Enforcement Problems in Informal Labor Markets: A View from Israel

Abstract

Enforcement problems have always been a key challenge for labour law, and the problems have exacerbated in recent years as a result of reduced unionization rates, and more generally, as a result of productive decentralization. The problem of enforcing labour laws is the focus of this paper. It begins by setting out an analytical framework, distinguishing between three types of enforcement problems in labour markets. There are cases in which specific legal requirements are not followed (i.e. the workers are partially excluded from labour and employment laws' protection). There are cases in which the workers are not declared - the employment is in effect concealed - and the exclusion from labor and employment protections is sweeping. Finally, there are cases in which the business as a whole is not declared. Such cases are also characterized by sweeping exclusion, but only as part of a larger problem of illegality. The following section then moves on to discuss a number of solutions, based on the experience in Israel. Discussing separately a number of different contexts in which enforcement problems are especially acute, I describe the (limited) efforts of the Israeli legislature to rectify the situation, and offer some additional suggestions. While the Israeli situation is used as an example, the problems are obviously quite similar in many other legal systems. The suggested solutions, therefore, can be just as useful.

Keywords: labor law, employment law, enforcement, compliance, contract workers, mogrant workers, undocumented workers, temporary agency workers, minimum wage, subcontracting, subcontractors, outsourcing, tax evasion