UKRAINIAN UNDECLARED wORK SURVEy : FIRST FINDINgS

(ILO), the Kyiv International Institute of Sociology (KIIS) carried out the Ukrainian Undeclared Work Survey (UUDWS). The UUDWS sample of 1000 individuals is representative for the Ukrainian adult population, excluding the Autonomous Re public of Crimea and temporally occupied territories of Donetsk and Luhansk oblasts; the sample is a stratified three-staged random sample, random at each step of selection. The questionnaire was developed according to the Eurobarometer methodology (EC, 2014). All interviewees were instructed about the definition of UDW as “activities which avoid partly or entirely declaration of the income to the tax authorities, but which are otherwise legal. This could be people working in certain sectors of activity like home maintenance – including builders, electricians, and plumbers – but also in restaurants and cafes. UDW is also common in a whole range of household services – such as gardening, babysitting and elderly care, personal services – like hairdressing, and repair services for cars, clothes, or computers. Also, this situation often manifests itself in the fact that part or all of the salary is paid to employees in an envelope.”

Introduction and research problem.Undeclared work (UDW), which considers the declared vs. undeclared status of an economic activity (in contrast to "informal employment", which considers the formal vs. informal status of a job), is re cognized as a challenge for the Ukrainian labour market in as much as it creates additional costs for the economy: less tax revenues, less or no social security contributions for those who are engaged in UDW, and disobeying social justice (EC, 2014).UDW stands for "any paid activities that are lawful as regards their nature hut not declared to the public authorities, taking into account the differences in the regulatory systems of the countries".Regarding the operational definition of UDW, it includes (Williams et al., 2017): a) hidden and underground activities where the transactions themselves are not illegal but are unreported to avoid official inspection (e. g. "envelope wages"); and b) "informal" activities, where no business records are kept (e. g. cash in hand transactions provided to households or individuals).UDW, therefore, does not include illegal activities.
In October-November 2017, on demand of the National University of Kyiv-Mohyla Academy Resent publications analysis.To the best of our knowledge, there is no survey that addresses the issue of the UDW in Ukraine.The State Statistic Service of Ukraine conducts the Labour Force Survey annually, but it detects informal employment of Ukraine and not the UDW.Hence, this survey is the first of its kind in Ukraine.
Research goal and questions.This paper focuses on the main findings of UUDWS that aims to study the UDW in Ukraine in terms of four aspects: 1) describe its nature from the demand side and 2) the supply side, 3) outline the incidence of envelope wages and formal vs. informal work earnings, as well as 4) describe perceptions an acceptance of the UDW in Ukraine.However, the latter is not discussed in this paper due to the restrictions of its size and will be addressed in the future papers.

Main findings
Demand side of the UDW Overall, 12.2 % of respondents report having acquired any services undeclared ("had a good reason to assume that they involved UDW" as was stated in the question) and 15.2 % of respondents report having purchased undeclared goods.
The socio-demographic groups of those who use undeclared goods or services are presented in Table 1.
As reported in Table 1, both women (16 %) and men (21 %) use UDW.In urban settlements, UDW is used more (22 % to 14 %, respectively).In terms of age, 25-44 years age group is more likely to buy undeclared goods or services.Self-employed have the highest tendency to be on the demand side of UDW (33 %), compared to employees (21 %), unemployed (19 %), retired (11 %), and students (8 %).Those who report to have a poor financial situation use UDW less frequently (15 %) compared to those with very good financial situation (31 %).In terms of sector, in hotels & restaurants UDW is used in the majority of cases (55 %), slightly less in personal services (37 %), followed by construction (24 %), manufacturing (24 %), and retail (24 %).
The most important goods or services coming from UDW acquired in the last 12 months were worth on average UAH 3,869.757(as of November 2017, this corresponds to USD 144.7).This represents 120,8 % of the minimum wage (UAH 3,200 or USD 119.7) and 51.7 % of average wage (UAH 7,479 or USD 279,7).
Finally, had the most important good or service for the respondent only been available on the regular market, the majority (65 %) of respondents would have bought it from the regular market, and only 3 % would refuse from purchasing it.
Supply side of the UDW Only 7.1 % of the respondents report having carried out any undeclared paid activity in the last 12 months *.At the same time, 45.8 % of respondents personally know people who work without declaring their income or part of their income to tax or social security institutions.Finally, 33 % of the respondents estimate that at least half (50 % or more) of the population of Ukraine work undeclared.
Out of those who worked undeclared, 74 % are males and 26 are females.62 % of undeclared workers live in urban and 38 % live in rural settlements.Most of the "suppliers" of UDW are in the 35-44 years age group (32 %), slightly less in the 45-54 * Informal employment in 2017 was estimated at the level of 22.9 % of the employed population (SSSU, 2018).years old group (28 %); 25-34 years old groups represent 23 %, the youngest 15-24 years old are 11 %, and above 55 years old represent 8 %.
As regards the employment status of undeclared workers, most of them report to be unemployed (34 %), slightly less are employees (31 %), selfemployed are 18 %, and retired are 11 %, 2 % are students.
Providers of UDW report that their financial situation in most cases is average (47 %) and good (39 %).At the same time, for 8 % the financial condition is poor and for 5 % it is very good.
As for the regularity of carrying out UDW, one in five (22 %) workers does this just once, one in three (33 %) -a few times, and two in five (41 %)with certain regularity.When those who perform undeclared activities are asked how many weeks during the last 12 months they worked in this activity, 28 % report to working fulltime (50-52 weeks).At the same time, the highest number is for those who "do not know" (41 %).The average yearly income from the undeclared activities ("Approximately, how much did you get in total from these undeclared activities in the last 12 months?")was UAH 17,759.93(or USD 664,2).This means that monthly income from the undeclared activities equals UAH 1,479.99 (USD 55.35).This constitutes 46.2 % of the minimum wage and 19.8 % of the average wage in Ukraine.
When those who admit having worked without declaration are asked about the reasons for doing the activities undeclared, the most common reasons were "Could not find a regular job" (20 %), "It was just a seasonal work and so it is not worth to declare it" (15 %), "This is the normal way how this is done among friends, neighbours or relatives" (13 %), "The state does not do anything for you, so why should I pay taxes" (11 %), and "Both parties benefited from it" (10 %).

Envelope wages and income
Almost every tenth (9 %) dependent employee reports to have been paid envelope (cash-in-hand) wages, without declaring wages to tax or social security authorities within the past year.At the same time, a majority of employees (81 %) say they have not received any part of their salary as envelope wages in the last 12 months.
More than a half (55 %) of dependent employees who had received income in the last year as cash, without it being declared, say that they received this envelope income as both regular and overtime work; one third (29 %) receive it as part of the payment for regular work; for every seventh (14 %) it was a payment for overtime or extra work.
In most cases (71 %), paying the undeclared salary was initiated by the employer.
In ignificantly fewer cases (16 %) it was a joint idea of an employer and an employee.Interestingly, no one replied, "It was on my initiative." The employees who received income in envelope in the last year were asked if they were happy getting part of their salary without having it declared to the tax or social security authorities or would they have preferred to have had their total gross salary declared.Just over two fifths (41 %) mention that "it depends", slightly less (36 %) are happy with this, every sixth (16 %) would prefer full declaration.Recipients of envelope wages were also asked if they had verbally agreed with the employer about any of the conditions in return for receiving the additional cash-in-hand payment.Three out of four (77 %) say that no additional conditions were agreed, "agreed to work longer working hours than is in the formal contract" applies to 11 %, "agreed to do different tasks than indicated in the formal contract" -to 7 %, and "agreed not to take full statutory holiday allowance" -to 3 % of respondents.
Around one in three employees who had received income in envelope in the last year (29 %), received 50 % of their net monthly income this way.Only one in ten (9 %) reports that the cash payments accounted for 25-49 % of their net monthly income.The equal number of 18 % correspond to the lower bound of 1-24 % and the upper bound of 75-100 %.Around one in eight (12 %) refused to provide an answer.Around one in seven (15 %) said that they "don't know."We also asked dependent employees about their official net monthly salary for the job.For most of them (56 %) the salary equals the minimum wage.For every fifth (21 %), the salary is above the minimum wage; for every seventh (15 %), the salary is below the minimum wage.
A high percentage of the net monthly income received in the envelope (Fig. 5) and a low level of officially declared monthly salary of dependent employees (Fig. 6) serve as an evidence of the low protection level of Ukrainian employees.
In the end of the questionnaire, the respondents were asked to describe their net income generated from formal work in the last month.The majority of respondents (40 %) fall into the category of UAH 3,200-5,000 (UAH 3,200 is the minimum wage at the time of interviews), which equals USD 119-187 per month.Seventeen percent of respondents earn less than UAH 3,200 (or USD 119).Sixteen percent of respondents earn in the range of UAH 5,001-7,500, which equals USD 187-280.Significantly less (5 %) indicate their income of UAH 7,501-10,000 (or USD 280-374).Finally, around 1 % earn in the range of UAH 10,001-15,000 (or USD 374-561) per month, and less than 1 % (0.6 %) have an income above UAH 15,000 (or USD 561).Fourteen percent of respondents refused to reply to this question.
The formal income distribution by age, gender, and type of settlement is presented in Table 2.
Those who were engaged in carrying out undeclared activities were asked to describe their net income generated from informal work in the last month.The majority of respondents (24 %) report to earn UAH 1,001-3,000, which equals USD 37-112 per month.Every seventh undeclared worker (15 %) earns less than UAH 1,000 (or USD 37).Every tenth undeclared worker (10 %) earns between UAH 3,001-5,000, which equals USD 112-187.Significantly less (4 %) indicate their income of UAH 5,001-7,500 (or USD 187-280) per month.Almost 2 % (1.7 % in both cases) earn  The informal income distribution by age, gender, and type of settlement is presented in Table 3.
Conclusions and further research proposals.The UUDWS results also suggest that the majority of Ukrainian undeclared workers are between 35 to 54 years old, live in ur ban areas, and are unemployed, employed in other occupation, or selfemployed.The main undeclared activities provided include home maintenance or home improvement services, selling farm produced food, gardening, car repairs, and selling goods/services associated with their hobbies.The reasons that justified the UDW were the difficulties on finding a regular job, the seasonal nature of the work, the fact that the UDW is the way such activities are usually done, the fact that the state does not do anything for them, and the fact that both parties benefit from it.The UUDWS also serves as an evidence of the low protection level of Ukrainian employees in terms of their salary.Finally, the income from informal work is lower than from the formal one.In our research in progress, we address the perceptions and acceptance of UDW in Ukraine, as well as assess the main determinants of UDW with the help of econometric modelling.

Fig. 3 .
Fig. 3. How many weeks during the last twelve months did you work in this activity?

Fig. 4 .
Fig. 4. Were you happy getting part of your salary without having it declared to the tax or social security authorities or would you have preferred to have it declared?

Fig. 5 .
Fig. 5. Approximately what percentage share of your net monthly income from this job did you get this way?

Fig. 6 .Fig. 7 .
Fig. 6.Which of the following best describes your officially declared monthly salary for this job?