- While the concept of an informal sector has existed for decades, in 1993 ILO statisticians drafted the first consensus approach on measuring the sector, using the following definition:
- The informal sector is composed of entities engaged in the production of goods or services with the main objective of generating employment and income. These entities tend to operate at a low level of organization, with little or no division between labor and capital, and on a small scale. Labor relations are based mostly on casual employment, kinship, or personal and social relations, not on contractual arrangements with formal guarantees. (ILO, 2014)
- The World Bank offers a narrower, government-perspective definition:
- The informal economy refers to activities and income that are partially or fully outside government regulation, taxation, and observation. (World Development Report on Jobs, 2013)
- At a 2013 workshop on expanding access to health services and financial protection for people outside the formal employment sector, Resilient and Responsive Health Systems (RESYST) provided this definition:
- People who do not receive health coverage through formal employment arrangements including those who work for unregistered or small enterprises, in subsistence agriculture, are unemployed or are not economically active. The definition also includes people who are poor and unable to afford financial contributions to the cost of health care.
- Women in Informal Employment: Globalizing and Organizing (WIEGO), a nongovernmental organization, uses what may be the broadest definition, which encompasses all employment unprotected by the government:
- The informal economy is the diversified set of economic activities, enterprises, and workers that are not regulated or protected by the state. Originally applied to self-em-ployment in small unregistered enterprises, the concept of informality has been expanded to also include wage employment in unprotected jobs. (WIEGO Working Paper No. 1, 2012)
- Individual countries may also use their own definitions. For example, in Malaysia the informal sector is described as follows (Baharudin et al., 2011):
- 1. All or at least some of the goods or services produced are meant for sale or barter transaction;2. Non-registration of the enterprise with the Companies Commission of Malaysia, Local Authorities, or other professional bodies; and 3. The number of employees are less than 10
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