Enlarged Europe under threat from the informal economy

Interview by Anne Renaut, ICFTU Online..., 152/031103, 3 November 2003

Brussels, 03 November 2003 (ICFTU Online): The theme of the informal economy and migration appeared high on the agenda at the annual conference of Central and Eastern European and CIS trade unions in Poland last week. In an interview with the ICFTU, CEETUC* President Zdenek Malek, also Vice President of the Czech national trade union centre CMKOS, explains why the informal or ‘shadow’ economy poses such a threat in an enlarged Europe and how trade unions can deal with this problem.

Why is informal economy a threat for an enlarged Europe?

It is important that we start by clearly defining the informal economy. In our experience, it means a lack of protection. The consequences of this are poor working conditions as well as noticeable losses for the State budget. It is often intertwined with certain illicit transfers, payments, activities. It destabilizes the social-economic fabric of the society. So we feel that this theme must be addressed from this perspective. Furthermore we believe that the only difference when it comes to the shadow economy in developed, transition, or developing countries is the volume. Certain economies are almost solely based on the shadow economy, which means that the State has absolved itself of the responsibilities which come hand in hand with participating in free general elections. In certain countries, the responsibility of the state has been taken over by other bodies and the people working in this kind of economy are just surviving. This is a dangerous phenomenon that can have consequences for neighbouring countries. We are not talking about the success of those countries entering the EU but rather those nations which would one day like to become a member of the EU. What we are looking for is a unified Europe based on sustainable development in all the countries across the Continent, irrespective of whether they are members of the European Union or not.

How can unions tackle this enormous task?

Unions must be aware of possible consequences in ignoring of this phenomenon. In a sense, it is easier for governments to think that the shadow economy can replace the policy of employment or wage policy, for which they are responsible. One way for trade unions to tackle this question is to mount pressure on governments to introduce legislative measures to convert the informal economy into a formal economy. Another method is for unions to enter into workplaces employing unprotected workers and try to explain the situation to them, highlighting the benefits of organising themselves since only an organized force can make a lasting difference to living standards, incomes and working conditions. Equally they could consider closer relations with existing trade unions which already represent employees.

The problem is that those working in the informal economy are aware that they work on the fringes of the economy. There are various reasons why they decide to take precarious work, knowing that they are outside of labour codes. The reality is that they may be afraid of organizing themselves, in fear of losing additional income, perhaps even being their only income. So first of all, they must actually want to re-enter formal employment once more. Existing formal jobs have to be maintained, efforts must also be made to create new jobs, and finally, attempts must be made to at least reduce the occurrence of this shadow economy. This requires joint efforts of all the parties concerned.

How is migration connected to informal economy?

Migration is closely connected because many migrants would not migrate if they were not forced to move because of their living and working conditions in their own countries. Migration does not simply occur for want of a better life. You can easily find these people working in the informal economy.

But migration brings also some positive aspects, for example when Germany invites certain professionals like Czech computer engineers because of a lack of qualified labour in certain sectors or for demographic reasons. As soon as sustainable development can be achieved in these countries only those who actually want to emigrate will go abroad, because somebody can give them better working conditions in their jobs and perhaps they will return to their home countries because they were not initially forced to leave. The problem of migration is being tackled more and more through trade union structures, for example at the Czech-Austrian border. There is also an information point created in Finland by Finnish and Estonian unions, for Estonians entering Finland.