It turns out that hidden employment is one of the important components of the country's economic growth
Professor Friedrich Schneider of Johannes Kepler University Linz not only sees no pernicious influence of shadow employment on the developed economy, but also asserts: undeclared work is one of the important components of economic growth. The turnover of the employment sector that has escaped the attention of tax authorities in Germany alone amounts, by some estimates, to €351 billion – that is about 15% of the entire German economy, and such solid figures for the shadow sector have not been seen since 2004. According to Professor Schneider, this year the turnover has increased by 5-7 billion compared to 2008.
Friedrich Schneider, who is considered one of the leading experts on the illegal employment market, obtained these figures by summarizing data from numerous sociological surveys and also by analyzing the growth of the money supply. How do the huge sums that escape the state help restore the economy?
The professor's conclusions seem fairly straightforward and yet it is hard to dispute their realism: money earned on the black labor market is not legalized or saved – it immediately enters the circulation of goods and money, boosting consumption and thereby fueling the economy. 'Due to rising unemployment, reduced working hours and overtime, many Germans have seen their usual income levels decline. People try to make up for lost income by working undeclared,' Schneider asserts.
On the other hand, supply in the shadow labor market also grows during a crisis, as it becomes harder to earn legally and employers pay less. Germans immediately spend three quarters of their shadow earnings, and this is a very significant injection into a declining or simply stagnating economy. 'This year, undeclared work is a blessing for the market,' boldly declares Professor Schneider, from whose perspective the shortfall in state coffers and social insurance systems is a lesser economic evil than a decline in consumption.
Illegal employment is especially common in construction and among craftsmen – these sectors, according to Schneider, account for 38% of black earnings. Second, with 17% of billion-euro turnover, is the service sector, where almost everyone works on the black – from hairdressers to nannies and cleaners. '98% of cleaners in German homes work without official registration,' the Austrian professor is certain. 'In this sector we observe a complete redistribution of the labor market in favor of illegal work.' Third place in shadow turnover is occupied by the restaurant and hotel industry with 16% of illegally employed workers.
Turnover from undeclared work has reached unprecedented levels not only in Germany but also in its immediate neighbors. However, in both Austria and Switzerland, they are still far from the German 14.6% of gross domestic product. In turn, according to the Organization for Economic Co-operation and Development, Germany is only in the middle of the list of 30 OECD member countries in terms of the share of the illegal labor market in total GDP.
When calculating shadow turnover, goods and services produced and provided bypassing the state treasury, salaries and fees paid to employees without official registration, income from entrepreneurial activities not accounted for in tax returns, as well as illegal employment of foreigners in the domestic labor market are taken into account.
Pyotr LEVSKY. 