Diagnostic report on undeclared work in Moldova

The high prevalence of undeclared work represents one of the biggest challenges for the labour market and the social protection system in Moldova. Some 22 per cent of the employed population in both informal and formal enterprises were employed informally in 2022. Undeclared work tends to be heavily concentrated in construction, agriculture, forestry, and fisheries, with men, younger and older age groups, and workers living in rural areas being the most affected. Informality in rapidly expanding online and platform work is also a concern.

Informal practices, such as non-payment of social protection insurance, envelope wages and unregistered employment, persist due to low institutional capacity, lack of clarity in the legislative framework, prevailing social norms and relatively low tax morality in the country. While certain aspects of undeclared work have improved in recent years, nearly two-thirds of entrepreneurs and managers continue to see undeclared wage payments as a matter of business survival.

This report investigates the main characteristics and determinants of undeclared work and provides policy recommendations that can contribute to a holistic policy framework to facilitate the transition to the formal economy. It proposes five areas of direct and indirect interventions, including measures that aim to: 1) increase institutional capacity through better cooperation among government services and with the social partners, improve data collection and employment registries, modernize the State Labour Inspectorate and State Tax Service, and update and clarify the legislative framework; 2) enhance social protection and foster commitment to operate in the formal economy; 3) encourages formalization of informal businesses, including the self-employed; 4) address specific sectors; and 5) reduce corruption and increase the standard of living.