How Informal Work Becomes Accepted: What Small Business Owners Say

What is it about?

Many people are familiar with informal work, like paying a tradesperson “cash-in-hand” or accepting off-the-books payments. But why do small business owners engage in this kind of work, and what makes it feel acceptable, even though it breaks official rules? This study explores how informal work becomes normalised for small business owners in the UK, particularly those working in trades like car repairs, hairdressing, and building services. We interviewed 25 business owners from the East Midlands and found that most had been exposed to informal work early in their careers, often before they even started their businesses. For example, they may have worked in cash-only jobs as teenagers or received extra payments off the books during apprenticeships. These early experiences shaped their views and made informal work feel like a normal, even necessary, part of running a business. We use a concept from behavioural economics called “nudge theory” to explain how small, everyday influences such as customers asking for a discount or accountants suggesting how to avoid tax can push people toward informal practices. These nudges come from people we call “choice architects,” who influence others’ decisions in subtle ways without directly telling them what to do. The study helps explain why informal work is so common even in well-regulated economies like the UK. It also shows that cracking down on informal work is not just about enforcement. It is about understanding the social cues and influences that make it feel acceptable. This has important implications for policymakers who want to reduce informal work without punishing those who feel they have no other option.

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Photo by Todd Quackenbush on Unsplash

Photo by Todd Quackenbush on Unsplash

Why is it important?

Our study is one of the first to use nudge theory from behavioural economics to explain why small business owners engage in informal work. Rather than focusing on broad economic conditions or formal policy failures, we shift attention to the subtle social cues and lived experiences that shape decision-making over time. What makes this work timely is the increasing interest from policymakers in tackling informal work more effectively, especially in the wake of economic pressures such as the cost-of-living crisis and post-pandemic recovery. By showing how legitimacy is built gradually through early exposure, customer expectations, and informal advice from professionals like accountants, we offer a new way of thinking about why informal work persists even in highly regulated economies like the UK. This perspective moves beyond traditional enforcement approaches and highlights the need to understand the everyday realities and pressures that shape business decisions. Our findings can make a real difference by helping policymakers and practitioners design interventions that take account of these behavioural and social influences, potentially leading to more realistic and effective responses to informal work.

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