Explaining and Tackling Under-Declared Employment in FYR Macedonia: The Employers Perspective

Abstract

The aim of this paper is to evaluate how employers who illegally under-report their employees’ salaries to evade paying the full tax and social contributions owed can be explained and tackled. These employers have been conventionally explained as rational economic actors doing so when the benefits outweigh the costs, and thus the solution is to increase the sanctions and/or probability of detection. An alternative social actor approach, however, explains employers as under-reporting salaries because of their lack of both vertical trust (i.e., their beliefs are not in symmetry with the laws and regulations) and horizontal trust (i.e., they believe many others are non-compliant). Reporting a 2015 survey of 450 employers in FYR Macedonia, the finding is that there is no strong association between employers under-reporting salaries and their perceived level of penalties and risks of detection, but a strong significant association with both their level of vertical and horizontal trust. The theoretical and policy implications are then discussed.

Revisiting the undeclared service economy as a dual labour market: lessons from a 2019 Eurobarometer survey

“…The proposal to also increase the penalties and detection risk for employers is also supported by the evidence. Although past studies reveal that using repressive sanctions and detection measures has little impact on workers likelihood of engaging in undeclared work , the expected fines and likelihood of detection have been found to significantly impact on employers' propensity to operate in the undeclared economy (Williams & Bezeredi, 2018a.…”

Explaining different types of undeclared work: lessons from a 2019 Eurobarometer survey

“…This study reveals that in Europe such initiatives should particularly target those living in large urban areas and in Southern Europe and East-Central Europe. There is also evidence that although raising sanctions and detection risks has no significant impact on workers participation in the undeclared economy (Williams and Horodnic, 2020), employers' participation is significantly impacted by the expected penalties and risk of detection (Williams and Bezeredi, 2018a).…”

Exploring the illegal practice of under-reporting wages in the construction industry: some lessons from Romania

“…However, the evidence that doing so reduces participation in under-declared wages is inconclusive. Some studies find a significant relationship between participation to this practice and level of deterrents and other studies no association (Franić 2019;Williams and Bezeredi 2017;Williams and Horodnic 2016;Williams and Yang 2017). Therefore, the following propositions for the construction industry are tested: H1a: The higher the perceived risk of detection the lower is the likelihood of an employee in the construction industry receiving under-reported wages.…”