Cash wage payments in transition economies: Consequences of envelope wages

Ioana Horodnic and Colin Williams

IZA World of Labor, 2021, No 280v2, 280

Abstract: 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.

Keywords: envelope wages; informal employment; undeclared economy; tax evasion (search for similar items in EconPapers)
JEL-codes: E26 J46 J48 O17 (search for similar items in EconPapers)
Date: 2021
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Related works:
Journal Article: Cash wage payments in transition economies: Consequences of envelope wages (2016)
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