The informal sector represents a fundamental component of the economic structure of many developing countries. Informal sector enterprises are a key form of organization of production and an important provider of employment and income opportunities in both rural and urban areas. In parallel to the many jobs created in the informal sector (i.e., employment in the informal sector), various forms of informal (or unprotected) employment in the formal sector have shown fast growth over recent years. Studies have shown that, in many developing countries, the informal sector could account for over 50% of non-agricultural employment and nearly 30% of non-agricultural GDP. Even in many countries with economy in transition, the size of the informal sector is estimated to be around 10% (in the case of Kyrgyzstan, as high as 25%).
Measurements of the informal sector and informal employment (informal employment in the formal sector and employment in the informal sector) are important in improving labour statistics as well as in contributing towards exhaustive measures of GDP. Despite their overwhelming importance, the informal sector and informal employment are poorly covered, if at all, by official statistics. Standard establishment and labour force surveys usually capture, or separately identify, only a small fraction of those whose livelihood relies on working in the informal sector or in unprotected jobs. In many developing countries and countries with economy in transition, informal sector is yet to be integrated into national accounts and less information is available on the contribution of the informal sector to economic growth. Even in cases where some data are available, they are often not comparable at the international level and are mostly collected on an ad hoc basis, hampering the construction of harmonized time series and comparative analysis across countries.
The lack of data on the informal sector and informal employment in official statistics often results in distorted estimates of the real economy. For example, without taking into account informal activities, estimates of female economic participation rates could be implausibly low, gross domestic product (GDP) significantly underestimated, and the share of population living below national poverty line overestimated. Lack of information also leads to limited public understanding of many social and economic issues related to informal economic activities, including the differentials in earnings and working conditions between formal and informal employment; social protection arrangements; the characteristics of informal enterprises in the use of technology, access to credit, training and markets; and the input-output relations between formal and informal sector enterprises. These data and measurement problems, in turn, weaken the formulation, implementation and evaluation of policies and programmes aimed at promoting gender equality, eliminating child labour, generating decent work for all and reducing poverty.
The typical characteristics of the productive units in the informal sector - small, high mobility and turnover, seasonality, lack of recognizable features for identification, and the reluctance of information sharing - explains partly why it is often difficult to cover the informal activities with conventional statistical data collection. Since 1993, a series of international efforts has been made to promote the development of a standard definition and measurement tools in this area. The 15th International Conference of Labour Statistics (15th ICLS) in 1993 established international criteria for defining the informal sector, providing considerable flexibility to countries in defining and measuring the informal sector. The 17th ICLS (2003) introduced the concept of informal employment to complement the concept of informal sector.
Based on the framework of international definition, the UN Expert Group on Informal Sector Statistics (the Delhi Group) - constituted in 1997 - has endeavored to harmonize national definitions of the informal sector to improve international comparability. Recognizing the limits of harmonization, the Delhi Group identified a subset of the informal sector that could be defined uniformly and for which countries could produce internationally comparable data. The United Nations Statistics Division (UNSD) is also in the process of updating the 1993 System of National Account (SNA) to provide guidance on the treatment of informal sector in national accounts.
Over the years, with the assistance of ILO, many countries have started collecting and working with data on the informal sector and informal employment, and accumulated extensive experience. Among the set of data collection instruments, labour force surveys - for measuring the size of informal employment and monitoring working conditions - and the mixed household-enterprise surveys - for collecting comprehensive data about the informal sector - have gained increasing importance.
Interregional Cooperation on the Measurement of Informal Sector and Informal Employment was a multi-year and multilateral Development Account project. The project was implemented by ESCAP as the lead agency, in collaboration with ECLAC and ESCWA. The main objectives of the project were (i) to increase availability of data on informal sector and informal employment and (ii) to improve analysis of this data to calculate the contribution of informal sector to employment and to GDP.
The first component of the project was to raise awareness among the national statistics offices and other government agencies in the participating countries of importance of collecting and disseminating informal sector and informal employment data and incorporating it into employment and GDP estimates. The second component was to enhance capacity to collect, compile, analyze and disseminate informal sector and informal employment data complying with international methodological standards. The expected outputs were published informal sector and informal employment data and a country report covering data collection, compilation, dissemination and analysis experience throughout the project. The project also, contributed to the conceptual work on informal sector by proposing a standardized data collection strategy and producing internationally comparable data.