Macedonia fights hidden employment

11/02/2012

Bloggers praise the measures to protect workers' rights, and encourage their transfer from the informal to the real economy.

By Кlaudiјa Lutovska for Southeast European Time in Bitola -- 11/02/12

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The informal sector consists of more than street vendors and small firms, but includes big construction companies. [Klaudija Lutovska/SETimes]

Macedonia began implementing measures to prevent informal sector – or unreported -- employment, but the move sparked a debate about the measures' costs and benefits.

Some bloggers argue finding work in time of economic crisis is paramount. Unemployment officially is around 30% but, they say, most unemployed work in the informal -- or "gray" -- sector.

Work in the informal sector is hidden from the government. Employers don't report wages and employees don't pay taxes on their earnings. The work is not part of a nation's GDP.

Many argue that informal sector work violates workers' rights and shortchanges the economy more than the momentary gain of offering work to people who would otherwise be unemployed.

"The informal sector is mostly represented in trade when employers do not report workers and do not pay taxes. This creates serious problems to implement the Law on Trade which forces us to strengthen activities to slowly but surely eliminate the informal economy," Economy Minister Valjon Sarachini told SETimes.

Inspectors conducted 24,000 inspections last year and issued nearly 1,000 orders to employers to sign contracts with unregistered workers and give them three months' salary, according to the labour and social policy ministry.

"Amendments to the employment law set minimum fines between 6,000 and 7,000 euros and provide grounds for a unified policy," Labour and Social Policy Minister Spiro Ristovski told SETimes.

It's a move in the right direction, argue Alexandra Filipovska and Valentina Angelovska.

"About 2 billion euros is laundered annually through illegal, unregistered business. Those who want to increase profits by not paying taxes, by hiding their employees' status, and those who are selling whatever on the streets, are leaking almost an entire annual state budget," they said.

Nikola Popovski said the informal sector is a result of two factors. "First, because of unregistered activities by medical personnel, small businesses like painting firms and services like plumbing which survive and profit from not being registered. These however, are a small part of the informal sector."

"The greatest problem," Popovski added, "are the big firms, particularly in construction, where the largest number of people is engaged to work informally".

Commentator Aleksandar Peshev argued the informal sector is one of the main factors which guarantee the social peace. "The individuals that are working informally are listed as unemployed and as such they receive health benefits and state compensation. They are paid cash in hand, and the pension issue is determined based on their age," Peshev said.

But the gray economy means not paying taxes and that has a domino effect and repercussions when the state budget is prepared each fiscal year, according to economic analyst Visar Ademi.

"There is normally less revenue to finance public expenditures such as investments in road infrastructure, health, education and for the public goods the state should deliver with every budget," Ademi said.

Blagoj Mitevski agrees, saying that policies exist to serve and improve the economy. "Government interventions are needed to ease [the process] of transferring those in the 'gray' economy to the 'white' economy," he said.

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Acknowledging that that process will endure costs, Mitevski appealed to informal sector workers. "The transfer of all those businesses will produce improvement for the whole society, the participants in the gray sector should understand that," he said.

The government must continue to create jobs for the measures to be effective, Pelagija Mladenovska said. She refers to funds from the state budget like the existing 4.5m euros at Macedonia's employment agency.

"The agency organises clubs and courses for the unemployed because a part of them have no qualifications. The EU is helping with a grant of 1.3m euros to help 8,000 unemployed improve their competitiveness," she said.

The EU announced a new tranche of 2.3m euros this year intended for specific projects to decrease unemployment.

This content was commissioned for SETimes.com.
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