THE INFORMAL SECTOR in the 1993 SNA, Rev'1

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THE INFORMAL SECTORin the 1993 SNA, Rev.1
AEG IVO HAVINGA, UN Statistics Division CAROL
CARSON, Project Manager AEG
Meeting Frankfurt, 30 January 8 February 2006

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Plan of the presentation

• 1. Context Why is the informal sector an
  important issue for the update of the 1993 SNA?
• - policy relevance
• - calls for statistical guidelines
• - substantial developments since 1993
• 2. Definition of the informal sector differences
  between the ICLS (ILO) concepts of employment in
  the informal sector/informal employment and the
  SNA framework
• 3. Draft annotated outline of a chapter on the
  informal sector in the 1993 SNA, Rev.1
• 4. Work plan to prepare the recommendations on
  the informal sector
• --with sections 3 and 4 for information

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Thus far in the update process

• Conclusions of the AEG December 2004 meeting
• confirmed the importance of the informal sector
• noted that coverage needs to be closely defined
• advised that extended text should be added to
  1993 SNA
• Feedback from regional meetings in 2005
• UNESCAP (April), UNECLAC (October), UNECA
  (November)
• Consultations with ILO and the Delhi Group

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Context Policy relevance of measurement of the
informal sector

• Links to development objectives on
• income generation,
• employment creation and
• poverty reduction
• and to the design and monitoring of targeted
  support programs
• Informal sectors contribution to
  non-agricultural GDP
• 27 percent in northern Africa
• 41 percent in Sub-Saharan Africa
• 29 percent in Latin America
• 31 percent in Asia

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Context Selected developments in methods and
practice since 1993

• Papers of Delhi Group on Informal Sector
  Statistics
• UN handbook Household Accounting Experience in
  Concepts and Compilation, Volume 1 Household
  Sector Accounts
• Measuring the Non-observed Economy A Handbook
  by OECD, IMF, ILO and CISSTAT
• UNECE manual Non-observed Economy in National
  Accounts

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Context Calls for guidelines

• Issue in the work on the 1993 SNA placed on the
  research agenda
• Statistical Commission 2004 reiterated
  collaboration between UNSD and the Delhi Group on
  informal sector
• Forthcoming publication Surveys of Informal
  Sector and Informal Employment
• Collaborative effort of ILO and members of Delhi
  Group
• Chapter on uses of informal sector data for
  national accounts purposes

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Questions

• 1. confirm that there are strong reasons why
  guidance on the treatment of the informal sector
  should be added to the updated 1993 SNA?
• 2. agree that there seems to be a substantial
  body of methodological literature and of
  practical experience available to serve as a
  foundation on which to prepare guidance on the
  treatment of the informal sector within the
  national accounts framework?
• 3. recommend any other sources to be consulted,
  or do they commend any in particular of those
  mentioned?

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Definition of the informal sector

• Differences between ICLS and SNA
• in terminology
• in segmenting the economy
• in the use of enterprise-based criteria
• in the universe of household enterprises
• --key points, with questions on each

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Terminology

• The ICLS use of sector does not match the
  definition in the SNA.
• The word informal has several meanings
• May imply a formal-informal sector distinction
  between household enterprises.
• Can refer to exhaustiveness of data collection
  practices as well as a production unit with
  specific characteristics.

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Terminology (cont.)

• The ICLS use of households is narrower than the
  meaning in the national accounts framework.
• National accountants consider the formal
  segment of enterprises to be confined to
  institutional sectors other than the household
  sector.

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Question

• 4. Should the different meanings of sector,
  informal, households, and formal be
  clarified and explained in the updated SNA?

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Segmenting the economy

• ICLS uses non-registration to identify informal
  enterprises within household enterprises in many
  countries this may coincide with lack of legal
  status and of accounts.
• ICLS refers only to production units that engage
  labor as input national accounts refer also to
  those that do not use labor inputs.

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Question

• 5. agree that the updated SNA should describe
  the differences between the ICLS and SNA
  definitions of the types of production units and
  where possible reconcile the differences?

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Use of enterprise-based criteria

• Criterion for market production
• SNA market producers are those that sell most
  or all of their production on the market at
  economically significant prices.
• ICLS uses the phrase some or all.
• Conceptual and practical advantage of some or
  all criterion.

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Use of enterprise-based criteria

• Possible grouping for macroeconomic statistics on
  the informal sector
• Household enterprises with employment
• Enterprises with market production
• Informal sector enterprises
• Other household enterprises
• Enterprises with only production for own final
  use
• Household enterprises without employment

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Questions

• 6. agree that there are advantages to the ICLS
  some or all criterion in identifying market
  producers? If so, could it be developed as an
  application for analytical and policy oriented
  purposes? Which option is preferredin the core
  household production account or in a
  supplementary presentation?
• 7. views on the question of comparability?
  Should further attempts be made to identify
  groupings of household enterprises, including the
  informal sector, in the SNA household production
  account that have a greater degree of
  international comparability, especially to
  facilitate the preparation of macroeconomic
  indicators on household production that are
  internationally comparable and consistent with
  the SNA?

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Universes of household enterprises

• With and without labor input (SNA) versus with
  labor inputs (ICLS) (noted above)
• All economic activities (SNA) versus
  non-agricultural activities (ICLS)

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Question

• 8. Should a bridge table be developed, in
  coordination with the ILO and Delhi Group,
  between the informal sector special cases and
  their SNA counterparts for inclusion in the
  updated SNA?

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Draft outline of chapter

• Introduction
• The informal sector a broad statistical
  perspective
• Definition of the informal sector
• Other concepts
• Measurement

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Questions

• 9. Are there relevant topics that are missing
  from the outline?
• 10. views about the approach of tracing with
  broad brush strokes the evolution of the subject
  as a frame within which to explain differences in
  terminology and differing analytical needs?
• 11. views about the balance struck between
  being too much and too little?

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Work plan, 2006 key elements

• AEG sub-group
• Collaboration with ILO and Delhi Group
• Forums to test preliminary drafts (e.g., UNECE
  April, Delhi Group, regional meetings)

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Questions

• 12. Are there AEG members who would like to
  volunteer for the sub-group to be set up to
  provide advice and review progress on the
  development of a recommendation on the informal
  sector?
• 13. Are there forumsgroups or meetingsin
  addition to the Delhi Group whose views should be
  sought or that can be used to test preliminary
  proposals?

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• Thank You