Statistical Concepts, Definitions & Methods

Dialogue and collaboration between statisticians and users of statistics is key to producing timely data that informs policy. The information in this section can support users of statistics on informal employment to maximize the use of available data and to begin discussions with producers of these statistics to better meet their data needs.

Defining Employment and Work

An important context for understanding labour statistics is the definition of “employment” and its amendments. The 19th International Conference of Labour Statisticians (ICLS) 2015 Resolution concerning statistics of work, employment and labour underutilization, and later amendments approved at the 20th ICLS (Resolution II), specify that employment is “work performed for others in exchange for pay or profit”. Employment no longer encompasses certain activities previously defined as employment, particularly own-use production work, which entails the production of goods and services for own final use, such as subsistence farming. These other forms of work are measured separately.

Countries’ statistical offices have begun implementing the 19th ICLS Resolution definition of employment, but not all have done so yet.

The Importance of the International Classification of Status in Employment (ICSE) and its Components

The ICSE is one of the primary international classifications for labour statistics. It is aimed at characterizing essential elements of workers’ employment relationships, whether they have autonomy in decision making in the running or the performance of the job activity, and whether they invest their own resources (finance, equipment) in the activity.

In 2018, the International Conference of Labour Statisticians approved a new classification system (ICSE-18) to replace ICSE-93, the system that had been in use since 1993 in labour statistics. Although the ICSE-18 is now the standard, it will take time for countries to implement it.

Importantly for statistics on informal employment, a worker’s status in employment in a particular job determines what criteria should be used to classify the job as informal or formal. ICSE-18 was designed to take account of the changing nature of employment and employment relationships and to reflect existing conditions of employment. Some workers are in employment “for profit”, meaning they are in what has commonly been called self-employment but they do not have the authority or autonomy over the organization or performance of the work, nor do they have direct access to the market. Examples include industrial outworkers and homeworkers (who take orders from an intermediary and produce to specifications but are not payrolled employees), contract farmers and workers accessing job tasks through a digital labour platform. As a result, in ICSE-18 a new category – dependent contractor – was created to classify workers in such jobs. Dependent contractors are not on an employer’s payroll and yet they also do not have independent control over what the work is or how it is organized.

ICSE-18 also clarified the definition for contributing family workers, stating that these are unpaid workers who “do not make the most important decisions affecting the enterprise or have responsibility for it.” This clarification ensures that women workers – many of whom contribute to household enterprises – are accurately classified. If they contribute to decision making, they should be classified as an independent worker, or if they are paid, they should be classified as an employee.

ICSE-18 distinguishes between independent workers and dependent workers and includes the following status categories:

Independent workers are classified into the following status categories:

• Employers:

11 – Employers in corporations.
12 – Employers in household market enterprises.

• Independent workers without employees:

21 – Owner-operators of corporations without employees.
22 – Own-account workers in household market enterprises without employees.

Dependent workers are classified into the following status categories:

• Dependent contractors:

30 – Dependent contractors.

• Employees:

41 – Permanent employees.
42 – Fixed-term employees.
43 – Short-term and casual employees.
44 – Paid apprentices, trainees and interns.

• Contributing family workers:

51 – Contributing family workers.

The status in employment in a worker’s job determines the criteria to be used to classify the job as informal or formal. In this way, ICSE categories play a significant role in how informal employment is measured.

The Definition of Informal Employment

In 2023, the 21st International Conference of Labour Statisticians Resolution clarified the definition of informal employment and included statistical standards to foster consistency in measurement and harmonization across countries in reporting of the levels and characteristics of informality:

The resolution notes that criteria for determining the status of a person’s job are tied to characteristics of the economic unit and of the worker status in relation to the regulatory environment. Persons holding informal jobs and engaged in production for the market may be categorized in the informal sector or the formal sector “depending on the sector of the economic unit for which the work is carried out or, in the case of dependent contractors, on their formal status in relation to the legal administrative framework of the country” (21st ICLS Resolution I, par. 63).

A common misconception is that informal employment only exists in the informal sector. However, informal employment exists both in the informal sector and outside the informal sector, that is, in the formal sector, as described below.

The “Informal Sector” and the Types of Workers it Includes

The terms informal or formal sector refer to the status of the economic units in which jobs are located – be they enterprises of several persons or economic units of one person as with so-called “own-account” worker units.

According to the 21st ICLS Resolution I, the informal sector comprises:

The characteristics of an enterprise in the informal sector are mainly: not being part of government, not being registered in a national governmental system, not being a separate legal entity from its owner and not keeping a complete set of accounts for tax purposes (par. 40).

For independent workers in particular, the economic unit’s informal/formal status also determines whether the job is informal/formal. Thus, independent workers whose economic unit is informal have an informal job.

Workers in the informal sector include:

• Independent workers – either employers or own-account/without employees – who operate and own or co-own an informal household unincorporated market enterprise.
• Dependent contractors who do not have a formal status in relation to the legal administrative framework or whose activities are not effectively covered by formal arrangements. (The sector of dependent contractors reflects their formal, or informal, status in relation to the legal administrative framework of the country.)
• Employees in informal economic units.
• Contributing family workers in informal household unincorporated market enterprises.

Informal Employment Outside the Informal Sector

Informal employment also occurs outside the informal sector, that is, in formal-sector enterprises and in households. It includes:

• Employees in formal economic units if their employment relationship is not, in practice, formally recognized by the employer in relation to the legal administrative framework of the country or not associated with effective access to formal arrangements such as national labour legislation and social protection laws providing "protection against economic and personal risks associated with carrying out the activities".
• Contributing family workers in formal economic units and whose work relationships are not formally recognized in relation to the legal administrative framework of the country or not associated with effective access to formal arrangements.
• Domestic workers who are not covered by national labour legislation, social protection laws and regulations, for example, job-related paid annual leave or sick leave.

Defining the Informal Economy

Statistically, the “informal economy” comprises all informal productive activities of persons or economic units, whether or not they are carried out for pay or profit (21st ICLS Resolution I, pars. 1 and 13).

WIEGO’s focus is on activities that are carried out for pay or profit – that is, for the market – so the more specific definition is that of the informal market economy:

In other words, the informal economy refers to both employment and the contribution of these workers to the national product (Gross Domestic Product).

The Link Between Non-Standard Forms of Work and Informal Employment

Increasingly, the concept of informal employment has become relevant and is being applied in statistics of developed countries as a dimension that cuts across a growing variety of forms of employment which differ on some dimension from what was considered “standard” employment – lasting jobs entailing labour rights and statutory social protection – for much of the 20th century in developed countries.

“Non-standard” employment, as this array of forms of employment are called, include temporary staffing jobs, short-term employment (limited duration positions, fixed term and intermittent contracts), “zero hours” contracts, part-time jobs or casual employment. In recent years, jobs that are accessed via digital platforms have arisen that are by definition short-term, and are generally administered with little or no responsibility from the platform company. The worker often is considered an independent worker rather than an employee.

A shared characteristic of many non-standard forms of employment in developed countries and elsewhere is that workers holding these jobs may not be covered by labour standards or regulations and may have limited or no access to work-related social protection. Hence, the growing interest in measuring informal employment – a dimension that cuts across these diverse forms of employment and provides aggregate information about the workforce in jobs that are, in law or in practice, not covered by formal arrangements. The ILO global estimates of informal employment encompass a notable number of developed countries in their measurement; a manifestation of the relevance of the concept of informal employment to the analysis of employment in all types of economies.

A Note on Data Collection Tools

Household surveys are questionnaires that are given to a sample of households in a population. The WIEGO Statistics Programme has based its work mainly on the household surveys collected by national statistical offices. Such surveys include labour force surveys, income and expenditure surveys, and the Living Standards Measurement Surveys that are undertaken in countries at the direction of the World Bank.

Citizen Data, an initiative of the UN Statistics Division and UN Women, draws on citizens’ engagement in the design and/or collection stages in the production of data. It is an important data source for groups not well measured in official statistics, for example, waste pickers. WIEGO Statistical Brief No. 39, Statistics on Waste Pickers: A Case Studies Guide, describes citizens preparing data on waste pickers in three cities and one country.