Back to Articles Cash wage payments in transition economies: Consequences of envelope wages

Horodnic, Ioana Alexandra

doi:10.15185/izawol.280

Cited by 11 publications

(7 citation statements)

References 10 publications

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“…Secondly, however, changes in the products of formal institutions are also required, by which is here meant the policy initiatives to tackle macro-level economic and social conditions. As previous empirical studies elsewhere reveal, this includes policy initiatives to increase the level of expenditure on active labour market policies to support vulnerable groups, and the level of expenditure on social protection (Autio and Fu, 2015;Horodnic, 2016;Thai and Turkina, 2014;Williams and Horodnic, 20156a,b;Williams and Kayaoglu, 2017), both of which are strongly associated with participation in the informal economy since these policy measures reduce the need for marginalised citizens to operate in the informal economy as a survival strategy.…”

Section: Discussionmentioning

confidence: 99%

Explaining and tackling the informal economy: an evaluation of competing perspectives

Williams

2019

Open Economics

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This paper provides an evidence-based evaluation of the competing ways of explaining and tackling the informal economy. Conventionally, participants have been viewed as rational economic actors who engage in the informal economy when the benefits outweigh the costs, and thus participation is deterred by increasing the sanctions and/or risks of detection. Recently, however, an alternative social actor approach has emerged viewing participation to result from a lack of vertical trust (i.e., their norms, values and beliefs are not in symmetry with the laws and regulations) and horizontal trust (i.e., they believe many others are non-compliant). Reporting 2,000 face-to-face interviews conducted in Croatia in 2015, only a weak and partial association is found between participation in the informal economy and the perceived level of penalties and risks of detection, but a strong significant association with both the level of vertical and horizontal trust. Those who perceive a larger proportion of the population to be engaged in the informal economy, and those whose norms differ to the laws and regulations, display a significantly greater likelihood of participating in the informal economy. The theoretical and policy implications are then discussed.

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Section: Discussionmentioning

confidence: 99%

Explaining and tackling the informal economy: an evaluation of competing perspectives

Williams

2019

Open Economics

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“…This proves once again the need to change the format of economic policy, to have institutional reform in order to build trust towards the state and its policy, which will form the basis for the unshadowing of labor relations. International experience proves that, given the institutional problems and failures of the market and the state, tough measures aimed at tightening penalties for shadow activity and informal labor relations are less effective than soft instruments aimed at creating incentives for formal employment and developing internal control in workers and employers [37]. First of all, it requires the implementation of a comprehensive development strategy that will change the model of socio-economic development, improving the institutional and business environment, and will increase the quality of regulation, the effectiveness of anti-corruption activities, the result of which should be the intensive creation of formal jobs in the economy.…”

Section: … Issn 1681-116x Ukrainian Society 2020 № 1 (72)mentioning

confidence: 99%

Informal employment: risks and consequences for the Ukrainian labor market

Blyzniuk¹

2020

Ukr. socìum

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Institutional pathologies and the inability of the institutional order of the labor market to adapt to possible changes is manifested in the expansion of the informal segment of labor market and in the distortionof social and labor relations. The author considers theoretical approaches to defining the volume and characteristics of the informal segment of the labor market. Generalized are the advantages and disadvantages of individual methods of estimating informal employment. Using logistic regression, author evaluates the risks of informal employment by socio-demographic characteristics, employment levels and occupation. According to the results of the evaluation, it is proven that the most dangerous age is the youngest and the oldest age groups, as these categories are the most vulnerable and socially unprotected in market conditions. It is those lacking vocational education who have the greatest risk of entering the informal employment segment. The calculations prove that having a vocational education significantly raises the "gain" for women employed in agriculture, and information and telecommunications. It is proven that the structure and level of employment in the formal and informal sectors is an important factor in aggregate labor productivity. By evaluating the aggregate productivity of formal and informal market segments, the author substantiates the importance of the relocation component in terms of economic development prospects. Thus, the calculations prove that the effect of the flow of workers between the informal and formal segments is quite significant for agriculture, trade and construction. While, on the contrary in healthcare, education, transport, and processing, the impact of the intra-industry component on aggregate productivity is greater in comparison to the displacement factor. The weight of the relocation component in the economy as a whole is higher than that of the intra-industry impact factors. Creating an institutional environment that would help reduce the economic activities in the informal segment would objectively promote economic growth.

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“…Such a verbal unwritten agreement to pay an additional undeclared (envelope) wage may simply deviate from the formal contract by stipulating that the employee will be paid more for their regular employment than is in the formal written contract. More usually however, this verbal agreement attaches additional conditions to the employee receiving this envelope wage, such as that they will not take their full entitlement to annual leave, that they will work more hours per week than is stipulated in the written formal contract (which might take the employee over the hours stipulated in any working hours directive or result in them being paid below the minimum hourly wage) or the job content may differ to that stated in the formal contract (Horodnic, 2016;Horodnic, 2015a, 2016a). Considering the seasonal nature of the hospitality industry, the informal labour practices of employing wholly undeclared labour or paying formal employees "envelope wages", not least for overtime worked during the high season, may well be extensive.…”

Section: The Informal Sector Sharing Economy and Hospitality Industrymentioning

confidence: 99%

Regulating the sharing economy to prevent the growth of the informal sector in the hospitality industry

Williams

Horodnic

2017

IJCHM

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Purpose To tackle one of the main negative consequences of the sharing economy, namely, the growth of the informal sector, the purpose of this paper is to evaluate for the first time the impacts of the informal sector on the hospitality industry and then to discuss what needs to be done to prevent the further growth of the informal sector in this industry. Design/methodology/approach To evaluate the impacts of the informal sector on the hospitality industry, data are reported from 30 East European and Central Asian countries collected in 2013 in the Business Environment and Enterprise Performance Survey. Findings The finding is that 23 per cent of hotels and restaurants in Eastern Europe and Central Asia report competing against unregistered or informal operators, and 13 per cent view these informal competitors as a major or severe obstacle. The larger the business, the greater is the likelihood that the informal sector is considered their biggest obstacle. Practical implications To prevent the further growth of the informal sector in the hospitality industry, regulation of the sharing economy will be required. To achieve this, it is shown that state authorities need to adopt both direct control measures that alter the costs of operating in the informal sector and the benefits and ease of operating formally, as well as indirect control measures that reduce the acceptability of operating in the informal sector. Originality/value This is the first paper to evaluate the impacts of the informal sector on the hospitality industry and to outline the policy measures required to prevent its further growth with the advent of the sharing economy.

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Back to Articles Cash wage payments in transition economies: Consequences of envelope wages

Cited by 11 publications

References 10 publications

Explaining and tackling the informal economy: an evaluation of competing perspectives

Explaining and tackling the informal economy: an evaluation of competing perspectives

Informal employment: risks and consequences for the Ukrainian labor market

Regulating the sharing economy to prevent the growth of the informal sector in the hospitality industry

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