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Black economy booms in Switzerland

Illegal workers continue to find jobs despite harsh penalties for employers Keystone

As Switzerland marks Labour Day, arguments about how to combat illegal working rumble on.

A government plan to fight illegal employment has been delayed by political squabbling since it was proposed in January 2002.

Illegal workers in Switzerland account for a smaller share of the economy than in many other industrialised countries, but the evidence suggests that the problem is increasing faster than in most other countries.

“The number of illegal workers is on the rise in Switzerland and it is among the top ten on the OECD list for countries with the fastest increase of illegal employment,” says the Swiss Employers’ Association.

A study published in 2002 estimated that up to one million people – foreigners and Swiss – work illegally in Switzerland.

According to the government, they earn around SFr40 billion ($30.4 billion) a year, accounting for up to ten per cent of Gross Domestic Product (GDP). That compares with 15 per cent in France and Germany.

One of the main concerns is the loss of tax revenue and social welfare contributions on income earned by illegal workers.

“If five to ten per cent of a country’s GDP is achieved by moonlighting it has a detrimental effect on the tax and social insurance systems,” the Employers’ Association adds.

Shadow economy

In January 2002, the then economics minister, Pascal Couchepin, unveiled a raft of measures and sanctions to clamp down on the shadow economy.

They include fines of up to SFr1 million for firms caught employing illegal workers, a simplified process for paying social insurance, concerted action by the cantons and banning guilty employers from applying for public contracts.

But despite two years of parliamentary debate the government’s proposals remain on hold.

One of the main sticking points is the proposal to make it easier for casual workers such as gardeners and cleaners to register with a social insurance scheme.

The rightwing Swiss People’s Party is demanding that this process be made available to everyone who earns less than SFr18,000 per year.

But the centre-left Social Democrats are resisting the proposal over fears that it could result in the creation of more part-time or badly paid jobs.

Sticking point

Another bone of contention is the government’s plan to create a network through which the federal and cantonal administrations can exchange information about illegal workers.

The Social Democrats say this is unacceptable because it would have negative consequences for illegal immigrants.

They say an employee without a work permit should be able to pay social insurance without it being reported to the authorities.

One point all the parties agree on is tougher measures against employers who give jobs to illegal workers.

The Swiss Farmers’ Association, however, says tougher penalties would be superfluous.

“Those farmers who employ moonlighters are already facing hefty fines or imprisonment,” said spokesman Fritz Schober.

swissinfo, Katrin Holenstein

Illegal working is the fastest growing sector in the Swiss economy.
The total number of people working illegally is currently between 700,000 and one million, with 500,000 of them in full-time jobs.
They earned SFr39 billion in 2002.

Whereas the black economy accounts for up to 15% of Gross Domestic Product (GDP) in Germany and France, the government says it makes up to ten per cent in Switzerland.

In Thailand, Nigeria and Egypt, illegal work accounts for more than 70% of GDP.

Experts say employers turn to cheaper, illegal workers because of Switzerland’s high labour costs.

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