Lessons from the Eurobarometer 2007SUBLEC International workshopBrussels 25 February 2008

Presented by:

Arnold Riedmann,TNS Infratest Sozialforschung, Munich

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Contents

1. Introduction:

(a) Background

(b) Concept

(c) Methodology

2. Participation in undeclared work (UDW): Some EB figures on the quantitative dimensions

3. Selected figures on structures and motives

4. Lessons learnt and recommendations for future surveys

Introduction: Background, methodologyand concepts

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BackgroundMajor challenges of a cross-national survey on ‚unlawful behaviour‘:

Country differences regarding the rules of taxation

Differences in the acceptance of UDW among population

Differences in the public interest/debates on the topic

2006: Feasibility study on a direct survey on UDW

Review of previous surveys

Proposal for a survey design

Recommendation to test 2 different questionnaire approaches in pilot survey:

(A) The „explicit approach“:

Asks directly for undeclared activities which would have to be declared but were not

Respondent is assumed to be fully aware of tax legislation

Uses the commonly known national term for „undeclared work“

(B) The „implicit approach“:

Asks first for various types of working activities, then asks whether income from these was declared or not

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Survey concept applied in the Eurobarometer

Only ‚explicit approach‘ tested in the Eurobarometer

Introduction by some general questions on the supposed spread and structures of UDW

Explicit definition of UDW given to the respondents: „Activities not or not fully reported to the tax or social security authorities and where the person who acquired the good or service was aware of this.“

Concept includes both the demand and the supply side

UDW for money and UDW done for payment in kind (exchange of services, payment with goods)

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Methodological characteristics of the EB

Face-to-face interviews (mostly CAPI, partly paper & pencil)

Random walk

Net sample size: ~ 1.000 interviews in most of the countries

UDW module as part of an omnibus survey with various other topics

Respondent‘s decision on participation in the survey not based on attitude towards UDW

General response rate does not allow conclusions on the acceptance of the survey!

Some hints on the acceptance can be derived from rates of item-non- response in the core questions on the participation in UDW

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A BC D

Types of undeclared work that can be covered by a survey among individuals

individual(supply/doer)

firm(demand/purchaser)

individual (demand/purchaser)

UDW

firm(supply/doer)

Covered from thesupply perspective (envelope wages)

Covered from two perspectives:

supply & demand

Covered from the demand perspective

Cannot be covered by a directsurvey among individuals

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Coverage of UDW of immigrants

Supply perspective of UDW done by individuals ("Did you do undeclared work?")

Demand perspective of UDW doneby individuals for private HH("Did you buy undeclared work?")

immigrants

problems ofaccessibilityand language

immigrants

Answers from demand perspectiveindependent of accessibility and language of supplier.

Participation in undeclared work: Some EB figures on the quantitativedimensions

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Demand of UDW by country

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0%

5%

10%

15%

20%

25%

30%

CY DE ES PT IE PL UK FR FI RO IT HU LT LU BG EE CZ SK MT EL SI AT BE SE LV NL DK

EU-27: 11%

Base: total population aged 15+

"Have you in the last twelve months acquired any goods/services of which you had a good reason to assume that they embodied undeclared work?"

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Supply side I - Supply by country

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0%

5%

10%

15%

20%

CY UK MT DE ES PT IT IE FI RO EL PL LU BG SI FR SK BE HU LT CZ AT SE EE NL LV DK

EU-27: 5%

Base: total population aged 15+

"Did you yourself carry out any undeclared activities in the last 12 months for which you were paid in money or in kind? Herewith we mean again activities which were not or not fully reported to the tax or social security authorities and where the person who acquired the good or services was aware of this?"

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Supply side II - Envelope wages by country

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0%

5%

10%

15%

20%

25%

DE FR LU MT UK DK IE NL CZ EL FI SE CY AT PT ES SI BE IT SK EE HU LT PL BG LV RO

EU-27: 5%

Base: DEPENDENT EMPLOYEES ONLY!

"Sometimes employers prefer to pay all our part of the regular salary or the remuneration for extra work or overtime hours cash-in-hand and without declaring it to tax or social security authorities. Did your employer pay all or part of your income in the last 12 months in this way?"

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Supply III – Total supply EU-27

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5%

2%

6%

Supply Envelope wages Total

Base: total population aged 15+

Envelope wages as specific part of supply side to be added to the „normal“ measured supply for a full picture of theundeclared work measured with the survey

5% envelope wages among dependent employees = 2% envelope wages calculated on base of total population (15+)

~1% overlap (people reporting both the „normal supply“ of UDW and the reception of envelope wages

+ =

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Supply side IV - Total supply by country

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0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

MT CY DE UK EL IE PT ES FI IT LU SI BE FR PL SK CZ AT HU LT BG SE EE NL RO DK LV

EU-27: 6%

Base: total population aged 15+

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Amount of supplied undeclared workAverage annual hours per involved person (for most important undeclared activity only!)(calculated as no. of weeks having worked undeclared x average no. of hours per week)

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~ 200 hrs.

~ 350 hrs.

~ 330 hrs.

~ 110 hrs.

~ 60 hrs.

0 50 100 150 200 250 300 350 400 450

Base: total population aged 15+

Southern Europeancountries

Eastern/Central European NMS

EU-27

Continental countriesincl. UK and IE

Nordic countries

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Comparison of EB indicators on participation in UDWContinental countries (as % of population)

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0%

10%

20%

30%

40%

50%

60%

70%

DE UK IE LU FR BE AT NL

Measured supply incl. envelopeEstimated supply of UDWRespondent personally knows suppliersMeasured Demand of UDW

Base: total population aged 15+

Structure and motives – Selected figures

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Structure of undeclared work: By sector

Envelope wages Other supply of udw

19%

19%

4%

6%

13%

13%

4%

5%

2%

10%Others

Hotel, restaurants

Repair

Pers. Services

Transport

Household Services

Construction 16%

5%

19%

3%

9%

3%

7%

8%

4%

15%

Industry

Retail

Agriculture

Difference to 100%: DK/NA

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Destinators (for whom?)Base: Suppliers of „other“ undeclared work (except envelope wages)

5%

20%

20%

55%

0% 10% 20% 30% 40% 50% 60%

Personal environment:Friends, colleagues,

relatives, neighbours

Firms or businesses

Other private persons

Others

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Reasons for doing undeclared work (Supply side)

Base: Suppliers of other undeclared work (except envelope wages)

47

23

16

16

13

12

8

5

5

0% 10% 20% 30% 40% 50%

Both parties benefited from it

It is just a seasonal work and so it is not worth to declare it

You could not find a regular job

Working undeclared is common practice in your region/sector of activity so there is no real alternative

Taxes and/or social security contributions are too high

The person(s) who acquired it insisted on the non-declaration

Bureaucracy/red tape to carry out a regular economic activity is too complicated

You were able to ask for a higher fee for your work

The state does not do anything for you, so why should you pay taxes

Multiple responses

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Comparison of perceived detection risk and reported supply of UDW

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0%

10%

20%

30%

40%

50%

60%

SE DK BG NL CZ SI MT ES SK LV RO FR FI LU CY BE PL DE IT EL HU AT IE UK EE LT PT

Perception of detection risk as fairly/very high

Measured total supply incl. envelope

Base: total population aged 15+

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Alternatives to buying UDW

53

13

12

9

13

0% 10% 20% 30% 40% 50% 60%

I would have renounced frompurchasing this good or service

I would have bought itfrom the regular market

The job would have been done by myself oranother member of my household

I would have postponed the acquisitionof this service or good

Others, DK, NA

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1 2 3 4 5 6 7 8 9 10

Acceptance of different forms of unlawful behaviour in society(scale from 1 = absolutely unacceptable to 10 = absolutely acceptable)

SozialforschungBase: total population aged 15+

Countries with lowest levels of acceptance of UDW: CY, MT, FI, EL Countries with highest levels of acceptance of UDW: LT, AT, SK, BE, BG, PL, HU

Using public transport without valid ticket 2,8

Reception of welfare without entitlement 1,9

UDW by private person for firm (envel.) 2,3

UDW by firm for firm 2,1

UDW by firm for private HH 2,4

UDW by private person for private HH 3,5

Lessons learnt from the EB and recommendations for a national Belgian survey on undeclared work

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Achievements of the EB pilot survey

Worked well in some countries, as far as can be judged on base of existing other information sources; problem: there is no benchmark for measuring the validity of the results

Envelope wage question module provided plausible results as far as country differences are concerned and gave valuable structural insight into the phenomenon

Showed broad variety of forms of undeclared work with different characteristics

Information on sectors and groups of persons most affected by UDW

Insight into people‘s motives for doing UDW (e.g.: bureaucratic hindrances are not the main motive for most groups)

Policy-relevant information on alternatives people would choose if UDW was not available ( amount of UDW potentially transferable to regular employment)

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Observed weaknesses of the EB survey concept on UDW

Measured levels of participation in UDW for some countries unrealistically low

Generally: direct survey shows only lower level of participation in UDW

In some countries only specific parts of undeclared work satisfactorily captured with the survey (e.g.: hardly any construction work in Southern Europe)

Possible explanations:

UDW done for payment in kind obviously covered to a relatively small degree only

Applied questionnaire concept presupposes that people know taxation rules

Complex definition of UDW in the questionnaire possibly not well understood by parts of respondents (e.g. by lower educated people)

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Assessment by regions

EB concept worked well in the three Nordic countries (DK, FI, SE)

Worked obviously well in some Continental countries, for many others an assessment is difficult in lack of statistical data

Mixed results from Eastern/Central European NMS:

Survey revealed large importance of envelope wages

Other forms of UDW likely to be underestimated

Picture for Southern Europe most unsatisfactory:

Partly large differences between supply and demand (presumably large parts of UDW done by immigrants)

Large differences between perceived and reported level of UDW

Generally unexpectedly low measures

Certain parts obviously hardly covered (e.g. construction work)

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Proposals for improving the instrumentTest both questionnaire approaches against each other (explicit vs. implicit)

Adapt questionnaire(s) to Belgian situation (e.g. specific priming questions)

Simplify questionnaire:

Simplification of the definition of UDW

Separation of UDW paid in money and UDW paid in kind (or: Skip ‚in kind‘)

Concentration on a set of core structural indicators

Skip questions about monetary categories

Positive experiences with envelope wage module custom-tailor of further questions to specific occupational groups (e.g. self-employed)?

Consider methods for covering undeclared work done by immigrants, e.g.:

Ask purchasers of UDW on nationality of supplier

Additional questionnaire versions in languages spoken by most relevant groups of immigrants

Higher number of interviews (minimum: 3.000)

Thank you for your attention!

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