Recession. The 2 million people employed in the gray economy in Spain are destitute due to the pandemic

The daily El Confidencial reported today that between 2 and 4 million people in Spain work wholly or partly in the shadow economy, and at least half of them have found themselves destitute due to the coronavirus pandemic.

The newspaper stressed that there is a lack of official data on employment on the margins of the official economy, and the figures given by most experts are estimates. However, the very existence of the shadow economy as a social phenomenon has long been obvious.

In 2018, the International Monetary Fund (IMF) recognized Spain as the country with the highest share of the shadow economy in the economy among developed countries; it was three times higher than in Austria or Switzerland.

According to the research of a European authority in this field, an economist from the Johannes Kepler University in Linz, prof. Friedrich Schneider, the gray economy in Spain in February 2020 accounted for over 15 percent. The country’s GDP – according to an interview for the daily “El Mundo”.

In 2015, it was 24.5 percent, and according to other studies cited by El Confidencial, in 2016 – 18 percent, i.e. the same as in 1989.

In 2015, there were over 4 million people employed in the shadow economy, i.e. 18 percent. active population, reported the trade union of the temporary employment agency Asempleo.

People employed in this way usually work in services or agriculture, without social security and usually temporarily. Among them there are also skilled workers employed as subcontractors who often live on the margins of the official economy. In addition, the phenomenon of part-time employment is more and more common, where an employee works longer than indicated in the employment contract, and overtime is paid without tax.

Almost 8 percent GDP is directly related to fraud to avoid paying taxes, which translates to at least 1 million full-time employees.

According to estimates, only 60 percent. illegal employment would generate fiscal revenues if the activity was regulated – representing 6.7 percent. GDP because the remainder does not exceed the tax-free minimum.

According to Schneider, the size of the shadow economy will increase dramatically during the pandemic, to over 17 percent. in the fall, and will be the first branch of the economy to recover from the crisis.

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