Do workers value formal jobs? Evidence from Brazil

Informal employment, and the resulting lack of social insurance coverage, remains widespread in low- and middle-income countries. This paper contributes to the debate on the determinants of informality by estimating workers’ willingness to pay (WTP) for a formal job using a sample of 4997 Brazilian dependent workers. On average, workers are willing to forgo 15.1% of their wages for a signed work card, with higher WTP among formal and highly educated workers. Predicted eligibility for non-contributory social assistance lowers WTP, while predicted eligibility for contributory social insurance increases it. A simple calculation suggests that workers’ WTP may not fully offset employer contributions if passed on through lower wages. Providing additional information on formality raises WTP, but mainly among those already having a higher valuation of formality.