Czech Shadow Economy Grew Amid Pandemic

There are at least 214,000 people working in the shadow economy in the Czech Republic, but realistic estimates speak of more than half a million. These are most often employees in gastronomy, retail, construction but also in IT, according to a study of the Invisible project.

These people do not declare their income at all or only a minimum wage. The rest of the earned money, which they often receive on hand, is not taxed. “They are not at all aware of the consequences of such actions. Even short-term participation in the shadow economy tends to have lifelong consequences for people, poorer access to health care, and social security systems. minimum old-age pension, “said Aleš Rod from the CETA Center for Economic and Market Analysis. However, many of these impacts only become apparent over time, which is why people do not perceive them as a risk.

A person who is aware of the risks associated with participation in the shadow economy chooses it only when he has no other choice. “He feels a high degree of insecurity, frustration, and guilt or failure. The shadow economy is not a tool for him, but a solution to a hopeless situation. Kateřina Brikciová from Dirivit psychological counseling center.

On the other hand, there are people who work intentionally in the shadow economy. They perceive only short-term benefits in the form of higher income, but they underestimate risks and long-term problems. At the same time, they ignore the fact that they are a black passenger who does not pay taxes but uses public services such as medical care or repaired roads. Brikci added to think about the risks of the shadow economy only when one affects his personal life.

The consequences of working in the shadow economy can manifest themselves suddenly and completely unexpectedly. For example, if such a person falls ill or is injured, he or she is not entitled to sickness benefits. Ordinary employment law protection does not apply to him. A similar situation arises in the case of loss of employment when he is not entitled to unemployment benefits.

“These effects were fully felt during the coronavirus pandemic. Unemployment rose sharply in some areas and people who had not previously granted all their income suddenly found that they could not obtain the same rights and financial compensation as those who granted income,” said Kryštof Kruliš of Consumer Forum.

The fact that one suddenly finds oneself in a shadow economy can be caused by the employer himself. Typical features of the shadow economy include pay on hand at shorter than monthly intervals, irregular working hours, trivialization, and the absence of contracts from the employer or the avoidance of third parties.

The Consumer Forum, CETA, and the non-bank credit provider Provident Financial are collaborating on the Invisible project. The CETA Center has examined available economic and sociological studies. According to the results, 13 vulnerable groups were identified as “invisible”. Ipsos then interviewed people from each group. The result is recommendations for people in more complex situations, companies, and the state.

According to the authors, “invisible” include students from poor families, single women, young families with children, workers in the gray economy, involuntarily unemployed over 50, the disabled, poor households, veterans, farmers, non-profit workers, seniors, minorities, and small entrepreneurs.