The shadow economy is known by different names, some more colourful than others. Hidden, grey, black, submerged or informal economies include activities that are deliberately hidden from official authorities for various reasons.
Some of these reasons are monetarily motivated by the desire to avoid paying taxes or social security. Some are regulatory reasons aimed at avoiding government bureaucracy. Other reasons are institutional and motivated by corruption aided by a weak rule of law.
Studies by the Johannes Kepler University of Linz, in Austria, rank Malta as having one of the highest levels of informal economic activities. At 25 per cent of GDP, Malta has one of the biggest shadow economies in the EU, exceeding even those of Greece and Italy.
According to a legal notice, Identity Malta Agency has set up a Reporting Unit to ensure that the relevant laws that fall within the remit of the agency, in particular, the legal migration process, are respected by employers. A spokesman for the Prime Minister’s Office confirmed that the necessary resources would be provided to the agency to ensure that the oversight on the implementation of employment laws is effective.
It is premature to equate this initiative with a new-found official determination to tackle the black economy that leaves thousands of vulnerable people exposed to exploitation by unscrupulous employers. Political expediency may be a more immediate motivation for the tightening of employment regulations.
Both the UĦM Voice of the Workers and the Nationalist Party expressed concern about the increasing reliance on cheap labour for economic growth that is not necessarily reaping reasonable benefits to all workers. The union’s CEO, Josef Vella, warns that the issue of precarious employment in the country is at an all-time high, claiming that some foreign workers are being paid as little as €1 an hour.
The condescending remarks about foreign low-skilled workers made by the Prime Minister some time ago were withdrawn as their insensitivity upset many people. However, many still look at low-skilled foreign workers as a cheap resource that should be exploited for financial gain. This is not what social cohesion should be about in a country that is enjoying robust economic growth but where the rich are becoming richer and the poor becoming poorer.
Existing employment legislation already provides the tools for government employment agencies to take effective action against employers who do not abide by the law. The setting up of a Reporting Unit is a remarkable admission that, like many other areas of law enforcement, there is little political will to ensure that employment laws are respected.
The consequences of employing people illegally can have devastating effects on the workers concerned. In the eyes of the law, a person who is not recognised as being officially employed may not have the legal protection that regularly employed people have. Unofficially-employed individuals cannot have a trade union to represent them, cannot benefit from wage legislation and, more importantly, may not have a right to insist on health and safety standards to protect them.
The economic consequence of informal employment is also harmful. Our health, education, pensions and social support systems depend on the contributions made by employers and employees to the national insurance fund.
Enforcing employment laws on all employers is long overdue.