Informal but Not Insignificant: Unregistered Workers in North Cyprus

Abstract

The size of the informal labour force and its contribution to the national income of North Cyprus has been an issue of considerable controversy and political significance. Because of the relatively free movement of labour between Turkey and North Cyprus, a significant body of unregistered workers have accumulated in North Cyprus. This study carries out an estimate of both the size of the informal labour force as well as its contribution to GNP for the period from 1996 to 2000. This study has been made possible due to three rich data sets available for this period that address different aspects of this issue. These data sets are the population census of 1996, the household income and consumption survey of 1998, and the records of the immigration department up to the year 2000: The size of the informal labour market is estimated through the use of the national census, and also by constructing an inventory of unregistered immigrant workers through the records of the immigration department. Similar estimates are obtained for the number of people working in the informal sector using either approach. The findings are that the informal employment is between 35 to 40 percent of the total labour force. Because not all the informal sectors production is excluded from the official national income statistics, the understatement of the official statistics is estimated to be between 12 to 17 percent of GNP. In addition to the correction of the national income statistics, the fiscal losses are estimated to be about 9 percent of total tax revenues and a loss of social security revenues is approximately 38 percent of the total annual contributions.