Aging of Workforce and Outflow of Migrant Workers Driving Down Share of Russians Being Paid on the Side, Studies Show

Paul Goble

            Staunton, July 12 – Surveys show that the share of Russians being paid informally and whose incomes are thus not taxed have fallen in the last several years, with 70 to 80 percent now being paid officially and taxed accordingly. But this decline appears to have less to do with enforcement than with the aging of the workforce and the outflow of migrants.

            The aging of the workforce is especially important in this regard, the HeadHunter firm says. Workers aged 18 to 24 are the most likely to receive pay in envelopes, and those over 55 are the least likely to. As the workforce ages on average, illegal pay arrangements thus tend to decline (ng.ru/economics/2022-07-13/1_8485_salaries.html).

            The decline in the number of migrant workers also plays a role as they tend to be concentrated in industries where side payments are the most common. If they return in any sizeable numbers as the current crisis eases, then it is likely that the share of Russians paid on the side will increase.

            Indeed, that is especially probable because the share of Russians who say they are ready to take their pay in this way has remained almost unchanged over the past decade, a reflection of continuing instability in the economy and uncertainty in the labor market. Consequently, while the situation has improved, there is not yet any reason to celebrate a triumph of legality here.