PurposeThis paper evaluates the prevalence of an illegitimate wage arrangement in the former Soviet Baltic states whereby formal employers pay their formal employees both an official declared wage as well as a supplementary undeclared ('envelope') wage.
MethodologyA 2007 Eurobarometer survey is reported that evaluates envelope wage practices in 27 EU member states. This paper focuses upon the 4,031 face-to-face interviews conducted in the four former Soviet Baltic republics that are now member states of the EU, namely Estonia, Latvia, Lithuania and Poland.
FindingsSome 1 in 8 formal employees in these former Soviet Baltic republics received an undeclared 'envelope' wage from their formal employer during the past 12 months which on average amounted to 45% of their gross wage packet. Although this practice is concentrated in smaller businesses, the construction industry, and amongst younger people, manual workers and lower income groups in these former Sovet Baltic states, it is by no means confined to specific pockets of the economic landscape. Rather, it exists throughout these countries in all business types and employee groups.
Research implicationsThe existence and commonality of envelope wages reveals the need to transcend the dichotomous depiction of formal and informal jobs as always separate and discrete and to recognise how they can be inextricably interwoven.
Practical implicationsThis paper outlines a range of potential policy measures for tackling envelope wages and calls for their piloting and evaluation.
OriginalityThe first cross-national evaluation of the incidence and nature of envelope wages in the former Soviet Baltic states and what needs to be done to tackle this practice.
Research Paper