Experts: less undeclared work in Germany

experts: less undeclared work in germany

This is the conclusion of the forecast for the shadow economy 2013, which was presented by economics professor friedrich schneider from the university of linz and the tubingen institute for applied economic research (IAW) on wednesday in berlin.

"People have good chances to get a job in the regular economy. They simply don’t have the time or the motivation for moonlighting," said IAW managing director bernhard boockmann, explaining the decline. Nevertheless, almost every seventh euro continues to be diverted away from the treasury. Germany is therefore slightly worse off than the average industrialized nation.

According to the model calculation, the shadow economy will be worth 340 billion euros this year, equivalent to 13.2 percent of gross domestic product. That had been 3 billion euros or 0.2 percentage points less than in 2012. The high point was reached in 2003 with a share of 17.1 percent. Since then, the rate has fallen continuously, with the exception of the crisis year 2009.

The experts define the shadow economy primarily as undeclared work, but also as other criminal activities. Black work generates "additional economic output and additional income," schneider said. About half of the undeclared work replaces regular work, the other half can be seen as additional value added.

"The big losers are the state institutions and the social security agencies"."According to scheider’s estimate, the state is missing out on around 50 to 60 billion euros in revenue per year because of the shadow economy. The industrial union for construction, agriculture and the environment called for more investigators and stricter controls against undeclared work.

Experts expect the stable economic situation to have the effect of reducing the shadow economy by 1.4 billion euros this year. The reduction in the pension contribution rate from 19.6 to 18.9 percent will contribute 1.1 billion euros. Because this leaves more net income than gross income, regular work becomes more attractive, said boockmann. The increase in the earnings limit for mini-jobs from 400 to 450 euros will have an impact of another 200 million euros.

At the same time, the experts warned: when the mini-jobs, which had recently come under increasing criticism, were abolished and low-paid employees had to pay normal taxes and contributions, this had a major effect. Particularly in the hospitality industry, among cab drivers or in construction cleaning, many mini-jobbers were switched to illegal employment. The bottom line is that this will increase the shadow economy by about seven billion euros.

Among the member countries of the organization for economic cooperation and development (OECD), germany ranks in the middle of the pack. The negative front-runner in a country comparison is greece, where according to the study, 24.6 percent of gross domestic product will be diverted away from the treasury this year.

In greece and spain, however, the share of undeclared work is currently declining slightly, an unusual development for countries in recession, as schneider said: "the loss of income is so severe there that even shadow economic services are less in demand."

The shadow economy is also strong in italy at 21.1 percent, portugal at 19.0 percent and spain at 18.6 percent of gdp. According to the model calculation, it is lowest in the USA at 6.6 percent due to low ancillary wage costs.

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