Shades of grey in the informal economy

This paper seeks to examine the influence of the national minimum wage (NMW) in the UK to small business owners operating in the informal economy.

Using the clothing and restaurant sectors as a context, the responses of ethnic minority employers operating in the informal economy are examined in the light of market and regulatory change (notably, the NMW). Case studies are undertaken with 17 business owners and their workers. Given the sensitivity of the information required (reasons for non‐compliance; avoidance strategies; labour use), industry “insiders” were deployed to gain access.

The findings highlight considerable diversity in employer responses, despite the focus on two comparative narrow market sectors. This has implications for both neo‐liberal approaches to the informal economy, and the so‐called “marginalisation” thesis.

Provides an insight into a neglected segment of the informal economy. Future studies should look at wider range of sectors and compare the experiences of different ethnic minority groups.

This paper demonstrates why extant policy initiatives designed to formalise informal work face major structural barriers. Further, the informal economy is much more widespread than policy discourse suggests, thus accentuating the challenge for policy‐makers.

Extant literature on informal economy tends to be “race‐blind” and rarely linked to the sphere of employment relations. This paper helps to fill both of these gaps.