Minimum wage: Is the undeclared work in East Germany now leaps down?

Minimum wage: Is the undeclared work in East Germany now leaps down?

The current discussion about the minimum wage in Germany raises many questions, especially with regard to undeclared work. A higher minimum wage could theoretically reduce undeclared work by becoming regular employment more attractive. However, report mdr that an increase in the minimum wage from 12.82 euros is unattractive, especially in East Germany. The high employment costs could lead to companies avoiding attitudes and the shadow economy increases.

A study by the Tübingen Institute for Applied Economic Research (IAW) and the University of Linz shows that the minimum wage that has already been in effect has already had an impact on the shadow economy. This is expected to grow by 1.5 billion euros, while the share of the shadow economy in the gross domestic product (GDP) remains stable at 12.2 percent, as Deutschlandfunk reports.

growth of the shadow economy

The shadow economy includes a wide range of illegal activities that do not go into the calculation of the social product. This includes undeclared work, illegal employment, stealing and fraud. Bernhard Boockmann, director of the IAW, emphasizes that despite a robust economy and stable labor market situation, the shadow economy does not decrease due to the minimum wage. Black labor is particularly often practiced in areas such as gastronomy, hotels, construction industry and personal services.

consequences of undeclared work

undeclared work, defined as professional activities or services without an invoice and tax levies, is often rated as a cavalier offense. But the economic damage is considerable. In 2022, the financial damage of the investigations by financial control undeclared work was a good 686 million euros, although the number of unreported cases can lead to even greater damage. This type of work is often associated with exploitation and human trafficking, which affects not only construction and service areas, but also other social spheres.

The complex structures of the shadow economy make the polite intervention work of the authorities difficult. Organized groups, including Mafia-like and clan structures, are also affected, whose delicate activities also challenge police work. In addition, money laundering in Germany is relatively unhindered, which continues to complicate the situation and focus on necessary reforms.