1ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Informal sector employment and

informal employment in South Africa

Yandiswa Mpetsheni

Executive Manager: Labour Statistics

Statistics South Africa

28 September 2009

2ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Presentation Outline

• Objective of the presentation

• Sources of informal sector employment in South Africa– October Household Survey– Labour Force Survey – Quarterly Labour Force Survey

• Survey of the employers and self-employed

• Informal employment

3ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Objective of the presentation

To discuss how informal sector employment and informal employment are measured in South

Africa

4ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Sources of data and periodicity

1. October Household Survey (OHS) 1994 – 1999 (annual)

2. Labour Force Survey (LFS) 2000 – 2007 (March, September)

3. Quarterly Labour Force Survey (QLFS) from Jan 2008 to date – Quarterly frequency

4. Survey of Employers & Self-employed (three year frequency)

5ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Scope and coverage

• Surveys household based

• Coverage: 30 000 dwelling units

• Reporting levels: National and provincial

6ISE Workshop – Tanzania, 27 Sep – 02 October 2009

October Household Survey (OHS)

7ISE Workshop – Tanzania, 27 Sep – 02 October 2009

October Household Survey

• Formal/Informal sector definition was based on registration of the business entity.

• Question used to compute informal sector employment was as follows:

– Do you consider your work/business to be formal or informal

8ISE Workshop – Tanzania, 27 Sep – 02 October 2009

October Household Survey

•1994 – 1996 : formal/informal distinction only for employers and self employed persons.

• 1997 – 1999 : same questions asked of everyone employed

OHS definition of the informal sector was based on the registration of the business entity

9ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Challenges with OHS definition

•Registration concept not clear for some respondents

•Definition difficult for employees who did not know if the businesses they were employed in were registered

• Self- perception question was used to measure the formal/informal sector employment and thereby there was no objective criteria.

10ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Labour Force Survey(LFS)

11ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Labour Force Survey

Formal/Informal self-perception plus the following questions:

• Size: Asked of all employed • From 2000: UIF, Location• VAT registration

LFS used the self-perception question on the informality of the business to measure the informal sector

12ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Challenges with LFS definition

• Self- perception question was used to measure the formal/informal sector employment.

• Employees did not always know if business they were working in was registered or not.

• The registration concept was not clear as it included any registration (eg medical associations, VAT, etc)

13ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Quarterly Labour Force Survey (QLFS)

14ISE Workshop – Tanzania, 27 Sep – 02 October 2009

QLFS

• Informal sector comprises:– Employers, own-account workers and persons

working unpaid in their household business ( where the business is not registered for VAT or income tax)

– Employees (not registered by their employers for income tax and working in establishments of less than 5 employees)

15ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Employed

Employers; Own-account; Working unpaid

in hhold business

Registered for VAT or Income tax

No

Informal sector

Employees

Income tax deducted by employer

No

Size of establishment less than 5 employees

Yes

The informal sector in the QLFS

16ISE Workshop – Tanzania, 27 Sep – 02 October 2009

What informed the choice of objective measure

• Need to be clear of what registration comprised (VAT registration and income tax registration)

•Consistent with the establishment register

• Need to use an objective criteria rather than self perception in defining the informal sector.

17ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Survey of employers and the self-employed (SESE)

18ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Survey of Employers and the Self-Employed

Two-stages:

1. LFS questionnaire (2001, 2005) - All employed persons

2. QLFS questionnaire (2009 and every 3 years thereafter)

3. SESE questionnaire:

Persons operating a business(es) with or without a partner

AND the business not registered for VAT (annual turnover of R1 mil or more)

• Report on individuals and the characteristics of their businesses

19ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Questions in SESE

• Location of the business premises

• Set of accounts

• Access to finance

• Employees (paid/unpaid, earnings)

• Expenditure

• Profit/turnover

20ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Informal employment

21ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Informal employment

• First published in 2008

• Done on quarterly basis through the QLFS

22ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Definition

• Informal employment comprises

•all persons employed in the informal sector,

•all persons helping unpaid in a household business,

•all persons employed in private households and

• employees in the formal sector who are not entitled to any of the following benefits: medical aid from the employer, contribution to pension by employer and a written contract.

23ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Informal Employment

Informal sectorEmployers, own-account,

employees

Informal employment*

Helping unpaid in their household business

Employed:

Market production activities

Employed in private households

: - Entitled to medical aid or

- Contribution to pension - written contract

* Excludes employers and own-account workers who are in the formal sector that do not have either medical aid or pension plans.

Formal Sector Employees

No

24ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Questions asked

• Pension or retirement fund

• Paid leave

• Contribution to UIF

• Medical aid access

• Written contract

25ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Informal employment results

  Apr-Jun 2008 Jan-Mar 2009 Apr-Jun 2009

Employed (Both sexes) 100.0 100.0 100.0

Formal employment 59.4 61.2 62.3

Informal employment 35.8 33.6 32.7

Other employment 4.8 5.1 5.0

       

Employed (Women) 100.0 100.0 100.0

Formal employment 55.6 57.9 59.2

Informal employment 41.2 39.1 37.8

Other employment 3.3 3.0 2.9

       

Employed (Men) 100.0 100.0 100.0

Formal employment 62.4 63.9 64.8

Informal employment 31.6 29.3 28.5

Other employment 6.0 6.8 6.7

26ISE Workshop – Tanzania, 27 Sep – 02 October 2009

 Apr-Jun

2008Jan-Mar

2009Apr-Jun

2009

Total employment 100.0 100.0 100.0

Formal sector (Non-agricultural) 68.6 69.3 70.0

Informal sector (Non-agricultural) 17.0 15.8 15.8

Agriculture 5.8 5.4 5.3

Private households 8.6 9.5 8.9

Formal and Informal Sector employment

27ISE Workshop – Tanzania, 27 Sep – 02 October 2009

Questions?