Economic Crisis Increases Shadow Economy

As a consequence of the global economical crisis experts like Friedrich Schneider expect an increase of the shadow economy in many European countries. Higher taxes and social security contributions, increasing unemployment rates as well as the precarious order-situation are the main factors influencing the shadow economy.

Thus the shadow economy in an OECD average including 21 countries from which are 16 European countries will grow from about 13,8% in 2009 to 14% in 2010. However, during the 1990s the shadow economy was higher with around 17% of the GDP in OECD countries. Whilst countries like the USA, Japan or New Zeeland register a shadow economy of less than 10% of their GDPs, the figure for Greece is anticipated to be more than 25%. Even if the total volume of the black market will grow continuously, the long-term development of the shadow economy shows that this value can vary depending on the development stage. Whilst the shadow economy currently is around 9% of the GDP in Austria, the black market was evlauated at approx. 11% in the years following the crisis of 2001. In Germany the share of the black market is currently considered to be at around 15%, in 2003 it was over 17%.

Those sectors whith the highest percentage of illicit work in most countries are the construction industry, the so- called “neighbourly help”, the food service and hotel industry as well as the entertainment sector. In Austria for example around 40% of the total black market is estimated to be generated in the construction sector. Another 20% is obtained by illicit work and services provided directly in private households (remedial maintainance, hair dressing, nursing, babysitting, etc.). The entertainment sector including prostitution is estimated at about 10% of the total black market.