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Reflections of informality and causalisation from Eastern Europe Piotr Lewandowski Cape Town, November 26-27, 2015

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Page 1: Reflections of informality and causalisation from Eastern Europe Piotr Lewandowski Cape Town, November 26-27, 2015

Re fl e c t i o n s o f i n f o r m a l i t y a n d c a u s a l i s a t i o n f r o m E a s t e r n E u ro p e

P i o t r L e w a n d o w s k i

C a p e To w n , N o v e m b e r 2 6 - 2 7 , 2 0 1 5

Page 2: Reflections of informality and causalisation from Eastern Europe Piotr Lewandowski Cape Town, November 26-27, 2015

In the communist era employment was „obligatory”

Employment in Poland (thousands)19

8119

8319

8519

8719

8919

9119

9319

9519

9719

9920

0120

0320

0520

0720

0920

1120

13

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000Other services

Transportation, storage and communication

Commerce, accommodation and food activities

Construction

Energy, gas and water supply

Manufacturing

Mining

Agriculture

Page 3: Reflections of informality and causalisation from Eastern Europe Piotr Lewandowski Cape Town, November 26-27, 2015

Informal work in Europe – regional patterns

Source: Hazans (2011) - European Social Survey

Share of „extended labour force” employed informally (2008-2009)

Page 4: Reflections of informality and causalisation from Eastern Europe Piotr Lewandowski Cape Town, November 26-27, 2015

Which workers are more likely to be informal in CEE

• Males

• Younger

• Single

• Lower education

• Construction, trade and related services (unskilled), agriculture and fishery (skilled)

• EU member states – rather natives, high incidence among ethnic minorities;

• Russia – rather immigrants (from Caucasus, Central Asia, other CIS countries)

Page 5: Reflections of informality and causalisation from Eastern Europe Piotr Lewandowski Cape Town, November 26-27, 2015

Russia: segmentation but also selection (risk attitudes, wage gaps)

-.4

-.2

0.2

.4

0 20 40 60 80 100quantiles

Informal employees

5Source: Lehmann & Zaiceva (2013)

Hourly wage gap in Russia: Informal employees.Coefficients from quantile regressions. Pooled sample, 2004-2011

Page 6: Reflections of informality and causalisation from Eastern Europe Piotr Lewandowski Cape Town, November 26-27, 2015

Some noncontributing workers have contracts

Source: Koettl, Packard, Montenegro (2012)

Social insurance critierion for dependent employment

Page 7: Reflections of informality and causalisation from Eastern Europe Piotr Lewandowski Cape Town, November 26-27, 2015

Informality vs. non-standard employment

• 10% of workers in CEE receive envelope payments, mostly involuntarily in firms not declaring all transactions (Leibfritz 2011)

• Non-standard contracts and temporary agency work combined with regular employment

• Terminating temporary contracts – very heterogenous laws (not covered by OECD EPL)

• Poor enforcement of laws to prevent abuse of non-standard contracts

Page 8: Reflections of informality and causalisation from Eastern Europe Piotr Lewandowski Cape Town, November 26-27, 2015

Rising but diversified role of temporary employment

Temporary contracts among new hires, 2006-07 vs. 2011-12

0 10 20 30 40 50 60 70 80 90 0

10

20

30

40

50

60

70

80

90

2006-07

2011-12

Source: OECD (2014)

Page 9: Reflections of informality and causalisation from Eastern Europe Piotr Lewandowski Cape Town, November 26-27, 2015

Many „temporary” workers remain in temporary jobs

ES

TGBR SV

KLU

XCZE NOR

BEL

HUNAU

T IRL

GRC ISL ITA FRA

FIN SWE

SVN

NLD PRT

ESP

POL

0

5

10

15

20

25

30

0

5

10

15

20

25

30

Workers moving to regular employment within 3 years

Workers trapped in temporary employment for 3+ years

Total share of temporary employment

%

%

Page 10: Reflections of informality and causalisation from Eastern Europe Piotr Lewandowski Cape Town, November 26-27, 2015

Job quality penalty in non-standard employment

Agnieszka Piasna © etui (2015)

Regression results, estimates for non-standard contract (reference: permanent contract), nested models. All p-values < 0.001N = 35,372Data: EWCS 2010, EU27.

• Strong compositional effects - concentration of ‘bad jobs’ in certain segments of the labour force (vulnerable workers) and labour market (sectors and occupations)

Main effect

countries

gender, education, age

occupation, sector

weekly working hours

With

con

trol

s

-400 -300 -200 -100 0

Income

-3 -2 -1 0

Intrinsic job quality

-3 -2 -1 0

Working time quality

Page 11: Reflections of informality and causalisation from Eastern Europe Piotr Lewandowski Cape Town, November 26-27, 2015

Civil law contracts in Central Eastern Europe

• Useful in the communist era

• Abolished in Romania in 2003

• Reformed in Slovakia in 2013 – full coverage with ss contributions

• Increasingly important in Poland:

• Contracts of mandate

• Contracts to perform a specific task

Page 12: Reflections of informality and causalisation from Eastern Europe Piotr Lewandowski Cape Town, November 26-27, 2015

Civil law contracts in Poland – interactions of regulations

• Higher net wages• Lower total labour costs

Lower social security contributions

Minimum wage is not binding

Easier to terminate than regular contracts

Page 13: Reflections of informality and causalisation from Eastern Europe Piotr Lewandowski Cape Town, November 26-27, 2015

Segmentation within segmentation in Poland

million

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

12.0

12.5

13.0

13.5

14.0

14.5

15.0

15.5

16.0

16.5

1.5

1.9

2.3

2.7

3.0

3.3 3.3 3.2 3.2 3.2 3.2 3.2

0.9 0.9 0.8 0.8 0.9 0.9 1.0 1.0 1.1 1.1 1.1 1.1

0.6 0.6 0.7 0.7 0.8 0.7 0.8 0.70.8

0.9 0.9 1.0

Total employment- right axis

Temporary workers - left axis

Self-employment outside agriculture- left axis

Workers only on civil law contracts - left axis

Page 14: Reflections of informality and causalisation from Eastern Europe Piotr Lewandowski Cape Town, November 26-27, 2015

Novel policy ideas – single contract

Page 15: Reflections of informality and causalisation from Eastern Europe Piotr Lewandowski Cape Town, November 26-27, 2015

Thank you for your attention

[email protected]

www.ibs.org.pl

@ibs_warsaw

Page 16: Reflections of informality and causalisation from Eastern Europe Piotr Lewandowski Cape Town, November 26-27, 2015

References

• Arak P., Lewandowski P., Żakowiecki P., 2014, Dual labour market in Poland – proposals for overcoming the deadlock, IBS Policy Paper 01/2014

• Hazans M., 2011, Informal Workers Across Europe: Evidence from 30 Countries, IZA DP 5871

• Lehmann H., Zaiceva A., 2013, Informal Employment in Russia: Incidence, Determinants, Segmentation, Working Paper DSE 903

• Leibfritz W., 2011., Undeclared Economic Activity in Central and Eastern Europe: How Taxes Contribute and How Countries Respond to the Problem, Policy Research Working Paper 5923, World Bank

• OECD, 2014, OECD Employment Outlook 2014, Paris

• Packard T., Koettl T., Montenegro C., 2012, In From the Shadow: Integrating Europe’s Informal Labor. Washington DC: World Bank

• Piasna A., 2015, Nonstandard work arrangements, employment regulation and inequalities, ETUI