Williams, C.C. and Horodnic, I.A. (2015) Explaining and tackling envelope wages in the Baltic Sea region: An institutional perspective. Baltic Journal of Management, 10 (3). pp. 295-312. ISSN 1746-5265
Abstract
Purpose – The purpose of this paper is to advance a new way of explaining and tackling the illegitimate wage practice where employers pay their employees an undeclared (envelope) wage in addition to their formal salary. Drawing upon institutional theory, it is here proposed that envelope wages result from the lack of alignment of a society’s formal institutions (i.e. the codified laws and regulations) with its informal institutions (i.e. the socially shared unwritten understandings which reflect citizens’ norms, values and beliefs).
Design/methodology/approach – To evaluate this, data are reported from a 2013 Eurobarometer survey involving 1,738 face-to-face interviews with formal employees in four Baltic countries, namely, Estonia, Latvia, Lithuania and Poland.
Findings – The finding is that the greater is the asymmetry between the formal and informal institutions (i.e. the level of disagreement of citizens with the codified laws and regulations of formal institutions), the higher is the propensity to pay envelope wages. This is the case at both the individual- and country levels.
Practical implications – To reduce the prevalence of envelope wages, the resultant argument is that the values of employers and employees need to be aligned with the formal institutions. This requires alterations not only in the informal institutions, using measures such as tax education, awareness raising campaigns and normative appeals, but also changes in formal institutions so as to improve trust in government by fostering greater procedural justice, procedural fairness and redistributive justice.
Originality/value – This is the first paper to apply institutional theory to explaining and tackling envelope wages in the Baltic Sea region.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2015 Emerald. This is an author produced version of a paper subsequently published in Baltic Journal of Management. Uploaded in accordance with the publisher's self-archiving policy. |
Keywords: | Employee relations; Informal economy; Undeclared work; Baltic States; Envelope wages |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Management School (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 19 Mar 2015 13:01 |
Last Modified: | 18 Jul 2017 11:09 |
Published Version: | http://dx.doi.org/10.1108/BJM-10-2014-0153 |
Status: | Published |
Publisher: | Emerald |
Refereed: | Yes |
Identification Number: | 10.1108/BJM-10-2014-0153 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:84109 |