Over 1M Poles in Grey Zone

In the Shadows (c) fractalenlightenment

In the Shadows (c) fractalenlightenment

Recent information from the Central Statistical Office of Poland (GUS) indicates that in 2011 over 1.4 million Poles earned income from unreported employment. It is estimated that in 2014 this number might even be higher due to an increase in unemployment since 2010. High unemployment rates and bureaucratic employment regulations that are disadvantageous to SMEs are a catalyst for the growth of the grey economy. Employers are afraid of complicated laws and regulations and do not want to pay exorbitant mandatory fees. Therefore, it is not surprising that 13% of Polish GDP comes from unreported employment. “The increased development of the grey economy is understandable, because the grey zone usually flourishes at times of economic decline or crisis,” says Professor Stanisław Gomułka, former Deputy Minister of Finance and Chief Economist at the Business Centre Club (BCC), the largest private employer organisation in Poland. Professor Elżbieta Mączyńska of the Warsaw School of Economics (SGH) claims that SMEs shift towards the grey economy when employment law is inflated; the poorer the employment regulations, the greater the grey zone. Industries with the largest unreported employment include commerce, repair and handyman services, construction, and food and hospitality industries. The grey economy divests billions of złoty from the state budget. The loss to the state economy was estimated at PLN 185 billion last year. However, it is difficult to assess the losses precisely, because some of the funds return to the public purse via VAT charged on purchases made with money earned under the table. Unreported employment destroys the market as employers who pay cash-in-hand have lower costs than entrepreneurs who follow labour law and they also drive down the prices of goods and services. Additionally, people who get paid under the table are not entitled to public health or employment insurance.

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