from the authors). But after including job market and work characteristics, the coefficient becomes insignificant (Table 6, columns 1 to 6, except 3) or negative (Table 6, column 3). It is hazardous conditions, concern about job stability and being paid, partly or fully, off the record (i.e., envelop wages) that are associated to dissatisfaction. The inclusion of these variables removes the significance of the informal employment variable. The lack of statistical significance of type of job contract (formal vs informal) is seen both for all informals (columns 1, 3 and 5) and salaried informal workers (columns 2, 4 and 6). The exception, column 3, indicates that informals are less dissatisfied with work pay, which seems to confirm a view of informal workers not being systematically disgruntled with their job (more on this finding later).

Informal workers are also significantly more likely to receive envelope wages. Receiving part of the wages off the record is an employment practice that is commonly associated with informal employment and still prevalent in some CIS and Central and Eastern European countries. The decision to pay or receive payment in envelope wages is often driven by an intent to evade taxes, or to ease tight economic conditions, and is known to often cover remuneration for regular work hours. The RLMS asks whether all, part or none of a worker’s wage payment was transferred unofficially. Table 6, shows that informal workers, both using total and salaried-only samples (columns 7 and 8, respectively) are more likely than formal workers to receive envelope wages even after controlling for personal and job market characteristics.

Although more prevalent, envelope payments are not exclusive among informal workers. The incidence of envelop wages varies markedly by type or work. About 10 percent of formal workers are paid part or all their earnings off the record. In contrast, among salaried informal workers (i.e., in a firm but without a contract), 91.5 percent report to have received all or part of their wages unofficially. Self-employed workers have a 66 percent chance of being paid off the record (Table 7).

Finally, we find that a statistically significant wage gap between formal and informal workers exists since the mid 2000s and has widened since. We use information on net wages received and hours worked to back out an hourly wage rate for all workers. Nominal wages are spatially and temporally deflated.<sup>21</sup> Differences in hourly wages of informal and formal were not statistically significant at the beginning of the past decade, but a clear divergence is observed since 2005 (Figure 10). Moreover, while real wages declined with the onset of the global (2009) and oil-andsanctions (2015) crises for both groups, it appears that the drop in real wages was larger for informal workers that formal workers. The difference is partly due to the fact that, among informals, the decline is more acute among the self-employed than among salaried without a

> 21 For spatial deflation, we use the cost of a fixed basket of goods in 2014 for all Russian regions. For temporal deflation, we use regional CPI series. All wages <u>are expressed in 2014 Moscow prices.</u> Informal Employment and Worker’s Wellbeing in Russia 20/67