Evaluating the illegal employer practice of under-reporting employees' salaries

This paper advances understanding of the prevalence and distribution of the illegal employer practice of under-reporting employees’ salaries, explains this practice and evaluates policy approaches. Analysing a 2013 Eurobarometer survey of 11,025 employees in 28 European countries, one in 33 employees receive under-reported salaries, mostly in small businesses and vulnerable groups (e.g., unskilled workers, with lower education levels and financial difficulties). Explaining this practice not as an individual criminal act that increasing the risk of detection can tackle, but as a symptom of systemic problems, which require improvements both in tax morale at the individual-level and in the formal institutional environment at the country-level to resolve, we then discuss the implications for theory and policy.