68.9 per cent of the occupied Salvadorans are in the informal sector, who contribute 21 per cent of GDP.
Workers in the informal sector generate 21.4 per cent of Salvadoran gross domestic product (GDP), concludes an analysis by the Central Reserve Bank (BCR).
The research, the first result of which was disseminated on the BCR’s documentary base in early 2024, takes up the supply and use table (COU) of the System of National Accounts (SCN) to calculate the weight of the informal economy in the country’s wealth generation.
The outcome document, published this week, acknowledges that the unseen or informal economy is difficult to measure, with an immediate reference to be the Multiple Purpose Homes Survey (EHPM) that shows indicators on employment and income.
The analysis of the BCR takes up two variables: the first corresponds to the productive units that are not registered in the tax administration and do not carry formal accounts, and the second refers to jobs that do not enjoy benefits stipulated by law, such as social insurance and social security coverage.
Citing EHPM 2019, the BCR recalls that there are more than 2.04 million Salvadorans in the informal sector – they have no social security or employment contract – representing 68.9 percent of the total employed.
Weight in the economy
The four of the offer and use of the SNA allows for a measurement of informality in GDP from employment matrices (insuming of labour force) and wages.
This cross-section of this information shows that the productivity of the informal employed is low with a contribution of 21.4 % of GDP, despite the fact that almost seven out of 10 Salvadorans are employed in this segment of the economy. Of the total, 8.4 per cent is generated by salaries and 12.9 per cent for mixed income.
Formal posts – where discounts such as income, pension savings and insurance payments apply – generate 30.7% of GDP, where wages contribute 29 per cent of GDP and 0.8% corresponds to the mixed income of self-employed workers.
According to the research, 37.9 per cent of the remaining GDP is generated by gross operating surplus and 10 per cent from net subsidy taxes.
The statistical table of the BCR indicates that the GDP of 2021 generated $29,043.1 million, of which $5,962.9 million occurred in the informal sector and $23,080.2 million in the formal economy.
Likewise, the report emphasizes that it would be desirable to have more information in the rural area, since, for the moment, there are no studies that help to deepen its analysis characterized by its temporary work, low wages and precarious conditions.
The largest employer
It is no surprise that the study of the Central Bank found that the largest informal employer is the agricultural sector, as at least 96.8 per cent of Salvadorans engaged in this area are in informality.
Employees in agriculture contribute 76.8 per cent of GDP generated by the informal economy.
The second activity with the largest informal population is other services,” with 87.3 per cent, followed by accommodation and food services, with 84.5 per cent.
Construction depends on 80.6 % of informal employees, while financial activities have fewer informal labour, with 10.1 per cent.