Conclusion
IN the hearing conducted by House Labor Committee Chairman Enrico Pineda, two major issues on the informals cropped up: who are the informals and how to count them.
The following are short explanations:
On defining the informal sector
The term was coined in the 1970s by Western economists who visited a number of developing countries. They “discovered” that, unlike the situation in developed countries of Europe and North America, many economic activities in the agricultural and service sectors of developing countries were unregistered. Hence, the informal sector was even baptized as the “underground economy” or “clandestine economy”. Very Euro- or American-centric indeed.
At the turn of the millennium, the global understanding of the informal sector had deepened. The huge contribution of the sector to employment and the overall functioning of the economy had been widely accepted. Thus in 2002, the ILO even adopted the concept of “informal economy” as an acknowledgment of the bigger role of informal employment in the economy. It is not simply a sector.
Also, organizations of the informals such as Self-Employed Women’s Association of India (SEWA), with over a million members, have gained acceptance as legitimate labor organizations and as partners in society’s development.
On counting the informals
IN the House hearing, Rep. Dan Fernandez and Ms. Beth Angsioco of MAGCAISA mentioned 25.7 million as the number of informal workers. The source of this figure is the study done by Ms. Lisa Bersales, former National Statistician of the Philippines, and Vivian Llarina, Assistant National Statistician of the Philippine Statistics Authority. The study was presented by the two experts in a 2019 IMF Statistical Conference. Based on the Bersales-Llarina study, the informals constitute over 63 percent of the labor force in 2018.
On the other hand, the Department of Labor and Employment has been estimating the share of the informals in the total labor force to be between 38 percent and 42 percent for various years. They say they use the PSA data. The problem, however, is that they use a narrow concept of computing informal employment, which is equated to the so-called vulnerable employment concept propounded by some ILO statisticians. Under the vulnerable employment concept, informal employment is the total of the unpaid family workers and the self-employed who have no employees. This concept immediately excludes millions of informal construction workers who have no formal trade certifications, no formal company employers and no SSS/BIR registration. This concept also excludes the wage workers with no formal employment contracts, which is common among the “endos.” Another major group excluded are the members of various labor gangs such as the seasonals hired by the “cabecillas” during land preparation and harvesting. Not surprisingly, DOLE estimates are way below the informal sector estimates given by the employers (estimates by the Employers Confederation of the Philippines: around 75-77 percent).
The estimation problem is, of course, very much related to the definition of informal employment. In the past, informal sector was simply equated to non-registration under the laws of a country. However, in 2015, the ILO Recommendation 204 describes the “informal economy” as referring to all economic activities by workers and economic units that are – in law or in practice – not covered or insufficiently covered by formal arrangements. In short, there are shades of formality and informality. Asia-wide, the estimates of informal employment range from over 60 percent for Southeast Asia to over 80 percent in South Asia.
Incidentally, the Bersales-Llarina study is based on the following definition adopted by the PSA in early 2000s:
“For statistical purposes, the informal sector refers to household unincorporated enterprises which consists of both informal own-account enterprises and enterprises of informal employers. Informal own-account enterprises are household unincorporated enterprises owned and operated by own-account workers, either alone or in partnership with members of the same or other households which may employ unpaid family workers as well as occasionally/seasonally hired workers but do not employ employees on a continuous basis. Enterprises of informal employers are household unincorporated enterprises owned and operated by own-account workers, either alone or in partnership with members of the same or other households which employ one or more employees on a continuous basis.
“Particular cases that are excluded are: corporations, quasi-corporations, units with 10 or more employees, corporate farms, commercial livestock raising and commercial fishing.”