Statistics Knowledge Sharing Workshop on Measurements for the Informal Economy

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1 NEPAL Statistics Knowledge Sharing Workshop on Measurements for the Informal Economy May, 2013 New Delhi, India Outline of the Presentation 1. Background Information in measuring the informal sector. 2. Share of informal sector in total GDP by major broad categories. 3. Data sources for capturing informal sector activities 4. Conceptual basis of Informal sector information in NLFS. 5. Concept of Informal employment 6. Informal sector Indicator produced by NLFS/NLSS/PHC 7. Statistical facts based on NLFS-II 8. Survey design of NLFS and coverage 9. Some Issues on capturing informal sector activities. 10. Way forward

2 Background information In Nepal, nation wide survey on informal sector has not conducted yet. Household survey by NPC secretariat in 1976/77. The Nepal labour force survey (NLFS) 1998/99 provided information on informal sector and structure of the labour force first time in Nepal. Informal sector employs about 96 % of the economically active population. Contribution of informal sector to GDP is 51.5 % Share of informal sector in total GDP by major broad categories Major broad categoriesofgdp Fiscal year 2012/13 (%) Agriculture and Forestry (all) Manufacturing 14.6 Construction Hotel and Restaurant Transport Storageand communication 0.64

3 Data sources for capturing informal sector activities Nepal labour force surveys (NLFS) Nepal Living Standards Surveys (NLSS) Population and Housing Census 2011 (PHC 2011) ( PHC does not follow completely NLFS based concept of labour force). Conceptual basis of Informal sector information in NLFSand NLSS The NLFS closely follows the ILO international standard definition of the informal sector. For operational purposes informal sector has been defined as follows. In terms of current economic status, those currently active have been classified into one of three categories: agriculture, non-agriculture informal, and non-agriculture other sectors,

4 Basis for classifying non-agricultural sector jobs as informal Paid employee Employment status Institutional sector Private unregistered company or Other Number of employees Less than 10 Operating own business with no employees Operating own business with regular paid employees or Contributing family member without pay " - " Less than 10 or Other Informal sector information based on NLSS Nepal living Standards Survey (NLSS) defined the informal sector based on the responses to each of two questions: Institutional sector of employment and Number of employees. So this is slightly different form NLFS concepts

5 Concept of Informal employment The NLFS survey includes the measurement of informal employment as following: a) All own account workers without employees b) All employers in the informal sector c) All contributing family workers d) All employees in informal jobs* (*where an informal job is defined as not having paid annual leave or where the employer does not pay social security contributions for the worker). Concept of informal employment Members of producer cooperatives are not separately identified in the NLFS-II and therefore are not included in the NLFS-II determination of informal employment.

6 Concept of informal employment Job-based concept of Informal employment: The total number of informal jobs, whether carried out in formal sector enterprises, informal sector enterprises, or households, during a given reference period Concept of informal employment It comprises: Producers cooperatives Own-account worke Own-account workers and employers employed in their own informal sector enterprises Contributing family workers Employees holding informal jobs, Members of informal rs engaged in the production of goods exclusively for own final use by their household

7 Informal sector Indicator produced by NLFS Informal sector Percentage of currently employed in nonagricultural informal sector by occupation (NSCO) Informal sector workers, by employment status and number of regular paid employees working in establishment percentage of Household having hire labour in non-farm activities

8 Informal sector Indicator produced by NLFS Informal employment Informally employed population by industry of main job all industries excluding agriculture and fishing industries Persons currently informally employed according to occupation of main job Informal sector Indicator produced by NLFS Informal employment Persons currently informally employed according to institutional of main job Persons currently informally employed according to status in employment

9 Nepal Living Standards Surveys Household having unregistered non-farm activities Household having Hire labor in non-farm activities Population census 2011 Sample frame of unregistered non-farm activities with no paid employed Survey Design of NLFS and coverage The sample design involved a two-stage probability proportional to size (PPS) selection process. First, wards were selected with PPS, where the number of households at the time of the census provided the measure of size. Then within the selected primary sampling unit (PSU), consisting of the ward or in some cases a sub-ward or an amalgamation of small wards,

10 Survey Design of NLFS All households were listed from each selected PSU and 20 households were chosen by systematic sampling from each PSU. In NLFS the design is based on two stages stratified random sampling technique with equal PSUs or households distributed between urban and rural areas. Survey design of NLFS NLFS II the prescribed 800 PSUs are divided equally in two parts, i.e., 400 PSUs each for urban and rural. NLFS II whole country stratified into six strata Urban Kathmandu Valley, Other Urban Hills Urban Tarai, Rural Mountains, Rural Hills and Rural Tarai.

11 Survey design of NLFS The sample size of 400 PSUs in each urban and rural area were proportionately distributed within their respective strata. Sampling Frame Population Census 2001 for both surveys Summary of Methodology Description NLFS-I NLFS-II Sampling Methodology Two stage stratified Two stage stratified Number of stratum 2 6 Number of PSUs Urban Rural Number of households Urban Rural

12 Coverage of the NLFS The survey covered the whole country. All permanent residents of Nepal (including foreign nationals except diplomats) were considered eligible for the survey. The homeless and those people living for six months or more away from the household or in institutions such as school hostels, prisons, army camps and hospitals were also excluded. Sample Distribution

13 Some Issues on capturing IS activities. Registration definition is not clear. (Industry registered in Company or industry office or Village development committee or municipality). These surveys are based on household survey. Respondents do not account small economic activities ( they understand as household core activities). Some concept and definition is not clear for agriculture sector work. Operational definitions vary in different countries. Many economic units escape the administrative,ligal, statistical framework. Widening the coverage of the IS in upcoming surveys Decent worker Home base worker Commuter worker Domestic worker Mixed household and enterprises surveys is the most appropriate method. Need of specially designed surveys ( including Time use survey )

14 Statistical facts based on NLFS-II Percentage of currently employed (aged 15 & over ) in non-agricultural informal sector =18.2 Percentage of non-agricultural current employment in informal employment = 86.4 Percentage of agriculture industry currently employed who were informally employed =99.7 Statistical facts based on NLFS-II Currently active rate Aged 15+ =83.4 % Labour force aged 15+who were classified as underutilized = 30.0 % Unemployed aged 15+ =2.1 % Time-related underemployed aged 15+= 6.7 % Inadequate earnings aged 15+ = 8.1 % Skills mismatch aged 15+ = 13.2 %

15 Main components of non-agricultural informal employment aged thousand (39.7 percent of non-agricultural informal employment) who were employees without formal conditions (i.e., not having paid annual leave or where the employer does not pay social security contributions for the worker); 106 thousand (4.0 percent of total informal employment) who were employers and others in informal sector 969 thousand (36.5 percent of total informal employment) who were self-employed without employees 525 thousand (19.8 percent of total informal employment) who were contributing family workers.

16 Persons aged 15 + with currently informally employed by institutional sectors Government 27.2% Private unregistered company 99% Private registered non-financial company 79.7% NGO/INGO 60.3% Private registered financial company 62.3% Financial public corporation 34.4% Way forward Adoption of the UN Fundamental principal of official statistics. The ILO guidelines on concept, definition and classification system would be followed in surveys and censuses as to capturing the informal activities. CBS is planning to conduct third round of labour force survey in FY 2014/15. Computing more gender disaggregated indicators in the informal sector by using previous survey data.

17 Thank you!

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