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To measure informal businesses’ contribution to a local economy, first define what counts as an informal business and which jobs are in scope. Then combine suitable local data to estimate business numbers, employment, and an economic measure such as output or gross value added (GVA). No single register or survey is automatically complete: the method should match the local data available and make its coverage gaps and assumptions clear.
Decide what you are measuring
“Informal business” and “informal employment” describe related but different things. The International Labour Organization (ILO) distinguishes them by unit: the informal sector is an enterprise-based category, while informal employment is a job-based category.
- Informal-sector businesses: household-owned, unincorporated production units classified as part of the informal sector under the statistical standards being used.
- Employment in the informal sector: jobs in those informal-sector enterprises.
- Informal employment: informal jobs that may be found in informal businesses, formal businesses, or households.
A study can measure businesses, informal employment, or both. State which one it estimates; counting only informal-sector enterprises will not capture every informal job. The ILO’s Statistical update on employment in the informal economy (13 June 2011) explains this enterprise-versus-job distinction.
Before collecting or combining data, write down the geographic boundary and reference period. Also specify how the estimate treats agriculture, household production for own use, unpaid contributing family workers, people with more than one job, and businesses operating across the boundary. These choices change what is counted, so make them explicit rather than treating one convention as universal.
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Choose data sources that fit the local population
Start by inventorying sources that may describe businesses, workers, or both. Depending on the location, these may include household or labour-force surveys, economic censuses, establishment or enterprise surveys, business registers, licensing and tax records, and community-based business lists. Their availability and coverage vary; a record of registered businesses, for example, should not be assumed to include unregistered activity.
For each source, record the population it covers, the unit it counts, how often it is updated, its geographic and industry detail, the worker and business variables it contains, and likely exclusions. Check whether records can be linked without exposing confidential business or household information. The ILO’s Measuring informality: A statistical manual on the informal sector and informal employment (published 4 October 2013) describes household surveys, enterprise surveys, establishment surveys or censuses, and mixed household-enterprise surveys as alternative approaches.
| Approach | What it can capture well | Main dependency or trade-off |
|---|---|---|
| Household or labour-force survey | Workers and household-based business operators, including people whose businesses are absent from a business register. | Business accounts may be limited; estimates depend on survey coverage, questions, and sample size. |
| Enterprise or establishment survey | Business-level information, potentially including sales, costs, and employment. | Requires a usable frame of enterprises or establishments; unregistered units may be missing from it. |
| Mixed household-enterprise survey | A route from identifying operators through households to collecting more detailed information about their businesses. | More complex fieldwork and data linkage; suitability depends on local conditions and resources. |
These are design choices, not a universal ranking. A household listing followed by enterprise interviews may be useful where no dependable register exists. A register-based business survey may be more practical where the frame is sufficiently complete. Compare options against coverage of unregistered units, ability to link operators and workers, detail on business activity, cost, timeliness, nonresponse risk, and the geographic or industry detail required.
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Classify businesses and jobs consistently
Use internationally aligned concepts and question wording where possible. The ILO’s Survey Questions for Collecting Data on Work Relationships and Informality (9 December 2024) reflects the 20th International Conference of Labour Statisticians (ICLS) resolution on work relationships, known as ICSE-18, and the 21st ICLS resolution on statistics for the informal economy. Its recommended questions classify work relationships and informality, and distinguish informal, formal, household own-use production, and community-sector economic units.
Do not use business registration as a stand-in for every aspect of informality. Registration, incorporation, recordkeeping, workers’ employment arrangements, social protection, and legal coverage describe different characteristics. Preserve the component responses where possible, document the rule used to classify a business or job, and avoid treating a single administrative status as a complete measure.
Estimate business scale and employment
At a minimum, report the number of in-scope businesses and the people or jobs associated with the activity. Break results down by relevant local geography and broad industry when the data support reliable estimates and confidentiality can be protected.
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- Say whether an employment figure counts people or jobs. A person with multiple jobs can contribute more than one job.
- If the source supports it, report worker characteristics, hours, and earnings, identifying which measure is used and who is included.
- Describe whether the count covers businesses operating at any time during the reference period or only those active on a particular date.
- Do not present fine-grained local or industry estimates when the sample or disclosure risk makes them unreliable.
Measure economic contribution with output or GVA
Business and employment counts show scale, but they do not by themselves quantify economic contribution. Add an economic aggregate such as output or GVA, and define how it is calculated. Output is the value of goods and services produced under the chosen accounting concept. GVA is output less intermediate consumption—the goods and services used up in production.
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Use data and estimation steps that fit the national accounts framework and the available local information. Document the source of production, sales, costs, or other inputs; any imputation; and how business activity is separated from household activity when accounts are mixed. Explain whether reported values are gross or net of intermediate inputs and whether they are nominal or adjusted for price changes.
Avoid adding business sales to wages or household spending and calling the total “contribution.” Those figures can overlap or measure different sides of the same activity. The ILO identifies informal-sector contribution to total GDP or GVA as a key indicator in Women and Men in the Informal Economy: A Statistical Picture (23 January 2014).
That publication reported that informal-sector activity excluding agriculture accounted for 46 per cent of non-agricultural GVA in India in 2008. It is a dated, country-specific illustration of a GVA measure—not an estimate for another place or year.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Account for missing activity and uncertainty
Informal businesses can be absent from administrative records and standard statistical collection. The wider non-observed economy also includes underground, illegal, own-use, and other productive activity missed because of data deficiencies; it is broader than informal businesses alone.
The OECD/ILO handbook Measuring the non-observed economy (11 June 2002) describes two complementary responses: improve direct measurement through data collection and improve indirect measurement during national-accounts compilation. Direct collection can reduce omissions from source data; an indirect adjustment can address activity not captured directly. An aggregate adjustment does not, by itself, identify the particular businesses or workers responsible.
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Describe uncertainty according to the design. Probability samples can report sampling error; frame undercoverage, imputation, nonresponse, seasonal activity, and hard-to-enumerate groups need separate notes or sensitivity ranges where feasible. Keep those caveats attached to the estimates they qualify instead of implying that a precise count is complete merely because it has many digits.
Publish enough detail to make the estimate interpretable
Present the estimate with the information needed to understand what it measures and reproduce the main steps. Include:
- the target population, geographic boundary, reference period, and treatment of the scope choices described above;
- definitions of informal-sector businesses, informal employment, people, jobs, output, and GVA as used in the analysis;
- the source data, their coverage and units, and how sources were combined or linked;
- classification rules, weighting or estimation steps, imputations, and any indirect adjustments;
- known exclusions, uncertainty, confidentiality protections, and limits on comparisons with other places or years.
For technical design and statistical-program detail, consult the ILO’s 2013 Measuring informality: A statistical manual on the informal sector and informal employment, alongside the ILO’s 2024 recommended survey questions and the OECD/ILO handbook on the non-observed economy.
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