Here is how the Eretes implements the Informal sector indirect approach measure:

  • First of all measuring jobs in Informal Sector according to the IOT recommendations: e.g. thanks to different surveys, a Labor Matrix “activities X status” (declared and non-declared workers, independents, bosses, family help) has been built, in which informal sector activities are often obtained as a balancing item. Other surveys (of the 1 2 3 kind) or monographic studies allowed to draw then ratios per capita by industry, such as gross output per capita, wages and technical coefficient.
  • ERETES provides a specific worktable, named Industry Account table, which makes the Informal Sector estimation easier on the basis of the job matrix and the ratios, which are available as soon as they are loaded in its database.
  • Within this worktable each industry is disaggregated into different production modes[1] arranged in columns. They enable to put apart accurate information (provided for example by formal sector) on one hand, from less accurate one (informal sector) on the other one.
  • For example, the table here below shows in bold data the sources about India Agriculture industry, as they appear in ERETES Industry Account table after loading for the account over the years 2004-05.

Table 1: Agriculture Industry Account in Eretes after data sources loading[2]

India Case / Agriculture / Unit: million
Companies Formal Sector / Reconstituted Companies / Informal Sector / Household for own account / Total
Output / 401 280 / 401 280
Intermediate Consumption / 71 280 / 71 280
Gross Value Added / 330 000 / 5 240 000 / 30 000 / 5 600 000
Wages / 156 723 / 156 723
Net Taxes / 12 841 / 12 841
Gross Operational Surplus / 160 436 / 160 436
Workforce / 110 000 / 20 000 / 130 000
Undeclared Workforce / 2 460 000 / 336 300 000 / 338 760 000
Ratios
Wage / Workforce / 0,061 / ![3] 0,000 / 0,000
GVA / Workforce / 0,128 / 0,017
Output / GVA / 1,216 / 0,072
IC / Output / 0,178 / ! 0,000 / ! 0,000 / 0,178
  • Each Here below as well ratios resulted from the surveys exploitation …

Table 2: Economic ratios extracted

from the survey exploitation for the Agriculture Industry

Ratios / Informal Sector / Household
Output / GVA / 1,359 / 1,283
Wage / Workforce / 8 450
  • … and the results from Eretes concerning informal sector and own account production

Table 3: Informal sector and Household for own account estimation

India Case / Agriculture / Unit: million
Companies Formal Sector / Reconstituted Companies / Informal Sector / Household for own account / Total
Output / 401 280 / 7 120 380 / 38 490 / 7 560 150
Intermediate Consumption / 71 280 / 1 880 380 / 8 490 / 1 960 150
Gross Value Added / 330 000 / 5 240 000 / 30 000 / 5 600 000
Wages / 156 723 / 2 841 274 / 2 997 997
Net Taxes / 12 841 / 12 841
Gross Operational Surplus / 160 436 / 2 398 726 / 30 000 / 2 589 162
Workforce / 110 000 / 20 000 / 130 000
Undeclared Workforce / 2 460 000 / 336 300 000 / 338 760 000
Ratios
Wage / Workforce / 0,061 / ![2] 0,008 / 0,009
GVA / Workforce / 0,128 / 0,016 / 0,017
Output / GVA / 1,216 / ! 1,359 / ! 1,283 / 1,350
IC / Output / 0,178 / 0,264 / 0,22 / 0,259
  • The Eretes surplus consist in disaggregating the inside Agriculture industry in several production modes arranged next to each other and introducing labor data within this table. That enables to make several analysis (in column: intra-consistency controls inside a mode; in row: inter - consistency control between them).
  • It remains to clarify the Reconstituted Companies production mode. The information provided by the household survey shows there are 130 000 declared workers in the formal sector instead of 110 000 declared by formal companies. This discrepancy is due by assumption to delays of transmission of activity reports of new companies to the statistical system. This leads to keep salaries formal production mode unchanged, but to add the surveys surplus of information in the ‘reconstituted’ mode by difference. Then we reconstitute it entirely by applying ratios of the formal sector production mode to it:
  • We apply the formal sector workforce gross value added productivity to the 20 000 workers of the reconstituted mode and we obtain GVA equals 2,6 billions of rupees.
  • On it we apply then the formal sector ratio “Output / GVA” to get the reconstituted mode total output equals 3,1 billions rupees.
  • We have then easily the intermediate consumption (Output minus GVA), wages = ‘reconstituted’ mode number of worker x formal mode declared wage per worker; net taxes = ‘reconstituted’ mode total output x formal sector ratio “Net Taxes / Output”.

Table 4: Reconstituted Companies estimation

India Case / Agriculture / Unit: million
Companies Formal Sector / Reconstituted Companies / Informal Sector / Household for own account / Total
Output / 401 280 / 3 123 / 7 120 380 / 38 490 / 7 563 273
Intermediate Consumption / 71 280 / 555 / 1 880 380 / 8 490 / 1 960 705
Gross Value Added / 330 000 / 2 568 / 5 240 000 / 30 000 / 5 602 568
Wages / 156 723 / 1 680 / 2 841 274 / 2 999 677
Net Taxes / 12 841 / 100 / 12 941
Gross Operational Surplus / 160 436 / 788 / 2 398 726 / 30 000 / 2 589 951
Workforce / 110 000 / 20 000 / 130 000
Undeclared Workforce / 2 460 000 / 336 300 000 / 338 760 000
Ratios
Wage / Workforce / 0,061 / 0,084 / ! 0,008 / 0,009
GVA / Workforce / 0,128 / 0,128 / 0,016 / 0,017
Output / GVA / 1,216 / 1,216 / ! 1,359 / ! 1,283 / 1,350
IC / Output / 0,178 / 0,178 / 0,264 / 0,22 / 0,259
  • Some remarks:
  • In this case we assume Agriculture Industry total GVA is unknown because we accepted a 2,6 billion rupees increase compared to data available.
  • Wage per worker between Formal Sector and reconstituted one differs due to composition effects. Reconstituted companies are assumed to have only declared workers, there are paid the official rate wage whereas the formal sector rate ratio includes undeclared worker paid a lower rate.
  • Ratio Output / GVA shows formal sector is both more efficient than household for own account and informal Sector. One explanation may be because formal sector workers are ten times better paid than informal sector ones and workers for own account are also more incited at work.

[1] “Construire les comptes de la Nation - © Ed. Economica, 1996” of Michel Séruzier.

[2] “Employment Unemployment Survey” (EUS) 2004-05

[3] “!” symbol means that cell which display calculus contains also inside a data source which may differ with the screen value. The values inside the cells with “!” symbol are given by table 2 below.

[2] “!” symbol means that cell which display calculus contains also inside a data source which may differ with the screen value.