Explain how Germany OR Denmark has sought to have both some elements of security and flexibility in their labour markets. How far have these policies implemented the EUs principles of flexicurity? Consider if these approaches been successful for business and for the workforce with special focus upon young workers? Explain how wage stagnation and the mini-jobs have affected this picture in your chosen country.
Undeclared work is that work which is not illegal but is not confirmed to the authorities for various purposes like social security and many labour law practices and tax. It is described as activities that are paid and legal in nature but are undeclared to the public authorities. It of course excludes those activities that are defined as criminal in national crime. Undeclared activities create considerable costs on several levels like less revenue to tax authorities as less value added tax and income taxes are collected. The notion of undeclared activity has been introduced in the European employment strategy. Various efforts have been invested across 27 European Member States for tackling undeclared work (Feld and Larsen 2012).
It is difficult to come across a general meaning of undeclared work from the European perspective. Its character itself makes it difficult to deal with. In majority of studies carried out for European Commission it has been observed that concept of irregular form of employment and underground economy has been described by the regulatory system. The unlawful work does not completely subsist under the non regulatory framework. Thus what is legal in some countries is illegal in others and therefore it becomes more difficult to get a common definition for it. Therefore undeclared work may be described as that work that is paid as well as legal and excludes those activities that are defined as criminal under the legal frame work (Müller et al 2004).
The informal economy increases the scope to escape taxes and raise income. From historical point of view there are three main factors that contribute to the subsistence of undeclared work: firstly, high disparate claim for personalised services; secondly, reorganisation of firms and industry to long lines of vertical chains of subcontracted in order to increase the flexibility of production, innovation and adaption to various situation. Thirdly, new working opportunities and service areas opened up by the spread of technologies like personal computers (Feld and Larsen 2012).
The different institutional aspects of economy that varies the scope and extent of undeclared work are: Social contribution and tax- the level social contribution and tax has an important effect on the undeclared work, in countries drive resolve from the labour supply side where the income tax level is high and in countries where level of social contribution is high, drive will come from the regulatory and administrative burden and demand side of labour- where the weight of administrative processes and overheads are high the declared work is discouraged when both employer and employee finds it appropriate not to declare it; inappropriate labour market legislation: people at time undeclared work because of less recognition in the current legislation for new type of works; structure of the industry: where small firms mostly compose the local economy undeclared labour is mostly observed there; cultural factors: cultural understanding has an significant role to play in informal economy, at local level it is observed as mutual exchange of services that does not require any declaration (Williams 2010).
Undeclared work is multi sided. The horizon of undeclared work ranges from constructing buildings to babysitting. Many methods have been developed in the past few decades to tackle undeclared work. The methods can be broadly divided in two categories: direct and indirect. Estimation of the size of undeclared work is the main focus of indirect methods. Macroeconomic aggregates such as cash transaction, national accounts are compared in indirect methods. Whereas survey based methods are direct methods and they rely on the information provided by the mass (Müller et al 2004). In the recent few years the survey approaches have been applied in a number of countries. The advantage of this method is that along with the extent the motives of the participants and the structure of undeclared work can be measured (Feld and Larsen 2012).
In the year 2007 and 2013 a Euro barometer Survey was conducted showing supply demand side. The data for this survey has been collected from various Member States. The divergences point out the requirement of cautious assessment. As there might be wide agreement between experts that they overestimate undeclared work caution needs to taken accordingly (Williams 2010).
42% of Europeans buy undeclared goods from someone they know, 9% from relatives and from neighbours, 24% buy from households or private persons, similar percentage of Europeans buy undeclared goods or services from firms or businesses, around 7% purchase from healthcare providers and 4% from various other sources. Europeans mostly favour buying undeclared goods and services because of the low price. Also the quality of the goods are far better compared to those available in the regular market and also in the case of undeclared goods the service is faster in comparison of those available in regular market (Williams 2010).
Undeclared work has its effect on all Member States. It affects everyone from business to employee to the government. Undeclared work for workers mean limited access to healthcare, lower pension, bad working conditions. Business that do not declare their workers get a unfair advantage over others and lead to competition that is completely unfair. For government it means lower collection of tax and revenue from social security. Since undeclared work affects the Member States therefore the responsibility for combating it lies with the Member States only(Williams and Martinez 2014).
There is one single solution to the issue of undeclared labour. A strategy involving various elements like a coordinated approach of the administrative bodies, prevention and sanctions along with the participation of judiciary authorities and social partners. The last resorts are the sanctions therefore it is important to design them properly and apply in an appropriate manner. If sanctions are too strict then it may lead to the insolvency of the employer. Therefore sanctions needs to be properly balanced. Other than sanctions many preventive measures have also been taken like removal of disincentives in start-ups and small ventures to encourage declaration of work (Williams Baric and Renooy 2013).
Undeclared work is responsible for obstructing various factors like economic growth, social policies. It also creates hazards for workers, detoriate work standards. Undeclared work is a major cause for financial crisis. That is why a lot of measures including both deterrent and preventive measures have been taken to control this issue (Williams and Martinez-Perez 2014).
Effective and Dynamic Labour Market Policies in Europe
Measures taken by European countries to fight unemployment with the help of active labour market policies are job search aid, training of labourers, wage subsidy given to public sector employees and create direct jobs in the public sector. The European Employment Strategies which are followed by EU member states believe ALMPs as a central part of the economic policies of the country to eradicate unemployment (Ehlert et al 2012). Though ALMPs have been applied in different countries for many years there is a increasing need for developing the effectiveness of these in a scientific and justified way. The effectiveness of these policies has become an significant feature in the Recommendations for Member State’s Employment Policies Economic Policy Guidelines, and the Employment Guidelines. Evaluation of the effectiveness of the ALMP’s has been done by different associate states and other European countries by independent researchers, government body appointed researchers as part of European Social Fund programs. Usually these evaluations have been temporary effect of employment of the population. The positive and negative connections between the participants of ALMP and employed or unemployment workers have not been taken into account. In spite of following such a narrow concept the results from the evaluations carried on remain indecisive. Whether Labour Market Policies lessen unemployment or augment the amount of employment is a much discussed topic. The type of program which will be useful in this context is also a topic of discussion. The highly significant ALMP category across European countries are- Service and sanctions, training programs, private sector incentive schemes and direct employment programs (Daguerre 2007).
Several labour market programs target young unemployed workers. In contrast several active labour market programs are for the disable. The existences of the evaluations are very few in number. Huge varieties of ALMP programs are existent in EU associate states and other European countries. These programs are classified into six categories. The first four categories illustrate the type of program and the last two categories illustrate the target group. Both training and youth program are a part of the youth training program (Jovan and Ivan 2013).
Labour market training deal with and work experience, classroom training, and on-the-job training. They also offer general educational courses like basic computer courses, language courses and other basic courses or specific professional courses like technical and manufacturing skill courses or advanced computer courses. The main objective of these courses is enhancing the output and employability of the contestant and increase skills of the workers which will result in enhancement of human capital. These training programs consist of the classical measures of dynamic Labour Market Policies (Roder 2003).
Private Sector inducement Program create incentive programs to change the behaviour of the workers towards private sector employment are the aim of this program. Wage subsidies are an important measure of these programs. The wage subsidies encourage the employers to hire new workers and retain the present workers who they had decided to retrench. The subsidies may either be financial aid given to the workers for a fixed period of time or direct wage subsidies to employers. These policies mostly target individuals who are in a disadvantageous position and employees who are unemployed for a long time. An additional type of subsidized private sector employment is self-employment grants. Persons who are unemployed may start their own company and receive business related advice for a set period of time.
Straight Employment Program in Public Sector creates and provisions for public works that produce public goods or services is the aim of this program. This programs target the individuals who are in the most disadvantageous positions and to keep them updated with the labour market and decrease the loss of human resources caused during period of unemployment. The jobs which are created are not ordinary jobs present in the labour market (GRIFFIN 2001).
Service and Sanctions programs are aimed at enhancing the efficiency of the job search. The standard “Job search assistance” is slightly redefined in this program by including sanctions. The effectiveness of job corresponding process is increased by the following- Sanctions in the case of noncompliance with job search requirements job search courses, job clubs, vocational guidance, counselling and monitoring. The disadvantaged employees and unemployed employees are targeted by the public services. Whereas, the private services focus more on white collared workers and the workers who are more privileged. These programs are the least expensive programs compared to other programs. In a number of countries if the monitored jobs search behaviour of an unemployed is not enough or if he does not accept a job offer then benefit sanctions are imposed (GRIFFIN 2001).
Disadvantaged and unemployed youth are the target groups of ALMP youth programs. The programs arranged for them are job search assistance, training programs and wage subsidies (GRIFFIN 2001).
The programs for the disabled consist of sheltered work programs or wage subsidies for the employees who have physical, mental or social disabilities and vocational rehabilitation.
Nationalized programs at many times merge two or more of these programs which involve both training and job creation so a firm categorization is not always possible. Usually direct job creation, training programs and wage subsidies involve aspects that apply pressure and inflict sanctions on unwelcome behaviour are called “sticks” (Tepe and Vanhuysse 2012).
In doing quantitative analysis few hypotheses are recommended by the compilation of evidences. Firstly, while raising employment outcomes sanctions and job search services appear to be comparatively effective. Secondly, training programs appear to have comparatively little effect in the longer run. Thirdly, the programs based on direct employment in the public sector normally have no major effect or even a negative impact on participant’s post-program employment outcomes. This is done through the method of Meta analysis (Heyes 2013).
Daguerre, A., 2007. Active labour market policies and welfare reform. New York: Palgrave Macmillan.
Ehlert, C.R., Kluve, J. and Schaffner, S., 2012. Temporary work as an active labor market policy: Evaluating an innovative program for disadvantaged youths.
Feld, L.P. and Larsen, C., 2012. Undeclared work, deterrence and social norms: the case of Germany. Springer Science & Business Media.
GRIFFIN, C., 2001. Imagining New Narratives of Youth: Youth Research, the `New Europe' and Global Youth Culture. Childhood, 8(2), pp.147-166.
Heyes, J., 2013. Flexicurity in crisis: European labour market policies in a time of austerity. European Journal of Industrial Relations, p.95.
Jovan, Z. and Ivan, N., 2013. Determining the effectiveness of ALMP on youth in Serbia.Industrija, 41(3), pp.55-66.
Müller, K., Spindler, G., Maenhaut, W., Hitzenberger, R., Wieprecht, W., Baltensperger, U. and ten Brink, H., 2004. INTERCOMP2000, a campaign to assess the comparability of methods in use in Europe for measuring aerosol composition. Atmospheric Environment, 38(38), pp.6459-6466.
Roder, K., 2003. Social democracy and labour market policy. London: Routledge.
Tepe, M. and Vanhuysse, P., 2012. Parties, Unions and Activation Strategies: The Context-Dependent Politics of Active Labour Market Policy Spending. Political Studies, 61(3), pp.480-504.
Vlandas, T., 2013. Mixing apples with oranges? Partisanship and active labour market policies in Europe. Journal of European Social Policy, 23(1), pp.3-20.
Williams, C., 2010. Tackling undeclared work in southeast Europe: lessons from a 2007 Eurobarometer survey. Southeast European and Black Sea Studies, 10(2), pp.123-145.
Williams, C.C. and Martinez-Perez, A., 2014. Why do consumers purchase goods and services in the informal economy?. Journal of Business Research, 67(5), pp.802-806.
Williams, C.C., Baric, M. and Renooy, P., 2013. Tackling undeclared work in 27 European Union Member States and Norway.