The black market, also known as the underground economy, has a substantial arsenal of words to describe it: black economy, illegal economy, unreported, unrecorded, ghost, invisible economy etc. Undeclared work also falls into the category of underground economy. This consists of different practices such as tax fraud, illegal working, drug trafficking, weapons and manpower, corruption, prostitution, theft, gambling etc.
According to Pierre Pestiau, a specialist who has been studying the underground economy, the black market covers all the economic activities which take place outside the boundaries of social and tax laws, and is largely outside the census of national accounting. It is difficult to measure the economy that defies the control of the state. Underground economy may contribute to anywhere between 10% and 20% of the production in industrialized countries, and probably much more in the emerging countries.
This phenomenon has been increasing in Western Europe. In Italy, the black market is tolerated by the public and the government, as they view this as an opportunity to surpass the wealth of the U.K and France. However, the countries of the East have always had a long tradition of having black markets.
Until the collapse of communism in 1989, the countries of the East had a black market that was so flourishing, that G. Grossman even called it the 'second economy'. Sometimes GDPs of nations could be inaccurate, as the underground economy cannot be measured, and even the laws pertaining to this phenomenon are vague. Therefore, a better knowledge of the underground economy, its size, shape and evolution is necessary.
In this study, the focus is specifically on 'moonlighting', which is one of the main components of the underground economy. Moonlighting refers to working a secondary job,in the evening or night, in order to avoid paying tax on the extra money earned. Even labor is termed 'black', when it escapes the control of the state.
Companies are prohibited from having illegal labor in order to maximize their profits, according to the Article L324-9 of the Labor Code. This means that if people work illegally for a company, it leads to tax shortfall for the state. Apart from this, there is no social protection for such laborers. The incidence of undeclared work has increased after the accession of ten new members (Eastern European countries) into the European Union.
As part of the study, the focus will also be on these following questions: What are the implications of undeclared work in the labor market within the European Union? What are the measures taken by the EU to stop the undeclared work? In the first part, there will be an attempt to explain the phenomenon of undeclared work, by relying on a few economic theories.
In the second part, a discussion will be made on the implications of undeclared work on the economy of the European Union. Finally, a discourse about the various measures adopted by national governments and European institutions to address this problem. Throughout the discussion, the focus is on undeclared work in two countries in particular, Italy and Hungary. Indeed, one can not address a topic about working in "black" without giving concrete examples.
Tags: Work in the European Union; Underground Economy in the European Union; Moonlighting; black labor; effect on the economy
[...] Thus, most countries have increased the penalties for failure to report work or benefit fraud. Some countries have introduced measures aimed at all levels of the chain of subcontracting. Some have also strengthened control measures in the service sector (hotels and restaurants). In addition, the cooperation between the authorities of the labor market and tax administration has resulted in some positive results in the case of undeclared "organized" work. Information campaigns and awareness In addition, some Member States have also launched information and awareness campaigns against undeclared work. [...]
[...] As for undeclared work in Italy, it mainly concerns young people, women and pensioners. Illegal immigration and undeclared work Note also that the temptation is strong to conflate " working Underground " and " illegal immigration However, undeclared work is not limited to the activity of immigrants. Illegal employment of foreigners still exists and for those of them who are in an irregular situation, it is even the only way to perform an activity. Thus, with regard to Italian immigration, we see that it originated in the second half of the 60s and the early 70s, i.e. [...]
[...] As old as the formal economy, hidden activities followed developments and recessions. This adaptability still appears very strong in the countries of Eastern Europe where the underground economy survives the planned economy, and thrives on the disorganization of the old system when the countries make the transition to a market economy. However, to access the European Union, the countries of Eastern Europe must show some transparency. To facilitate its entry to the European Union, many measures have been adopted in Hungary in order to see decline in all forms of underground activities. [...]
[...] In general, immigrants occupy positions of painful work that had traditionally been reserved for Italians who came from agricultural and mountain regions. Thus there was an internal immigration, but that economic growth provided the most attractive opportunities. Other migration is from Morocco and Tunisia, but also the Philippines and Cape Verde for domestic, and some former Italian colonies, such as Ethiopia and Somalia, even if colonial relationship does not give rise to significant long-term immigration. D. Areas most affected by undeclared work areas Undeclared work is generally found in areas characterized by a high density of labor and low earnings. [...]
[...] Thus, it is particularly important to increase the employment rate, especially among workers of a certain age, women, and unskilled and disadvantaged people, and reducing regional imbalances. It should also take measures to promote mobility and strengthen the incentives for people to work. Conclusion Illegal by nature, the underground economy has not failed to encourage fantasies fantastic and demagogic evaluations. In the late twentieth century, it remains in most industrialized countries, but also in developing countries in Central and Eastern Europe in particular. [...]
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