The prevalence of envelope wages in the Baltic Sea region

What is it about?

This 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.

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Why is it important?

Some 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 among younger people, manual workers and lower income groups in these former Soviet 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.

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