UNDECLARED WORKER

A worker who performs paid activities that may or may not be lawful as regards their nature but are not declared to the public authorities.

"According to a European Commission communication of Apr. 1998 on undeclared labour, the underground economy accounts for between 7 and 16 per cent of gross domestic product (GDP) of the European Union, i.e. between 7 and 19 per cent of all declared jobs. In other words, the ‘clandestine economy' provides the equivalent of 10 to 28 million full-time jobs, which gives some idea of the huge losses in revenue to the State. The Committee recalls however that, while clandestine immigrants account for a large percentage of undeclared workers, they are not the only ones working illegally."
(International Labour Organization (ILO), 1999, Migrant Workers: Chapter 4. Migrant workers who are in an irregular situation and/or illegally employed, 1999, visited 2010-02-02)

The terms "undeclared worker", "clandestine worker", "illegal worker", "black market worker" and "unregistered worker" are often used interchangeably. They all refer to the general definition of workers, self-employed or salaried, who occupy a gainful activity which violates one or several official regulations.

The types of individuals engaging in such work vary from country to country, depending on the parameters for undeclared work and the sectors in which such work is most prevalent. The most significant types are:

• Workers who fail to declare all or part of their activities and/or fail to meet the national requirements with regard to making social insurance contributions (for example, students and housewives providing personal and domestic services)
• Employees who present under-declaration of income (often second or multiple job holders)
• People who are officially "inactive" or "unemployed" but are working while claiming benefits
• Immigrants working illegally, without a work permit

Participation in the underground economy is generally due to a desire to increase earnings, to avoid taxation and social contributions or to reduce costs.

As to the consequences of undeclared work for the economy, especially over the last couple of years, public opinion has strongly criticized undeclared work because it further affects the already weakening financial base of the welfare state. Undeclared workers are not contributing to the social security system and might, in addition, frequently be receiving benefits. Undeclared work also weakens the bargaining conditions on the labour market as undeclared workers forego their social security rights.

Moreover, it is often mentioned that illicit workers cause security problems because they ignore safety regulations. Undeclared work weakens unions, puts heavy pressure on productivity and will eventually entail wage cuts. Public opinion also agrees that undeclared work allows businesses with low productivity to continue competing by not declaring profits. In debates, it is often mentioned that undeclared work endangers enterprises that do play by the rules, and, more importantly, that it forces the government to impose higher taxes.
(adapted from the European Union, European Employment Observatory, 2005, visited 2009-05-13)

Undeclared work is particularly prevalent in labour-intensive sectors:

• Traditional sectors such as agriculture, construction, retail trade, catering and domestic services
• Manufacturing and business services where competitiveness depends mainly on costs
• Innovative sectors using electronic communications

The main attraction of the undeclared economy is financial. This type of activity allows employers, paid employees and the self-employed to increase their earnings or reduce their costs by evading taxation and social contributions.
(adapted from the European Union, Undeclared Work, 2005, visited 2009-05-13)