Weak economic growth and rising unemployment in Germany could boost the shadow economy, a study argued on Thursday, with more workers set to receive clandestine employment.
The study from the Institute for Applied Economic Research (IAW) suggested that the volume of services provided by undeclared work could increase by 6.1% to some €511 billion ($525 billion) in 2025.
Adjusted for inflation, the figure represents a 3.8% rise in clandestine employment.
The weakening economy is the prime factor behind the development, with the institute, based at the south-western University of Tübingen, forecasting a 0.4% fall in Germany’s gross domestic product (GDP), unemployment at 2.9 million and 2.2% inflation in 2025.
“This reduces the income from registered employment relationships and creates an incentive for undeclared or illegal activities,” the study said, with higher health and pension insurance contributions playing a part in encouraging clandestine work.
Increases in the minimum wage, and the raising of income tax thresholds, are not enough to offset the effect of low growth, the study argued.
A recent survey from the German Economic Institute, which has ties to employers’ associations, found that the number of people working illegally in Germany could lie between 8 million and 10 million.
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