© Kurier / Juerg Christandl
The largest proportion of undeclared work occurs in construction and crafts. However, Austria is the EU country with the lowest ratio.
The weakening economy, high inflation and high energy prices are also boosting the shadow economy. This is how it should be this year Sales of undeclared work around 1.25 billion euros about 34.52 billion euros increase, emerges from a study carried out by the Linz economist and undeclared work expert Friedrich Schneider. This means that the “critical crisis” in Austria is coming to an end 7.5 percent of gross domestic product outside of. Austria is therefore the EU country with the lowest proportion of undeclared work.
“The failure was last year 33.27 billion euros or 7.65% of official GDP in 2023. This is an increase of 4.45 billion euros or an increase of approximately 15.06% compared to 2022. This was the largest increase in the shadow economy (the failed economy) since 1998!”, states Professor Schneider in his current study.
Economic benefits
“85 percent of the money earned on botch is immediately spent back into the official economy, i.e. the economy and we, i.e. everyone who botched or commits botch, benefit from the underground/glitch economy critical. Furthermore, the income earned by the parallel economy, for example, also benefits as a buffer for the recession caused by the pandemic, as this income compensates for part of the large income losses. Likewise, many houses and houses occupied by homeowners wouldn't exist without a critical failure, because very few people can afford their home from the first turn of the shovel to the last stroke of the brush,” explains Professor Schneider.
The biggest losers are the State and social security institutions. According to Schneider's estimates, “both lose tax and social security contributions of around 2.0 to 3.5 billion euros per year. Other losers are accident and health insurance companies, which bear the increased costs of additional accidents or the incapacity for work of those who fail. wear”.
The previous years
“In 2020, the corona pandemic caused a severe recession and thus a sharp increase of 12.03 percent in the shadow economy. In 2021, the shadow economy increased slightly by 900 million euros to 27,820 million euros (or 3, 34%)); this is because the economic recovery was still affected by the ongoing Corona pandemic”, says the study. “In 2023, it increased by 15 percent due to high inflation and economic recession; this is the largest increase in over 25 years! For 2024, the shadow economy is expected to be 6 percent due to very low economic growth of 0.35 percent and inflation still high, 0.6 percent, increase of 3.80 percent.
According to Schneider, Luxembourg continues with a “poor” quota of 8.91 percent and the Netherlands with 9.61 percent. EU members Finland and Sweden, which are known for transparency, are ranked 7th and 8th. However, when it comes to corruption, according to Transparency International, Finland performs significantly better, ranking 2nd after Denmark in 1st place.
Losing the state and social security
On average across the EU, the share of the shadow economy in GDP increased from 16.28 percent in the pre-crisis year 2019 to 18.78 percent in the previous year. The study expects a decline to 18.50% this year.
However, according to the study, around two thirds of undeclared work is carried out by “clumsy part-timers”. The rest is equally divided between organized crime on the one hand and the unemployed and retired on the other. For many artisans, undeclared work is a buffer to compensate for lost income caused by the recession. And many customers would not be able to pay for services regularly.
Lots of illegal work in construction and crafts
The highest proportion of undeclared work occurs in the “construction and crafts, including repairs” sector, at 93 percent. “Other commercial companies and domestic services” represent around 17 percent of “Pfusch”, followed by “other commercial and industrial companies” and “service companies”, i.e. hotels and restaurants. According to the study, undeclared work could be combatted by reintroducing the premium for artisans of 2,000 euros per household and per year and reducing additional wage costs.
Low economic growth of 0.35 percent and still high inflation of 6.6 percent will lead to an increase in the underground economy by 2.45 billion euros this year. However, extensive abolition of cold progression and additional relief would counteract this situation, so the increase in the final result would be moderate at 1.25 billion euros, Schneider noted.