Fuzzy landscape of undeclared labor in Greece
by Dimitris Rapidis and Alberto Paez
The first problem that appears deals with the credibility of the relevant studies. The Greek Ministry of Labor (i.e. during the period 2009-14), the Research Institute of the General Confederation of Greek Workers, and the research body of the major public social fund present different studies with almost scandalous declines. At the current stage, the Greek government and the European Commission put trust on ILO studies. Still, we might have some second thoughts on the accuracy of the results, as a big part of them is dragged from domestic sources.
The employment landscape in Greece is completely distorted, deeply affected by the economic crisis and recession. Despite the fact that since 2012 we have seen a significant drop of undeclared labor, this decrease takes on two dependent variables: the first is that the labor force counted is the one registered in the relevant state authorities, meaning that those being undeclared are not included, and thus not affecting the final rate; the second one is that surveys on undeclared labor are addressed to the employers and not to the employees. Therefore, we are faced with some serious burdens with respect to the research methodology that deprives us from making solid conclusions.
Compliance on tax obligations and fines is another important issue. On average, only 25% of these employers that have been fined by the state authorities for not declaring their workforce pay on due time. At the same time, employees that have not been declared or lacking insurance are largely exploited in the work field deprived of the right to seek for justice for one major reason: for he majority it is way more important to keep a job, no matter what the conditions are, rather than losing the job and resort to a judicial struggle with the employer. The labor inspectorate has reported hundreds of cases of tax evasion and non-declaration, but the deterrence strategy does not seem much efficient so far.
The Greek government intends to address this issue in two ways: first, lower the fines for non-compliant employers; second, erase fines under the condition of an employability clause. This is a clear shift from a deterrence strategy towards a more flexible system that acknowledges current burdens of the market, providing also an incentive for employers to recruit more employees. This new strategy cannot be efficient unless the creditors endorse this plan and re-evaluate the current tax hikes for the business sector.
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Dimitris Rapidis is Director at Bridging Europe. Alberto Paez is Policy Analyst at Bridging Europe.
October 27, 2015