Helsinki (27.10.2009 - Juhani Artto) In Finland the grey economy is a smaller problem than in most countries in the world. However, since the mid 1990s it has grown to be a real pest. It creates problems for companies who operate honestly and in compliance with the law and additionally deprives the state of billions of euros in tax money and social security payments each year.
According to experts, the problem tends to get even worse in times of economic recession, such as the present one.
It is obvious that -in order to tackle the grey economy effectively- legislation needs to be updated and the authorities, responsible for ensuring laws are upheld, must be allocated more resources for this task. In this respect things do not look promising, in the near future at any rate, as the government of Prime Minister Matti Vanhanen has not been very responsive to such demands.
The passive attitude of the government strikes one as rather strange considering the fact that the employees of the government's anti-grey-economy units have been economically very productive. In 2008, the net result per employee was EUR172,000. By any accounting methods this means these employees are delivering three times more to the exchequer than what it costs the state in paying their salaries. This year the net result is approaching the same level.
Wages below the minimum in the forest service sector
The Wood and Allied Workers' Union is fed up with the penetration of shady entrepreneurs into the forest service sector. On Friday, the union announced that it will publicise the names of all companies involved in proved illegal activities. According to the union, there are an increasing number of cases where forest service companies hire foreign labourers paying them below the minimum as set down in the collective agreement.
The union blames Finnish forest industry companies and forest owners' associations for buying the services of these companies and for consciously favouring illegalities. Even the major forest organisation in the public sector, Metsähallitus, does the same, the Wood and Allied Workers' Union says.
Almost a tenth of catering and hotel business belongs to grey economy
In April 2009, Virke, the major anti-grey-economy project of the government estimated that as much as 8.5 per cent of the catering and hotel sector may fall into the grey economy category. Huge sums circulate outside companies' bookkeeping or are “off the books” so to speak. This allows companies to pay not only hidden wages but also hidden dividends to owners. Thousands of companies neglect to pay taxes and social security payments.
Previous experiences prove that tightening up inspections and control makes grey economy actors more cautious, and vice versa. This is a clear indication of the need for more resources being made available to the authorities who are responsible for control.
Still worse situation in the construction industry
The experts estimate that 9 per cent of the employees in the construction industry and 5 per cent of its production falls into the grey economy category. It is not only the hidden employees that make up these figures but also the hidden incomes of entrepreneurs. A large proportion of the economic crime cases that come to the attention of the police concern the construction industry. Foreign companies and labour are often involved in these cases.
The Construction Trade Union -together with authorities- has actively struggled to combat shady entrepreneurs and illegal employment. The union has a presence at almost all large construction sites.
Recently, the Construction Trade Union opened an office in Estonia's capital Tallinn, from where it distributes information on working life regulations in Finland, and also information about the union itself.
"The Construction Trade Union does not entice or encourage Estonians to seek work in Finland but neither does it try to prevent mobility that respects legislation and international agreements", Kyösti Suokas, vice president of the union explained recently.
Most of the foreign construction workers in Finland originate from Estonia. In 2007, about 30,000 Estonians worked at construction sites in Finland. Now the figure is lower as the recession has significantly reduced construction projects.