From the Formal/Informal Work Dichotomy to Hybrid Semiformal Work Practices

Abstract

This article reveals that not all formal jobs in the European Union (EU) are quite as pure, wholesome, and legitimate as is often supposed. Although it is commonly assumed that the formal economy is separate from the informal economy, this article draws attention to a "hybrid" semiformal work practice where formal employees receive two wages from their formal employer, one declared and the other an undeclared ("envelope") wage. To evaluate the prevalence and nature of this hybrid practice, the results of a 2007 survey composed of 26,659 face-to-face interviews in the twenty-seven European Union (EU) member states are reported. This reveals that some 5 percent of all formal employees receive envelope wages and that these undeclared wages amount on average to two-fifths of their wage packet. However, this hybrid semiformal work is not evenly distributed across the EU. It is markedly more prevalent in East-Central Europe, where envelope wages are commonly paid for regular employment hours, while in Continental Europe and Nordic countries such undeclared wages are less common and paid mostly for overtime or extra work. Given the prevalence of such a hybrid work practice in the EU, the article concludes by calling for a move beyond depicting the formal and informal economies as separate and for greater understanding of how informality permeates the so-called formal economy.