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04/12/2016

Undeclared work increased with the economic crisis

Social Europe & Jobs

Undeclared work increased with the economic crisis

Migrant construction worker. Slovenia, 2009. [Miran Rijavec]

A group of EU member countries will help tackle the problem according to a new opinion by the European Economic and Social Committee (EESC), an advisory body to the EU institutions.

“We need to create a positive environment for workers and businesses, so there is less of a temptation to turn to the black market,” said Stefano Palmieri, who drafted the EESC opinion.

Undeclared work is any paid and legal activity that is not declared to public authorities. In Europe, an estimated €2.1 trillion of income is lost to undeclared work annually.

In recent years, the most notable increase in undeclared work took place in Slovenia and Spain, according to the most recent Eurobarometer survey (Spring 2014). Denmark, Sweden, and Latvia on the contrary have experienced a decrease.

There is no initiative at the European level on coping with undeclared work. With the free movement of workers, the working group is meant to bring member countries together to coordinate strategies at the European level, in order to prevent further increase of undeclared work.

Europeans tend to hide their work revenues in industries such as repairs and renovations, gardening, cleaning, babysitting, and working in catering.

Workers in southern Europe receive almost 70% of annual income in the form of cash in hand. Central and Eastern Europeans follow with 29%, 17% in “Continental” countries, and only 7% in the Scandinavia.

Undeclared work generates immediate earnings, but there are negative consequences over the long-term. Short term laborers tend to have poorer working conditions when doing undeclared work, and suffer from poor health and inadequate pension coverage. The state is similarly deprived of taxable revenues to finance public services.

The three most common reasons for laborers engaging in undeclared work include high social security contributions and taxes, lack of job opportunities, and low salaries.

The EESC has proposed a number of instruments to decrease undeclared work. These are tax incentives, fines, inspections, better regulation, and a better coordination at the European level through a mandatory platform.

“For the platform to be rightly steered, we will need constant dialogue between all the players involved,” said Ana Bontea, co-rapporteur of the EESC opinion. These include “from social partners at EU level and from sectors with high levels of undeclared work, from SME organisations and the social economy”.

The proposal to establish a European taskforce, obligatory for all member countries, comes from the Commission and was endorsed by the EESC on 10 September. The European Parliament Employment and Social Affairs Committee is next to put forward its position on the legislative proposal. 

The European Economic and Social Committee is an EU body that consults the European Parliament and the EU Council on Laws Proposed for Adoption. The Parliament and the Council are obliged to take into account the general concerns of the EESC opinions. It is formed of representatives from the trade unions, employers’ organisations, and other civil society groups.

Background

The European Commission has proposed in April 2014 the creation of a European Platform to improve cooperation at EU level to prevent undeclared work more effectively. The Platform is meant to bring together national enforcement bodies who are involved in the fight against undeclared work.

Such a phenomenon causes serious damage to working conditions, fair competition and public financial coffers.

The proposal has been sent to the European parliament and the EU Council for deliberation and approval. 

 

Timeline

  • Autumn 2014: European Parliament to publish its position on the legislative proposal
  • Winter-Spring 2015: the EU Council to adopt the proposal

Further Reading