within the same household - for example, because more than one member of the household earns compensation of employees or because more than one property or transfer income is received - the classification must be based on the total household income within each category. The four sub-sectors are described as follows:
(a) Employers (S.141);
(b) Own-account workers (S.142);
(c) Employees (S.143);
(d) Recipients of property and transfer incomes (S.144).
The employers' sub-sector consists of the group of households for which employers' mixed incomes are the largest source of income for the household. Each of the other three sub-sectors is defined similarly using the income categories listed earlier. The distinction between own-account workers and employees is explained in detail in chapter VII. |
| 4.154. | The fourth sub-sector, households for which property and transfer incomes make up the largest source of income, constitutes a heterogeneous group and it is recommended that it should be divided into three further sub-sectors when possible. These sub-sectors are defined as follows:
(4.1) Recipients of property incomes (S.1441)
(4.2) Recipients of pensions (S.1442)
(4.3) Recipients of other transfer incomes (S.1443)
Pension households are households whose largest income consists of retirement or other pensions, including pensions from previous employers. |
| 4.155. | Other methods of sub-sectoring usually require a reference person to be identified for each household. The reference person is not necessarily the person that other members of the household regard as the "head of the household", as the reference person should be decided on grounds of economic importance rather than age or seniority. The reference person should normally be the person with the largest income although the reference person could also be the person who makes the major decisions with regard to the consumption of the household. |
| 4.156. | Once a reference person has been identified, it is possible to group households into sub-sectors on the basis of the reference person's characteristics. For example, sub-sectors may be defined according to:
(a) Occupation of the reference person;
(b) Industry, if any, in which the reference person works;
(c) Educational attainment of the reference person;
(d) Qualifications or skills possessed by the reference person.
Each of the criteria listed above provides its own possible scheme of sub-sectoring. It would also be possible to group households into sub-sectors according to the main income of the reference person if, for some reason, it was not possible to group on the basis of the largest income received by the household. For this purpose, the same income categories may be used as those recommended for the household's largest income. |
| 4.157. | Finally, it may be noted that households may be sub-sectored using criteria that apply to the household as a whole. For example, sub-sectors may be defined according to:
(a) Size of the total income of the household;
(b) Size of the household as measured by number of persons;
(c) Type of area in which the household is located.
The last criterion enables households living in agricultural, urban or metropolitan areas to be distinguished from each other, or households located in different geographical regions. |
| 4.158. | There are thus many useful ways in which the households sector may be sub-sectored and statistical agencies are advised to give due consideration to the various possibilities. More than one method may be adopted if there is a demand for different breakdowns of the households sector from different users, analysts or policy-makers. |
| 4.159. | It is particularly important for many developing countries to be able to distinguish between the formal and informal sectors of the economy. The fifteenth International Conference of Labour Statisticians (Geneva, January 1993) adopted Resolution II concerning statistics of employment in the informal sector. The resolution provides, among other guidelines, an international statistical standard definition of the informal sector. The relevant paragraphs of the International Conference of Labour Statisticians' resolution are reproduced in the annex of this chapter for the benefit of those countries that wish to introduce the distinction between formal and informal sectors into their sub-sectoring of the households sector. |
| 4.160. | The System has to be applied flexibly, and not rigidly, and the adaptation of the System to countries in different circumstance is the subject of a special chapter. In order to implement any of the possible methods of sub-sectoring the households sector suggested above, individual countries are obliged to make their own decisions about what they consider to be the most relevant classification - for example, with regard to location or levels of skill - for which international guidelines may not be helpful. Thus, the fact that specific classifications may not be proposed here should not be interpreted as implying that the characteristics in question are less important for purposes of economic analysis and policy-making. |
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