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KILM 7. Employment in the informal economy
Introduction
The KILM 7 indicator is a measure of employment in the informal economy[1] as a percentage of total employment, i.e. the ratio between the number of persons employed in the informal economy and the total number of employed persons. Because of the wide variations in definitions and methodology of data collection related to the informal economy, five series are presented in table 7. Series 1 includes measures of the informal economy according to a harmonized definition agreed upon by the Expert Group on Informal Sector Statistics (the Delhi Group); series 2 includes the measures of informal economy as defined on a nation-specific basis; series 3 includes data on employment in “small or micro-enterprises” presented according to national definitions; series 4 includes data for 12 Latin American countries, based on a harmonized definition of “small or micro-enterprises” from the ILO Regional Office for Latin America and the Caribbean; finally, series 5 presents information on the informal economy based on “related other concepts”. Users are cautioned to make country-to-country comparisons only within the series based on harmonized definitions.
Table 7 contains information for 59 economies in total. Recent trends in the indicator can be monitored for approximately half of the economies, where comparable time-series data on informal economy employment are available. A gender-specific breakdown for the indicator is given where the data are available. In most cases, information on persons employed in the informal economy is given as absolute numbers and as a percentage of total employment, except for series 4 where only percentages are available. National, urban and rural figures are given when available; however, for some economies, statistical information is available for urban areas only.
Trends
Figure 7a. Employment in the informal economy (harmonized definition) as a percentage of total employment, latest years
Five countries can be compared on the basis of the harmonized definition of employment in the informal economy. Very high levels of informal economy employment (nearing 50 per cent) are evident in both Ethiopia and India. Except in Georgia, informal employment rates are higher in rural than urban areas.
Figure 7b. Persons employed in small or micro-enterprises as a percentage of total employment, 1990-97
Cross-country comparable time series are available only for the series based on employment in small or micro-enterprises in Latin American economies (series 4). Between 1990 and 1997, of the economies with data, Panama persistently had the lowest rate while the highest rate was seen in Bolivia, Ecuador or Paraguay. An increasing trend was seen in all the economies. Bolivia showed a particularly large increase (18 percentage points) in the number of persons employed in small or micro-enterprises between 1990 and 1995, although the percentage began to decline after that.
Figure 7c. Percentage change in employment in the urban informal economy (national definitions) as a percentage of total employment, earliest to latest years
Although rates should not be compared among countries when looking at the series based on national definitions, it is possible to assess how informal economy employment has changed over time in the same country. The data show that it decreased from the earliest to latest year of data availability in Benin and Pakistan, increased in Brazil, Latvia, Mali, Mexico and the United Republic of Tanzania, and increased substantially - by 60 per cent or more - in the transition economies Kazakhstan, Kyrgyzstan and Lithuania.
[1]In KILM 7 and elsewhere in KILM Third Edition, the term “informal economy” is primarily used. In accordance with the conclusions concerning decent work and the informal economy, adopted by the Committee on the Informal Economy, International Labour Conference, 90th Session, 2002, the term “informal economy” is preferable to “informal sector” because the workers and enterprises in question do not fall within any one sector of economic activity, but cut across many sectors. However, “informal sector” is used historically in this text with reference to documents preceding the 2002 conclusions, and occasionally to avoid confusion with other nuances of the word “economy”.
