GDP suffers: Too Many Cash-in-Hand Workers

Employing workers without formalizing their employment contracts is becoming increasingly more attractive as labor costs rise.

According to the Gazeta Prawna, economists predict the economic boom in Poland may, in addition to lowering labor costs, decrease the amount of workers employed unofficially. The reasons for the illegal employment of workers remain unchanged.
For many tax evasion is the primary reason. Additionally it is difficult for some to find legal employment while others seek second jobs to supplement their incomes. Individuals who are carrying out contract work often refuse to register their businesses for fear of the high obligatory monthly social security payments. Further some employers offer higher wages in return for a lack of an official work contract. This is done to cut costs also.

The Gazeta Prawna, reports 14 percent of Poland’s GDP comes from the cash-in-hand economy. This percentage continues to decrease and is lower than in Bulgaria and Greece. In Sweden the amount stands at 3 percent. In Austria it is 1.5 percent.

The Bureau of Statistics indicated in 2004 some 1.3 mln people were cash-in-hand employees. In 1998 the number was 1.4 mln. Home businesses are the major employers of cash-in-hand workers, employing some 1.02 mln illegal workers.

The Bureau of Statistics specified the highest amount of illegal employment is in home businesses situated in farming regions. The employment is carried out mainly during the summer months.
The sectors for illegal employment also remain unchanged. Poles as well as foreigners who refrain from disclosing their income are usually employed in the construction and home improvement sector, as well as in agriculture and retail. Aged and child care, tutoring and domestic work such as cleaning also form a major portion of the illegal employment sector.

Critics argue the primary reason for cash-in-hand employment is tax evasion.

The national budget suffers an estimated 20 to 30 bln zloty annual loss due to this problem.

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