Recession driving workers into underground economy

Published: 18 Apr 09 10:45 CET
Online: http://www.thelocal.de/national/20090418-18715.html

Germany’s worst recession since World War II is driving millions of workers into the ‘shadow economy,’ according to a report published Saturday in Wirtschaftwoche.

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The informal - and untaxed - sector of the German economy could reach almost 15 percent this year, or €352 billion, according to economist Friedrich Schneider at the University of Linz. That output is equivalent to roughly eight million people working full-time, Schneider estimated.

Known in German as Schwarzarbeit, or ‘black work,’ the practice is especially common in the construction industry and for domestic work, where high German taxes and social contributions make working legally less attractive.

With taxes likely to become a major issue in this year’s German national elections, Schneider’s findings are being seized upon as an argument to cut taxes for skilled tradesman.

“To confront the rising informal economy, legal work must become more attractive,” Otto Kentzler, president of the Craft Workers Association, told Wirtschaftswoche.

Germany is not alone. Spain, Britain and Italy are also likely to see a sharp uptick in the informal sector of the economy, according to Schneider.

“The stronger the country is hit by the economic crisis, the more the shadow economy will grow,” Schneider told Wirtschaftwoche.

The informal economy had been steadily shrinking since 2003, according to Schneider’s research, and started to grow again once the recession started last year.

DDP/The Local (news@thelocal.de)

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11:11 April 21, 2009 by Need NOT Greed

In the UK community links has been measuring the informal economy at a localised level. We have formed an indepth understanding to peoples motivations for working informally - namely out of need- to escapre poverty, rather than greed. As a result we have launched the Need NOT Greed campaign, asking government to prevent the need for informal work throuogh changes to the benefits and tax system and to harness this informal economic activity and create formal jobs where others could then be formally employed - a potential solution to the economic downturn rather that a consequence/ problem! - www.neednotgreed.org.uk

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Recession driving workers into underground economy

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