The informal economy in the former Soviet Union and in Central and Eastern Europe

Guest editors' introduction

Workplace crime and the informal economy in Ukraine: Employee and employer perspectives

Purpose – The purpose of this paper is to explore the criminal workplace activities of both employers and employees in Ukrainian enterprises. It challenges traditional definitions of corruption and suggests that the practices that can be observed fit into the category of organised crime because of the country's economic framework. The paper also explores how the practices are partially a legacy of Soviet economic processes. Design/methodology/approach – A total of 700 household surveys were completed in three cities, Kyiv (where 450 surveys were completed), Uzhgorod (150) and Kharkiv (100). To complement these, approximately 25 in-depth interviews were undertaken with workers in each region. Furthermore, ethnographic observations and “kitchen table” interviews also played an important role in the research. Although the research was oriented towards those working in informal economies, business owners (both formal and informal) were also interviewed. Findings – As well as revealing the endemic nature of corruption in Ukrainian workplaces and the high levels of informal activity undertaken by workers, the research found that many people wish for their workplace to become more regulated. Research limitations/implications – Further interviews could have been carried out with state officials and in more locations. The implications are multiple but mainly they demonstrate the difficulty that those charged with economic reform in Ukraine must face. Originality/value – It is one of the first studies to explore these issues in Ukraine using a variety of research methods.

Beyond the formal/informal economy binary hierarchy

Purpose – This paper aims to evaluate critically the conventional binary hierarchical representation of the formal/informal economy dualism which reads informal employment as a residual and marginal sphere that has largely negative consequences for economic development and needs to be deterred. Design/methodology/approach – To contest this depiction, the results of 600 household interviews conducted in Ukraine during 2005/2006 on the extent and nature of their informal employment are reported. Findings – Informal employment is revealed to be an extensively used form of work and, through a richer and more textured understanding of the multiple roles that different forms of informal employment play, a form of work that positively contributes to economic and social development, acting both as an important seedbed for enterprise creation and development and as a primary vehicle through which community self-help is delivered in contemporary Ukraine. Research limitations/implications – This survey reveals that depicting informal employment as a hindrance to development and deterring engagement in this sphere results in state authorities destroying the entrepreneurial endeavour and active citizenship that other public policies are seeking to nurture. The paper concludes by addressing how this public policy paradox might start to be resolved. Originality/value – This paper is one of the first to document the role of informal employment in nurturing enterprise creation and development as well as community exchange.

Entrepreneurship and the informal economy: a study of Ukraine's hidden enterprise culture

How many entrepreneurs start-up their business ventures conducting some or all of their trade in the informal economy? The aim of this paper is to answer this key question that has been seldom addressed using data from 600 face-to-face structured interviews conducted in Ukraine in late 2005 and early 2006. Analyzing the 331 entrepreneurs identified (i.e., individuals starting-up an enterprise in the past three years), just 10 percent operate on a wholly legitimate basis, while 39 percent have a license to trade and/or have registered their business but conduct a portion of their trade in the informal economy, and 51 percent operate unregistered enterprises and conduct all of their trade on an off-the-books basis. Given that some 90 percent of all business start-ups operate partially or wholly in the informal economy, and that 40 percent of all respondents depend on the informal economy as either their principal or secondary contributor to their livelihoods, the paper concludes by considering the wider implications of these findings both for further research and public policy.

Engaging with a world outside of ourselves:vistas of flatness, children's work and the urban informal economy

This paper considers the work and labour of children living on the streets of Accra, Ghana. It does so in two distinctive ways. First, it considers how the children's photographs of a day or two in their working lives, and the dialogues that go on in, through and around them, may contribute to the making of strong sociological arguments about children's work. In so doing, this paper elaborates the connections between visual sociology and realist traditions of photography, and argues that photographs can contribute distinctive and novel sources of insight into working children's lives and a powerful, humanising media of dissemination. Second, these arguments are then deployed to examine street children's experiences of work. Conceptualised in terms of its 'flatness', the paper explores the informal means of regulation through which the children are locked into types of working that prove difficult to escape. © Sociological Research Online, 1996-2012.

Evaluating the motives of informal entrepreneurs: some lessons from Ukraine

To understand entrepreneurs' motivations, it has become increasingly common to distinguish between those driven by necessity (or pushed) and those driven by opportunity (or pulled) into entrepreneurship. Until now, entrepreneurs operating wholly or partially in the informal economy have been widely assumed to be necessity-driven, pushed into this enterprise as a survival strategy in the absence of alternatives. To evaluate whether this is indeed the case, this paper reports one of the first surveys of informal entrepreneurs' motives. Reporting face-to-face interviews conducted in Ukraine during 2005–06 with 298 informal entrepreneurs, the finding is although most identified themselves as necessity entrepreneurs when initially asked whether they were either pushed or pulled, subsequent questions reveal in the vast majority of cases, there were not only both push and pull factors driving their original decision to start-up informal enterprises, but also a clear shift among these entrepreneurs as their business became established away from necessity-oriented motivations and toward more opportunity-oriented motivations. The outcome is a call for a transcendence of a static either/or approach and the adoption of a dynamic both/and approach that recognizes the coexistence of necessity- and opportunity-drivers as well as the fluidity of entrepreneurs' motivations.

Corruption in the post-Soviet workplace: the experiences of recent graduates in contemporary Ukraine

While Ukraine was bestowed market economy status by the European Union in 2005 its labour market still endures many structural problems. By exploring the experiences of young graduate employees this article highlights the difficultly in obtaining work within Ukraine's labour market and the problems they face once they have secured employment. Rather than seeing the development of a transparent labour market the collapse of the command economy has seen a relatively closed system develop. The article demonstrates how many jobs are secured through the use of connections or the demanding, and payment, of bribes.The situation does not improve once graduates obtain long-term employment. Interviewees discuss the lack of job security, the informal payment of wages and the lack of legal protection from corrupt employer practices. The article has broader resonance outside of the Ukrainian case study as the discussion of workplace corruption highlights how the issue is concerned with much more than simply cash based transactions and how those that endure it are likely to turn to the informal economy for employment.

The end of transition?:The role of informal economies in the post-Soviet space

This book challenges the accepted notion that the transition from the command economy to market based systems is complete across the post-Soviet space. While it is noted that different political economies have developed in such states, such as Russia’s ‘managed democracy’, events such as Ukraine gaining ‘market economy status’ by the European Union and acceding to the World Trade Organisation in 2008 are taken as evidence that the reform period is over. Such thinking is based on numerous assumptions; specifically that economic transition has defined start and end points, that the formal economy now has primacy over other forms of economic practices and that national economic growth leads to the ‘trickle down’ of wealth to those marginalised by the transition process. Based on extensive ethnographic and quantitative research, conducted in Ukraine and Russia between 2004 - 2007, this book questions these assumptions by stating that the economies that operate across post-Soviet spaces are far from the textbook idea of a market economy. Through this the whole notion of ‘transition’ is problematised and the importance of informal economies to everyday life is demonstrated. Using case studies of various sectors, such as entrepreneurial behaviour and the higher education system, it is also shown how corruption has invaded almost all sectors of the post-Soviet every day.