Mapping the Informal Employment in Romania. A Comparative Analysis based on Labour and Discrepancy Approaches

Keywords

informal employment, regional level, informality map, Romania

Abstract

Informal employment is a widespread phenomenon in Romania. Employees often lack access to social protection or employment benefits, and untaxed envelope payments are common. As the OECD report stated “informality on this scale is a serious problem. It means less tax income for the state and therefore less room to provide infrastructure and public services. The insufficient reach of safety nets to the informal sector renders people vulnerable to economic shock and poverty”. Trying to abolish informal employment isn’t the solution. A better understanding of the complexity of informal employment is needed. The paper aims to estimate the level of informal employment in Romania at regional level using the labour approach and the discrepancy approach for the period 2000-2013 highlighting the regions with the highest level of informality using the both methods. In order to do that, administrative data from Labour force balance, survey data from Labour Force Survey and data from Labour Cost Survey were used. The empirical analysis based on the methods used revealed that using the labour approach survey data, the regions with the highest level of informality are South-West-Oltenia, South-East and South-Muntenia, while using administrative data the regions North-East, South-West-Oltenia, South-East and South-Muntenia represented poles of informality. Using the second method, the discrepancy approach, the regions with the highest number of persons employed in the informal sector are South-Muntenia, North-East and North-West. The main conclusion regarding the evaluation of informal employment at regional level using different methods of estimation highlighted two main regions as poles of informality-South-Muntenia and Nord-East for the year 2013.

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