European Interests - newsletter provided by European Social, Organisational and Science Consultancy (ESOSC), Aghabullogue, Ireland. ISSN 1649-1955. Issue 2-2004

Massimo D'Angelillo

 

Undeclared work in one region of Italy.

 

1.

In 1998, the EU Commission brought the attention of its Member States on a phenomenon known as undeclared work, which currently affects the entire European Union.

14.7% of the work force in Italy is irregularly employed, making it one of the European countries with the highest percentage of undeclared work.

Undeclared work is relevant from both an economical and social standpoint.

Economically speaking, undeclared work is relevant because it has been caused by the particular situations currently existing in various sectors of industry, as well as general cost-related conditions. Seen instead in terms of consequences, undeclared work alters the way the market works and is detrimental to both law abiding employees and employers, not to mention the  State which suffers losses through untaxed income.

Socially, undeclared work is directly tied into other related phenomena such as illegal immigration and unemployment among youth and women.

Research on undeclared work was carried out in the province of Pesaro and Urbino, an area located in the central part of Italy.

The province of Pesaro and Urbino is one of the most important provinces of the Marches region. Its economy is mainly generated by SMEs (small and medium enterprises) in industry (furniture, engineering and construction), agriculture (wine, oil and fruit) and services (tourism, trade and business and personal services).

In this area, employment, including women, is high (3.5%) and unemployment, one of the lowest in Italy, ranks far below the national average of 8.8%. Only 19 of the 103 provinces have a lower percentage of unemployment than Pesaro and Urbino

Average income in the province is relatively high (19 thousand Euro per capita) and there is an even distribution of wealth and no evidence of widespread poverty.

Given this general summary, it is readily apparent that the conditions in the province of Pesaro and Urbino are quite different from those in, for example, Southern Italy where undeclared work is more common due to the scarcity of available regular jobs.

However, the results of the research – which was conducted through confidential interviews and testimony of the various sectors [1] – reveal that many forms of undeclared work are thriving also in the province of Pesaro and Urbino.

 

2.

There are about 16,000 people working irregularly as undeclared work, the equivalent of 8,058 full time jobs or 9.8% of legal employment, in the province of Pesaro and Urbino.  

One form of undeclared work in industry can be seen in the furniture and engineering sectors. These sectors, made up of companies organized within industrial districts, employ highly skilled workers. Here undeclared work is predominantly overtime hours that are paid off the books as cash under the table, not included in the employee’s paycheck. 

The situation is much more devastating in the textiles and clothing industries where there are serious structural problems. Cheap labor has increased international competition, causing many textiles and clothing companies in Italy to close down. Some companies have managed to survive by using undeclared work or by outsourcing part of their production to unregistered manufacturing operations such as Chinese immigrants.

In construction there are many small companies that irregularly employ workers or illegal immigrants.

In agriculture, forms of undeclared work include summer fruit harvesting, the truffle trade and livestock herding.

In the services sector, there are certain businesses where undeclared work is very rare or non-existent such as in credit institutions, insurance agencies, public administration and innovative services to businesses. 

In other activities of the services sector, undeclared work is very widespread. In small trade and tourist businesses, many workers are not registered. In menial services to businesses, such as cleaning services, the situation is much the same. In personal services, for example baby sitting and care for the elderly, many families prefer to pay these services in cash under the table to avoid paying taxes and/or contributions.

Sometimes undeclared work is a decision that employers make and place on their employees. In other cases it is mutually agreed on between the company and the workers – companies save by not having to pay taxes or contributions and the workers or employees receive a higher immediate pay cash in hand, even if it means that they will never receive a pension. It should be noted that in Italy many people have little faith in the State pension plan and see no guarantee of future payment of their State pension.

Young people, women and immigrants represent the weakest social groups and they are the individuals most at risk. Young people often agree to work as undeclared work during their transition from school to their first jobs. Many of them consider it a the price they must pay to gain work experience in order to get their foot in the door of a company. In other cases, undeclared work such as baby sitting or working in tourism is simply a way for many young people to earn money to finance university studies.

Young and middle-aged women often accept to work and be paid cash under the table so that they may  contribute to the family income, especially in the case of divorced women with children. Many women wish to re-enter the work force after having taken maternity leave.

Illegal immigrants have no choice but to work as undeclared work. However there are cases where even though they are legal, some immigrants, such as those who work in construction for example, still agree to accept to work as undeclared work.

Two other categories documented by the research show that working adult males often work undocumented hours in the company where they currently work or they accept a second job elsewhere (moonlighting). In most cases, the working males are the ones who propose this solution of undeclared work to the company.

Sometimes less well-off retirees will look for ways to earn extra money without having to suffer a cut in their pension. In other cases these retirees are sought out by the companies where they had worked before retirement because of their skills. Retirees tend to prefer working as undeclared work since they already have a pension.

 

3.

Easy solutions have proven to be ineffective when faced with such a complex issue such as undeclared work.

Strategies based solely on repression have had absolutely no effect  – the deep economic motives behind by undeclared work are much stronger than the controls conducted by the State.

Deregulation strategies, supported by those who see undeclared work as a consequence of excessive taxation and state regulations, are also the wrong approach.

The sectors with the highest-paid salaries and the most specific norms and regulations, such as furniture and engineering companies, are precisely where undeclared work is less present. Nor is it true that smaller businesses chafe under the weight of the norms and regulations since undeclared work is not a consistent phenomenon but rather occurs only in some sectors and not in others.

How can the undeclared work phenomenon be approached? According to the results of the research, there are 5 possibilities:

1.     Create a better organization of labor control agencies. Such agencies are currently very fragmented in Italy.

2.     Promote awareness among young people. Often many young people are not aware of their rights as tomorrow’s workforce.

3.     Support the formation of regular businesses, in particular in cases where undeclared work, such as craft workshops and unregistered shops, are being run independently.

4.     Encourage professional training which can be used to teach young people how to do jobs that presently only retired people are skilled enough to do.

5.     The most important strategy, however, lies in the trend of the local economy towards innovative sectors and advanced technology. The businesses in this sector (as in the engineering and furniture industries and business services) compete on product quality and not on cost of labor. The high added value of their production allows them to pay taxes and social contributions without difficulty.  

 

 

European Interests - newsletter provided by European Social, Organisational and Science Consultancy (ESOSC), Aghabullogue, Ireland. ISSN 1649-1955. Issue 2-2004

 

European Interests - newsletter provided by European Social, Organisational and Science Consultancy (ESOSC), Aghabullogue, Ireland. ISSN 1649-1955. Issue 2-2004