THE INFORMAL SECTOR in the 1993 SNA, Rev.1

1. THE INFORMAL SECTORin the 1993 SNA, Rev.1 AEG IVO HAVINGA, UN Statistics Division CAROL CARSON, Project Manager Session on the Non-observed Economy Joint National Accounts Meeting April 25-28, 2006 Geneva 1

2. Plan of the presentation • Informal sector in the SNA Update process • Context: Why is the informal sector an important issue for the update of the 1993 SNA? • Definition of the informal sector: differences between the ICLS (ILO) concepts of employment in the informal sector/informal employment and the SNA framework • Draft annotated outline of a chapter on the informal sector in the 1993 SNA, Rev.1 • Looking ahead

3. Thus far in the update process • Building on earlier discussions, the January-February AEG agreed that… • differences in terminology should be reconciled, • differences in the definitions of market and non-market should be considered, • questions of comparability should be explored, • the new SNA chapter should provide a good introduction without attempting include all the material of a handbook. • The Statistical Commission, last month, welcomed the chapter on the informal sector

4. 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 sector’s 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

5. Context: Selected developments in methods and practicesince 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

6. 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

7. 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 would be key points for discussion in the new chapter. What are these differences?

8. 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.

9. Terminology (2) • 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.

10. 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.

11. 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.

12. Use of enterprise-based criteria (2) • 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

13. 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) • …

14. Points for discussion • What are views … • about the differences listed—for example, which are most important in practice? • about the ICLS “some or all” criterion used in identifying market producers? Does it have potential as an application for analysis and policy? • about international comparability—should further attempts be made to identify groupings, including the informal sector, that have greater cross-border and cross-region comparability?

15. Draft outline of chapter • Introduction • The informal sector: a broad statistical perspective • Definition of the informal sector • Other concepts • Measurement

16. Points for discussion • Are there relevant topics that are missing from the outline? • Are there views about the balance to be struck—that the chapter should be an introduction, not a handbook? What could be omitted from the outline?

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

18. Thank You Ivo Havinga at havinga@un.org Carol Carson at ccarson@imf.org