Envelope wages as a new normal? An insight into a pool of prospective quasi-formal workers in the European Union (EU)

ABSTRACT

PurposeIn spite of millions of quasi-formal workers in the European Union (EU), there is still limited understanding of what motivates workers to participate in these detrimental employment schemes, and why certain groups of workers exhibit higher inclination towards it. This article takes a novel approach by putting prospective envelope wage earners in the centre of this analysis.Design/methodology/approachData from the 2019 Special Eurobarometer on undeclared work are used, and two-level random intercept cumulative logit modelling is applied.FindingsOne in seven fully declared EU workers would have nothing against receiving one part of their wages off-the-books. Manual workers and individuals whose job assumes travelling are the most willing to accept such kind of remuneration, and the same applies to workers with low tax morale and those who perceive the risk of being detected and persecuted as very small. On the other hand, women, older individuals, married persons and employees from large enterprises express the smallest inclination towards envelope wages. The environment in which an individual operates also plays a non-negligible role as the quality of the pension system and the strength of social contract were also identified as significant determinants of workers' readiness to accept envelope wages.Originality/valueThis article fills in the gap in the literature by analysing what workers think about wage under-reporting and what factors drive their willingness to accept envelope wages.