Indicator Name, Target and Goal

Indicator 8.3.1: Proportion of informal employment in total employment, by sector and sex

Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services

Goal 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all

Definition and Rationale

Definition:

This indicator is defined as the percentage of non-agricultural employment that is classified as informal employment. 

Concepts: 

Employment comprises all persons of working age who during a short reference period (one week), were engaged in any activity to produce goods or provide services for pay or profit. The working-age population is usually defined as all persons aged 15 and above. 

Informal employment comprises persons who in their main or secondary jobs were in one of the following categories:

  • Own-account workers, employers and members of producers’ cooperatives employed in their own informal sector enterprises (the characteristics of the enterprise determine the informal nature of their jobs);
  • Contributing family workers, regardless of whether they work in formal or informal sector enterprises (they usually do not have explicit, written contracts of employment, and are not subject to labour legislation, social security regulations, collective agreements, etc., which determines the informal nature of their jobs);
  • Employees holding informal jobs, whether employed by formal sector enterprises, informal sector enterprises, or as paid domestic workers by households (employees are considered to have informal jobs if their employment relationship is, in law or in practice, not subject to national labour legislation, income taxation, social protection or entitlement to certain employment benefits);[1]  Operational criteria used by countries to define informal jobs of employees include the lack of coverage by the social security system, the lack of entitlement to paid annual or sick leave and the lack of a written employment contract.
  • Producers of goods exclusively for own final use by their household (e.g. subsistence farming[2], fetching water, collecting firewood, etc.).  Operational criteria used by countries to define informal jobs of employees include the lack of coverage by the social security system, the lack of entitlement to paid annual or sick leave and the lack of a written employment contract.

An enterprise belongs to the informal sector if it fulfils the three following conditions:

  • It is an unincorporated enterprise (it is not constituted as a legal entity separate from its owners, and it is owned and controlled by one or more members of one or more households, and it is not a quasi-corporation: it does not have a complete set of accounts, including balance sheets);
  • It is a market enterprise (it sells at least some of the goods or services it produces); 
  • The enterprise is not registered or the employees of the enterprise are not registered or the number of persons engaged on a continuous basis is below a threshold determined by the country. 

Non-agricultural activities are defined according to the latest revision of the International Standard Industrial Classification of All Economic Activities (ISIC Rev.4). They correspond to sections B to U of the ISIC Rev. 4, that is, all sections except section A. Agriculture, forestry and fishing.

For more detailed information on informality definitions, please refer to the Resolution concerning statistics of employment in the informal sector, adopted by the Fifteenth International Conference of Labour Statisticians (January 1993), available at http://ilo.org/global/statistics-and-databases/standards-and-guidelines/resolutions-adopted-by-international-conferences-of-labour-statisticians/WCMS_087484/lang--en/index.htm, the Guidelines concerning a statistical definition of informal employment, adopted by the Seventieth International Conference of Labour Statisticians (November-December 2003) available at http://ilo.org/global/statistics-and-databases/standards-and-guidelines/guidelines-adopted-by-international-conferences-of-labour-statisticians/WCMS_087622/lang--en/index.htm and the ILO manual Measuring informality: A statistical manual on the informal sector and informal employment available at http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_222979.pdf. 

Rationale and Interpretation:

Informal employment offers a necessary survival strategy in countries that lack social safety nets, such as unemployment insurance, or where wages and pensions are low, especially in the public sector. In these situations, indicators such as the unemployment rate and time-related underemployment are not sufficient to describe the labour market completely. Statistics on the informal economy are key to assessing the quality of employment in an economy, and are relevant to developing and developed countries alike. 

ILOSTAT indicator description for informality is available at: http://www.ilo.org/ilostat-files/Documents/description_IFL_EN.pdf  

Data Sources and Collection Method

The data for this indicator can be collected through labour force surveys or other nationally representative household surveys with a module on employment. These surveys should have sufficient questions to determine whether the respondent’s job is of formal or informal nature, or the formal or informal nature of the employing establishment. These surveys are conducted by the national statistical offices of countries or the ministries or bureaus of labour.

For information on national practices in terms of questions used to capture data on informality, refer to the ILO report Women and Men in the Informal Economy: A Statistical Picture (Third Edition, 2018).

Method of Computation and Other Methodological Considerations

Computation Method:

The percentage of non-agricultural employment that is informal is calculated as follows: 

Comments and limitations:

The variety of concepts, definitions and operational criteria used by countries to measure informal employment greatly hinders the international comparability of the resulting statistics. The ILO makes an effort to derive harmonized statistics on informal employment from national household surveys following standard definitions and criteria for as many countries as possible (available on ILOSTAT).

The scope of this indicator is limited to non-agricultural activities. However, to have a more comprehensive picture of the informal economy, statistics on informal employment that incorporates  both agricultural and non-agricultural activites can be helpful. 

Proxy, alternative and additional indicators: N/A

Data Disaggregation

In order to produce this indicator, employment statistics need to be disaggregated by formal/informal employment and by economic activity (agriculture/industry/services etc.). Beyond this, the indicator is required to be disaggregated by sex. 

References

Official SDG Metadata URL
https://unstats.un.org/sdgs/metadata/files/Metadata-08-03-01.pdf  

Internationally agreed methodology and guideline URL
http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_222979.pdf  

Other references
ILO (1993). Resolution concerning statistics of employment in the informal sector. Fifteenth International Conference of Labour Statisticians. Available at: http://ilo.org/global/statistics-and-databases/standards-and-guidelines/resolutions-adopted-byinternational-conferences-of-labour-statisticians/WCMS_087484/lang--en/index.htm

ILO (2003). Guidelines concerning a statistical definition of informal employment. Seventieth International Conference of Labour Statisticians. Available at: http://ilo.org/global/statistics-and-databases/standards-and-guidelines/guidelines-adopted-byinternational-conferences-of-labour-statisticians/WCMS_087622/lang--en/index.htm 

ILO (2013). Manual Measuring informality: A statistical manual on the informal sector and informal employment. Available at: http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_222979.pdf

ILO (2018). Women and Men in the Informal Economy: A Statistical Picture (Third Edition, 2018). Available at: http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/publication/wcms_626831.pdf

ILO. ILOSTAT’s indicator description on informality. Available at:  http://www.ilo.org/ilostatfiles/Documents/description_IFL_EN.pdf

ILO (2013). Resolution concerning statistics of work, employment and labour underutilization. Nineteenth International Conference of Labour Statisticians. Available at: http://ilo.org/global/statistics-and-databases/standards-and-guidelines/resolutions-adopted-byinternational-conferences-of-labour-statisticians/WCMS_230304/lang--en/index.htm

UNSD (2008). International Standard Industrial Classification Revision 4 (ISIC Rev.4). New York. Available at:  https://unstats.un.org/unsd/cr/registry/isic-4.asp

Country examples
N/A

International Organization(s) for Global Monitoring

This document was prepared based on inputs from International Labour Organization (ILO).

For focal point information for this indicator, please visit https://unstats.un.org/sdgs/dataContacts/

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