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IJEBR 11,4

The undeclared sector, self-employment and public policy

Colin C. Williams
Management Centre, University of Leicester, Leicester, UK
Abstract
Purpose Viewing undeclared work as low-paid, exploitative, organised employment conducted under sweatshop conditions, public policy has widely treated this illegitimate sphere as a hindrance to development and actively pursued its deterrence using stringent regulations and punitive measures to change the cost-benet ratio for those considering participation in such endeavour. In this paper, however, the intention is to evaluate critically this portrait of the nature of undeclared work and resultant public policy approach. Design/methodology/approach To evaluate this representation of undeclared work and consequent public policy approach, empirical evidence is reported from 861 face-to-face interviews in English localities. Findings The nding is that the majority of undeclared work is undertaken on a self-employed basis by people who have identied an opportunity to provide a good or service and are taking a calculated risk in order to full others needs. Research limitations/implications Future research will need to further investigate this relationship between self-employment and the undeclared sector. Practical implications Identifying that the undeclared sphere is predominantly composed of self-employed endeavour, a call is made for greater emphasis in public policy on developing initiatives to legitimise this illegitimate self-employment, rather than simply deterring such work. Originality/value By re-reading the nature of undeclared work as primarily composed of self-employed activity, it highlights the need for public policy to stop treating undeclared work purely as something to be deterred and for more emphasis to be put on developing enabling initiatives to help such workers formalise their business ventures. Keywords Entrepreneursialism, Public policy, England Paper type Research paper

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International Journal of Entrepreneurial Behaviour & Research Vol. 11 No. 4, 2005 pp. 244-257 q Emerald Group Publishing Limited 1355-2554 DOI 10.1108/13552550510603289

Introduction How many self-employed start-up their businesses conducting either a proportion or all of their trade in the undeclared sphere? For those who do start-up in this manner, what should be done about them? Should governments seek to clamp down on their endeavour by using ever more punitive measures to both deter them from doing so and send a clear message to potential future miscreants that such activity will not be tolerated? Or should more enabling measures be adopted that seek to help those currently conducting a proportion or all of their activity in this illegitimate realm to formalise their business ventures? Such questions provide the starting point of this paper. Throughout the world, tackling undeclared work is now high on the agenda of governments as a priority for action (e.g. European Commission, 2002; Grabiner, 1999; International Labour Ofce, 2002; OECD, 2000), not least because it is widely recognised that this is a large sphere

that constitutes somewhere between 7 and 16 per cent of GDP in the advanced economies and is continuing to grow (European Commission, 1998). Until now, the widespread view in public policy circles is that this activity is a hindrance to development. Grounded in a representation of undeclared work as low-paid exploitative employment conducted on an organised basis often under sweatshop conditions, the argument has been that the most appropriate way to eliminate it is to deter people from engaging in such activity by ensuring that the expected cost of being caught and punished is greater than the economic benet of participating in such activity. To do this, stringent regulations and punitive measures have been adopted so as to change the cost-benet calculation of participants and thus deter participation in undeclared work (e.g. Allingham and Sandmo, 1972; Falkinger, 1988; Hasseldine and Zhuhong, 1999; Milliron and Toy, 1988; Sandford, 1999). In this paper, however, this reading of undeclared work that views it as a hindrance to development and the consequent policy response of deterrence is put under the spotlight. To commence, therefore, this paper will review the conventional depiction of undeclared work in the academic literature as a form of organised employment conducted under sweatshop conditions along with the consequent deterrence approach towards such work that tends to prevail in public policy throughout the advanced economies. It will then review how, rst, there has been a growing recognition that some undeclared work is conducted on a self-employed basis and second, and more recently, a small but growing stream of writing that has begun to question whether it is always appropriate to read undeclared work as a hindrance to development. Reporting empirical evidence collected during 861 face-to-face interviews in a diverse range of English localities, one of the rst measures of the extent to which undeclared work is conducted on a self-employed basis will be then provided along with preliminary tentative evidence that some self-employed appear to start-up their business conducting either a proportion or all of their trade in this sphere. Turning to the public policy implications of these ndings, it will then argue the case for treating this sector as an asset to be harnessed rather than as something to be deterred. Given the tentative and preliminary nature of the evidence here presented on the relationship between self-employment and undeclared work, the nal section will then set out the further research required in order to explore in greater detail the degree to which the self-employed start-up their businesses conducting either a proportion or all of their trade in the undeclared sphere as well as what is required in order to help them to formalise their endeavours. Before commencing, however, there is a need to dene what is being discussed in this paper. So far as undeclared work is concerned, or what has been variously called cash-in-hand work, informal employment, the hidden economy and the underground sector (see Williams, 2004a; Williams and Windebank, 1998), the widespread consensus is that such work involves the paid production and sale of goods and services that are unregistered by, or hidden from the state for tax and welfare purposes but which are legal in all other respects (European Commission, 1998; Feige, 1999; Grabiner, 1999; Portes, 1994; Thomas, 1992; Williams and Windebank, 1998). Undeclared work thus includes activity that is illegal solely because the earnings are not declared to the state for tax and social security purposes. Activities in which the good and/or service itself is illegal (e.g. drug trafcking) are thus excluded from consideration when discussing this realm.

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Representations of undeclared work Reviewing the extensive literature on undeclared work, it quickly becomes apparent that the vast majority focuses on estimating the size of this sphere and how it changes both temporally and socio-spatially. To greater or lesser degrees, the starting point of much of this literature is the marginality thesis that views undeclared work as concentrated in marginalised groups and/or areas (e.g. Blair and Endres, 1994; Button, 1984; Castells and Portes, 1989) in the sense that most studies ultimately do little more than seek to either corroborate or falsify this thesis. Although the vast majority of studies in advanced economies have found undeclared work to be concentrated in afuent rather than deprived populations (e.g. van Geuns et al., 1987; Mingione, 1991; Renooy, 1990; Williams, 2004a) in some specic populations evidence has been found to support the marginality thesis (e.g. Kesteloot and Meert, 1999; Leonard, 1994, 1998). The result is that in recent years, a more embedded understanding has emerged which recognises that even if undeclared work is usually concentrated among the afuent, there are particular economic, political, cultural and/or geographical circumstances where this does not hold (e.g. Kesteloot and Meert, 1999; Mateman and Renooy, 2001; Williams and Windebank, 1995, 1998). When representing the character of undeclared work, however, such rened and embedded understandings are less prevalent. The recurring portrayal in the media, academic commentaries and public policy is that undeclared work is a form of low-paid exploitative organised employment conducted under sweatshop-like conditions. In the media in the UK over the past year, for example, the depiction of undeclared work has been dominated by two stories: organised gangs employing (illegal) immigrants as cockle-pickers and gang-masters who use (illegal) immigrants to provide agricultural labour. In academic commentaries, it is similarly the case that to the fore is a representation of undeclared work as a form of low-paid organised exploitative employment conducted by a weak and unprotected workforce for unscrupulous employers. Depicted as a new form of work emerging in late capitalism as a direct result of economic globalisation (a dangerous cocktail of de-regulation and increasing global competition), which is encouraging a race-to-the-bottom, undeclared workers are seen to share characteristics subsumed under the heading of downgraded labour: they receive few benets, low wages and have poor working conditions (e.g. Castells and Portes, 1989; Gallin, 2001; Portes, 1994; Sassen, 1997; Ybarra, 1989). In public policy circles, similarly, undeclared work has been widely depicted as a largely negative phenomenon and a hindrance to development that has the following features:
.

. .

It is fraudulent activity that causes a loss of revenue for the state in terms of non-payment of income tax, national insurance and VAT (e.g. Grabiner, 1999; Home Ofce, 2002, 2003a, b). It leads to dumping of wages and social security payments (e.g. Mateman and Renooy, 2001). It weakens trade unions and collective bargaining (e.g. Gallin, 2001). It creates unfair competitive advantage for rms who use undeclared labour over those who do not (e.g. Grabiner, 1999).

. .

It leads to competition between undeclared and formal workers and businesses and generates circumstances of hypercasualisation as more formal workers are forced to informalise to compete effectively (Williams, 2004a). It leads to a loss of regulatory control over the quality of jobs and services provided in the economy (Grabiner, 1999; Williams, 2004a). It erodes compliance with health and safety standards (Williams, 2004a). It creates circumstances conducive to the exploitation of workers due to the reduction of wage rates (Gallin, 2001). It results in the loss of various employment rights (e.g. annual and other leave, sickness pay, redundancy, training).

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Given this popular portrayal of undeclared work as exploitative organised employment that has largely negative consequences and hinders economic and social development, it is perhaps unsurprising that the predominant public policy response has been to pursue a deterrence approach (e.g. Allingham and Sandmo, 1972; European Commission, 1998, 2002; Falkinger, 1988; Grabiner, 1999; Hasseldine and Zhuhong, 1999; International Labour Ofce, 1996, 2002; Milliron and Toy, 1988; Sandford, 1999). To do this, stringent regulations and punitive measures have been adopted as to change the cost-benet calculation of participants and thus deter participation in undeclared work. Take, for example, the UK. Here, and due to a growing concern about the negative consequences of undeclared work, the Chancellor of the Exchequer in 1999 asked Lord Grabiner to produce a report on how to tackle undeclared work. His report exemplies the prevailing view throughout the advanced economies that deterrence is the most appropriate way of dealing with this sphere. For Grabiner (1999, p. 19):
As long as people can prot by not declaring their work, it will be impossible entirely to eradicate the hidden economy. Therefore, the most effective way of tackling the problem is signicantly to improve the likelihood of detecting and penalizing offenders. What is needed is a strong environment of deterrence.

His policy recommendations were thus to increase both the probability of detection and the punishments for those caught so as to deter people from engaging in such work. In the March 2000 Budget Statement by the Chancellor of the Exchequer, it was announced that this report by Lord Grabiner QC would be implemented in full. Since then the tougher rules and penalties he recommended have been applied (e.g. HM Customs and Excise, 2003; Home Ofce, 2003a, b; Small Business Service, 2003). In recent years, nevertheless, it has been recognised that this depiction of the character of undeclared work does not tally with the widespread nding that such work is usually undertaken by the formally employed and people living in relatively afuent localities. The result has been the emergence of various streams of thought that are questioning not only this dominant conceptualisation of undeclared work as conducted on an organised basis but also whether it is always appropriate to view such work as a hindrance to development. Rather than view undeclared work as composed of exploitative organised forms of low-paid employment conducted under sweatshop conditions and sitting at the bottom of a hierarchy of types of formal employment, it is thus now becoming more common for undeclared work to be seen as a heterogeneous labour market with a hierarchy of

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its own. In other words, just as there is a segmented formal labour market, a segmented informal labour market is also seen to exist. As Williams and Windebank (1998, p. 32-3) put it:
. . . existing alongside the formal labour market is a heterogeneous informal labour market composed of very different groups of people engaged in widely varying types of informal employment for diverse and contrasting reasons and receiving varying rates of pay. This informal labour market, to adopt a simplistic dual labour market model, ranges from core informal employment which is relatively well-paid, autonomous and non-routine and where the worker often benets just as much from the work as the employer, to peripheral informal employment which is poorly paid, exploitative and routine and where the employee does not benet as much as the employer.

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In other words, a spectrum of types of undeclared work has been identied ranging from organised types of undeclared work conducted by employees for a business that undertakes some or all of its activity on an undeclared basis at one end of the spectrum to more individual or autonomous forms of undeclared work at the other (see Benton, 1990; Warren, 1994; Williams and Windebank, 1998). Indeed, this recognition that undeclared work is not always organised has in recent years led a small but growing literature to start to ask whether such work should always be viewed as a hindrance to development or whether greater emphasis needs to be placed on some of the more positive features of this realm, particularly its role as a school for self-employment and entrepreneurialism for people looking to test out or establish a business (e.g. Global Employment Forum, 2001; International Labour Ofce, 2002; Leonard, 1998; Tabak, 2000; Vaknin, 2000). Until now, however, and despite this re-reading of undeclared work, few studies have actually identied the proportion of undeclared work that is conducted on an autonomous self-employed basis and even fewer have attempted to explore whether there is evidence that some entrepreneurs appear to start-up their business conducting either a proportion or all of their trade in this sphere. In the next section, therefore, the results of a survey of undeclared work conducted in a diverse range of English localities is reported that begins to suggest that this might well be worth exploring in far greater depth than has so far been the case. Examining undeclared work in England To analyse the level and nature of undeclared work, between 1998 and 2001, 861 structured face-to-face interviews were conducted in 11 deprived and afuent localities in both urban and rural England (see Williams, 2004a). These localities were selected based on maximum variation sampling using the Index of Multiple Deprivation produced by the DLTR (2000) so as to investigate the above cited marginality thesis that undeclared work is concentrated among deprived populations. Although this sampling method cannot and does not provide a nationally representative sample, and thus the data that follows cannot be taken as national measures, it has avoided the common problem of studies of specic localities that leave one not knowing whether the ndings are more widely applicable. To identify the extent and character of undeclared work, a relatively structured interview method was employed centred around a list of 44 common activities covering home improvement and maintenance, routine housework, gardening, car maintenance and caring activities. In order to identify where households used undeclared labour,

interviewees were asked whether each of the 44 activities had been undertaken in the household during the previous ve years/year/month/week (depending on the activity). If so, they were asked: who had conducted the task (e.g. a household member, kin living outside the household, a friend, neighbour, rm, landlord, etc); whether the person had been unpaid or paid, and if paid, whether it was cash-in-hand or not, as well as how much they had been paid. They were also asked in an open-ended manner why they had decided to use that source of labour so as to enable their motives to be understood. Following this, the supply of undeclared work by household members was examined. The interviewee was asked whether a household member had conducted each of the 44 tasks for another household and if so, who had done it, for whom, whether they had received money, how much they had received and why they had decided to do the task. To capture other undeclared work received and supplied, meanwhile, a series of open-ended questions with probes were used, focusing particularly on undeclared work conducted for rms and why they had decided to do it. Below the results are reported. Evaluating the nature of undeclared work Until now, and as stated above, it has been often assumed by both academic commentators and public policy-makers that undeclared work is predominantly conducted on an organised basis under sweatshop conditions (e.g. Castells and Portes, 1989; Gallin, 2001; Sassen, 1997; Williams and Windebank, 1998). This study suggests, however, that this is but a partial and skewed sketch of the situation. Although this study does not seek to deny that there exists undeclared work organized by unscrupulous employers who are exploiting employees on very low wages that are below the national hourly wage in something akin to sweatshop conditions (e.g. in restaurants, on building sites), it does reveal that the undeclared sphere is not composed entirely of this type of undeclared work. Indeed, the nding is that just 18 per cent of all undeclared work that undeclared workers reported that they had conducted was carried out as an employee for informal or formal businesses. The remainder (82 per cent) was undertaken on an autonomous self-employed basis. It is similarly the case when the responses of those employing undeclared workers are analysed. Just 5 per cent of the undeclared work received by these 861 households was supplied by formal or informal businesses. The remaining 95 per cent of undeclared work was supplied by the self-employed. As such, whether one examines undeclared workers responses on whom they work for, or customers responses, the same common nding prevails. Organised undeclared work conducted for and by informal and formal business is only a small segment of the undeclared sphere. This is the case across all of the locality-types analysed. Of course, this is not to suggest that organised undeclared work does not exist or that nothing needs to be done about this type of work. Indeed, the instances of this work identied clearly reveal that when this work takes place, it usually involves the exploitation of some of the most vulnerable members of society and is very low-paid. In lower-income neighbourhoods in particular, the wage rates tended to be below the national minimum wage (3.60). Examples identied include: doing bar work for two weeks for 50; working in a restaurant for 2.00 per hour; working early mornings in a small bakery for 20 per month; working full-time for three weeks in a canteen on a building site for 50; being paid 10 to clean trucks for three hours; stafng an

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ice-cream stall for 2.80 per hour and refurbishing a pub for one week for 100. In 90 per cent of these cases, moreover, it was unemployed people who undertook such work who did it because they were in desperate need of extra money. In total, however, this low-paid organised informal employment accounted for just 6 per cent of all undeclared work in the deprived neighbourhoods studied. Given that some 82 per cent of all undeclared work conducted by respondents was supplied on an autonomous basis and some 95 per cent of undeclared work received was undertaken by self-employed individuals, it appears that this sphere is much more accurately portrayed as self-employed activity than it is a sphere of organised exploitative employment. In order to understand the type of self-employed activity taking place in this undeclared realm, rst, who is engaged in such self-employed activity is investigated, and second, why they are doing it, especially in terms of whether they are using this sphere to start-up business ventures. Examining who undertakes this self-employed underground activity, Table I reveals that despite those who already hold formal jobs being only some two-thirds of the sampled population, they conduct some three-quarters of all undeclared work conducted on a self-employed basis. The non-employed, meanwhile, representing just over one-third (36 per cent) of the sampled population conduct only one-quarter (26 per cent) of all self-employed undeclared work. As such, autonomous undeclared work is very much the province of those who are already in formal employment. Why do people engage in self-employed undeclared work? Ideally, and in order to pinpoint the degree to which the self-employed draw on the undeclared sphere when launching their enterprises, the research reported here should be able to answer the following questions. Is such self-employed activity in the undeclared sector evidence that some self-employed take their rst tentative steps on the road to developing a formal business venture in the undeclared sphere? And if this is the case, what proportion of the self-employed does so in this manner? Unfortunately, the research reported here is unable to answer the nal question, which would require a survey of the self-employed. It can, however, answer the rst question. To see that it is indeed the case that many engaged in self-employed activity in the undeclared sphere are taking their rst tentative steps towards forming formal business ventures, the responses of those interviewed can be analysed. In each case where somebody was engaging in self-employed undeclared work, they were asked why they had undertaken such work. In some 40 per cent of all cases where this work was conducted on a self-employed basis, some allusion was made to the fact that they were in the process of creating or running a new business venture, including becoming
Percentage of sampled population Percentage of all autonomous undeclared activity 74 26 8 ,1

Table I. Proportion of all self-employed undeclared work conducted by the employed and non-employed in England

Employed All non-employed registered unemployed long-term registered unemployed Source: English Localities Survey

64 36 16 5

self-employed. The remaining 60 per cent of tasks, meanwhile, were one-off tasks conducted either to help somebody out or to earn a little money on the side. This 40 per cent of all self-employed undeclared work reported to be conducted for the purpose of creating or running a business, including becoming self-employed, can be broken down into various types of self-employed activity for analytical purposes. On the one hand, and arising inductively from the responses, a clear distinction can be drawn between those seeking to get-by and get ahead through their undeclared work. On the other hand, and again arising inductively but crosscutting this rst distinction to some extent, is the division between the for-prot self-employed and the not-for-prot self-employed. For some two-thirds of undeclared workers seeking to create a business and/or be self-employed, engaging in autonomous undeclared work was seen as a way of getting by (i.e. they had no current intention of formalising their business venture). An example was a woman who lived in a deprived neighbourhood who engaged in household cleaning in a neighbouring afuent suburb. She had made contacts with customers by working for a formal business that supplied household cleaning services and had then branched out on her own by asking her customers for people known to them who she could clean for on a cash-in-hand basis. In this way, she had broken into the local market where she knew that there was a shortage of cleaners and had done so in a manner that enabled her to overcome the principal barrier to being employed which was to do with a lack of trust of strangers being left in their homes and entrusted with door keys. She had managed to use the formal cleaning company to establish both relations of trust and word of mouth recommendations. For her, nevertheless, this endeavour was purely seen as a means of earning sufcient extra cash to enable her to get by. She had no desires to expand beyond nding sufcient work that she herself could do and no intention of formalising this work. For the other third, however, engaging in undeclared work so as to create a business or be self-employed was much more about getting ahead (i.e. conducting this work on an undeclared basis was seen as temporary and a stage in the development of their enterprise which they wished to eventually formalise). An example was a man in his mid-20s who on hearing what the research project was about recalled to the researcher how he had come to be self-employed running his own car valet business with three employees. As a young teenager, he had partaken in washing cars one morning for a charity event and following this, decided to do so at weekends for neighbours and others in the neighbourhood to earn extra cash for himself. Knocking on doors and offering his services, he had built up a regular clientele and had carried on doing this throughout his years at school. He had then left school and used the money that he had accumulated to buy a van and equipment to set up as a car valet and built on his existing client base. At the time of interview, he employed three people and was busy building up the commercial side of his operation, working for various second-hand car dealers for example. Over the years, he had slowly transferred a greater proportion of his business from the undeclared to the declared realm and was intending to be fully legitimate within the next year or so. For him, therefore, and as he explicitly stated, his undeclared work had been his route into self-employment and creating his own formal business. Many of these self-employed using the undeclared sphere in this manner to get ahead can be dened as entrepreneurs. Although the meaning of entrepreneur is

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highly contested and numerous contrasting denitions exist (e.g. Casson, 1990; Galloway and Wilson, 2003; Hurley, 1999; Levie, 1999; Morrison, 2000; Reynolds et al., 2001), the growing consensus is that entrepreneurial activity relates to risk-taking, growth-orientated and wealth-enhancing enterprises (see Beaver, 2002). If dened in these terms, there is little doubt that many of these self-employed using the undeclared sphere as a strategy for getting ahead, such as the individual above, are engaged in entrepreneurial activity. Besides dividing up the self-employed seeking, into those seeking to get-by and get ahead through their undeclared work, another way of distinguishing between the 40 per cent of all autonomous undeclared work that was reported as conducted for the purpose of creating or running a business, including becoming self-employed, is to draw a distinction between not-for-prot and for-prot undeclared workers. About half were for-prot entrepreneurs in the sense that their undeclared work was undertaken primarily to make money and/or undercut the formal sector competition, including their own employers. An instance was somebody who worked for a garage door company and offered customers he met his own services at a cheaper rate than the price charged by the company who employed him. For him, the wage from the garage door company provided a basic wage and he was engaged in what he called an entrepreneurial self-employed sideline to boost his income. The other half of such undeclared workers pursuing business ventures, however, can be classied as not-for-prot self-employed people. These undeclared workers already knew the vast majority of their customers and conducted regular work for them primarily because the people would not otherwise have been able to afford to have the work undertaken. In these instances, those involved were either mainly people with professional craft skills (e.g. plumbers, electricians) and often formally employed who supplied these skills to people they knew for a fee well under the market price, or else they were unemployed or early retired people who saw themselves as helping out those who had less free time than themselves by supplying their time. An example was a plumber who worked for a major utility and spent some of his weekends doing plumbing jobs for people he knew for fees well below the market price. His rationale was that these people who were friends, neighbours and kin would not have been able to afford to have the work undertaken if they had to pay the full market price so he offered his services at a level below the market price and made a little extra money on the side at the same time. Why, however, were these favours for others done for money? The nding was that a strong culture of paying for favours was identied. As money has penetrated deeper into every nook and cranny of the social, even private life, it appears that realms of activity that might in the past have been conducted on an unpaid basis are now undertaken for money (see Williams, 2004b). In part, this is because giving money negates the need to return a favour. In other part, it is because money acts as a substitute for trust in the sense that suppliers can no longer be sure that people will return favours and thus demand payment so as to prevent relations turning sour if and when favours are not returned (see Williams, 2004a). The outcome has been a transfer of many activities that might have been in the past conducted as unpaid favours into the realm of undeclared work.

Public policy implications Until now, and based on the illusion that undeclared work is predominantly organised exploitative low-paid work conducted under sweatshop conditions, public policy has sought to deter such work using stringent regulations and ever more punitive measures so as to change the cost-benet ratio. In this paper, however, it has been revealed that not only is the vast majority of undeclared work conducted on a self-employed basis but also tentative and preliminary evidence that for some, undeclared work represents a starting point for entrepreneurs launching their enterprises. Continuing with a public policy approach that seeks to deter such activity, therefore, not only fails to recognise that the undeclared realm might be the platform from which self-employment and entrepreneurial endeavours emerge but also fails to get to grips with the idea that this sphere is not an obstacle to modernisation but, rather, a potential asset to be harnessed and even a driver of economic development or breeding ground for the micro-enterprise system (e.g. Global Employment Forum, 2001; International Labour Ofce, 2002; Tabak, 2000). How, therefore, might public policy seek to harness this activity? There is a range of incentives as well as aid that could be given to those working on an undeclared basis in order to enable them to transfer their activity into the formal sphere. These include both introducing changes to state regulations (e.g. shifting the income tax threshold and changing earnings disregard levels) so that their work is no longer classied as undeclared work, and developing initiatives to ease their transition to the formal sphere such as amnesties as well as advice. Here, and in order to show likely initiatives that open up once this asset-orientated approach towards the undeclared sector is adopted, I review one initiative of an advisory service so as to shine a light on the type of initiative that could be adopted. Street (UK) was created in 2000 when its current Director, Rosalind Capisarow, recognised that if the self-employed were going to be facilitated to maximise their business potential, then those operating in the undeclared sphere would need to be helped to formalise their businesses. At present, Street UK has around 200 clients and they fall into two main categories. First, people claiming benets (e.g. disability benet, carers allowance) and second, those who are not claiming any benet but who are either under-declaring income from their enterprise activity or are not declaring at all. On the Street UK web site (www.street-uk.com), one can nd case studies of the type of self-employed clients that have been so far helped to formalise their enterprises. For instance, there is a case study of a female client in East London (originally from Ghana) who was able to save enough from working in the cleaning industry to start up as a hairdresser rst in the undeclared sphere but now, after intervention by Street (UK), in the formal economy. Her original micro-enterprise has grown to create ve or six additional formal jobs that have enabled other Ghanaian migrants to gain entry into the formal labour market. Another case study cites a married couple in Newcastle who for some 20 years had been running a window cleaning enterprise on an undeclared basis but who have now been assisted to move this enterprise into the formal sector. What is so important about this case study, besides the fact that the Street (UK) interventions can shift stalwart undeclared enterprises into the formal sphere, is that it provides a useful example of how undeclared work operates as a school for self-employment and/or entrepreneurialism. Over the two decades that this couple had

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been running their undeclared enterprise, they had helped numerous young people into employment and/or self-employment by starting them up in window-cleaning rounds. What is of more importance here however is the strategy that Street (UK) adopts to help people to formalise their undeclared work. This organisation views the transition from undeclared work to formality as involving 12 separate steps: (1) Moving from part-time to full-time work. (2) Moving from home to business premises. (3) Keeping basic level records. (4) Keeping higher-level accounts. (5) Purchasing public liability and employers liability insurance. (6) Hiring employees on a PAYE basis. (7) Using a bank account for their business transactions and opening a separate business bank account. (8) Obtaining the required licences and permits to operate the business (e.g. health and safety inspection certicates, driver instructor licence). (9) Graduating off all non-work state benets. (10) Graduating from majority cash revenues to majority invoiced revenues. (11) Incurring a formal business tax liability. (12) Becoming VAT registered. As they recognise, it is highly unlikely that any micro-enterprise will take all 12 steps in one fell-swoop and its intention is to help them take each of these steps individually so that eventually, they can become a formal business. For this organisation, moreover, the objective is to encourage their clients to take at least three new steps in any 12-month period. If they do, then they are classied as being on the road to transforming themselves from an undeclared enterprise to a formal business. Obviously, this advisory service is just one way of facilitating the transfer of work from the undeclared sector into formal employment. The reason for highlighting it is simply to show that initiatives already exist that can be more widely used if governments wish to take a more positive approach. Conclusions and future research In sum, this paper has evaluated critically the representation of undeclared work as low-paid exploitative organised employment conducted under sweatshop conditions and the related public policy approach that views this illegitimate sphere as a hindrance to development and actively pursues its deterrence. Reporting evidence from English localities, it has been here highlighted that the vast majority of undeclared work is conducted on a self-employed basis and that some use this sphere as a launch pad for new business ventures. The outcome has been a call for public policy to start to view this sector more as an asset to be harnessed rather than an activity to be deterred and for greater emphasis to be put on developing initiatives to facilitate the legitimisation of this illegitimate endeavour.

To conclude, therefore, let me answer the questions posed at the beginning of the paper. Here, it has been shown that undeclared work is predominantly composed of self-employed activity and that the self-employed sometimes use undeclared work as a starting point for their business ventures. Still not known, however, is whether it is common to use undeclared work in the early stages of self-employment and when and why engagement in undeclared sphere tails-off. What is now required, in consequence, is further research to answer these questions. To do this, a survey of the self-employed at various stages of development in order to investigate the degree to which, if at all, their ventures operate in the undeclared sector, and if so, what they view as the barriers preventing formalisation. Indeed, until these barriers to formalisation have been identied, work cannot begin on developing targeted initiatives to facilitate the transition of enterprises from the undeclared to the declared sphere. What seems certain from the above, however, is that a conceptual shift in understanding is required with regard to the nature of the undeclared sphere. Indeed, unless it occurs, then governments may well nd that with each step that they take to deter undeclared work, they will be with one hand destroying precisely the self-employment and entrepreneurial behaviour that they are so desperately seeking to nurture with another hand.
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