Cash wage payments in transition economies : consequences of envelope wages : reducing under-reporting of salaries requires institutional changes

Ioana Alexandra Horodnic, Colin C. Williams

In transition economies, a significant number of companies reduce their tax and social contributions by paying their staff an official salary, described in a registered formal employment agreement, and an extra, undeclared "envelope wage," via a verbal unwritten agreement. The consequences include a loss of government income and a lack of fair play for lawful companies. For employees, accepting under-reported wages reduces their access to credit and their social protections. Addressing this issue will help increase the quality of working conditions, strengthen trade unions, and reduce unfair competition.

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Year of publication:	October 2021
Authors:	Horodnic, Ioana Alexandra ; Williams, Colin C.
Publisher:	Bonn : Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA)
Subject:	envelope wages \| informal employment \| undeclared economy \| tax evasion \| Schwarzarbeit \| Moonlighting \| Lohn \| Wages \| Steuervermeidung \| Tax avoidance \| Schattenwirtschaft \| Underground economy \| Informelle Wirtschaft \| Informal economy \| Vergütungssystem \| Compensation system \| Institutioneller Wandel \| Institutional change \| Osteuropa \| Eastern Europe \| Systemtransformation \| Economic transition \| Steuerstrafrecht \| Criminal tax law