Unregistered Work: Causes and Consequences.

People working without a contract earn “net” the same amount as those working legally. However, without a contract, they lose many benefits associated with registered employment.

A significant motivation for taking unregistered work is the desire to increase earnings by avoiding paying social insurance contributions and taxes. However, an analysis by CASE based on data from BAEL (Labour Force Survey conducted by the Central Statistical Office) from 2017 shows that the belief in higher earnings when working without a contract is incorrect.

“If we apply the so-called propensity score matching (PSM) method, which in this case involves comparing the earnings of people with the same education, age, and gender, it turns out that people working without a contract receive the same hourly rate as those formally employed. The vast majority of people not only do not gain any wage benefits from working off the books but also lose out because health and pension contributions are not paid for them,” says Dr. Jacek Liwiński, a CASE expert who conducts research on the labor market in Poland.

Scientific research also confirms that working in the informal sector not only does not increase our income but also negatively impacts our career. This phenomenon is called the scarring effect. The lack of documented work experience makes it difficult to find legal employment and achieve promotion in the future. Employers may also mistreat unregistered workers, which can result in reduced self-esteem and negatively impact the motivation to develop and seek legal employment.

More information on the risks associated with performing or assigning unregistered work can be found in our handbook “Unregistered Work: Causes and Consequences.”

The handbook has been developed to provide trainers and teachers with basic knowledge that can be useful in conducting training promoting registered work. On one hand, it presents the benefits of registered work, and on the other, the potential costs associated with unregistered work. First, this information is presented concerning employees (chapter 2), particularly emphasizing that the negative consequences of unregistered work are borne throughout life. Due to the specific situation of foreigners working in Poland, the consequences borne by this group are described separately (chapter 3). Furthermore, the effects concerning employers in the gray market, with a distinction for those employing foreigners, are presented (chapter 4). An addition to the presented information is a description of actions taken by the state to limit the phenomenon of unregistered work in Poland (chapter 5) and in the UK, which is a leader in the fight against the gray market (chapter 6).

We have also launched the website www.naumowe.pl, which features courses on the benefits of legal employment, aimed primarily at young people, the unemployed, foreigners, and employers.

The research, handbook, and website were created as part of the project “Building and implementing innovative tools to reduce the phenomenon of unregistered work in institutions co-responsible for minimizing the gray market on the labor market,” co-financed by the European Social Fund under the Knowledge Education Development Operational Program 2014-2020. The project was implemented by CASE – Center for Social and Economic Analysis in cooperation with the National Revenue Administration, the Voluntary Labour Corps – Headquarters, the Provincial Labour Office in Olsztyn, the Provincial Labour Office in Katowice, the Association for Legal Intervention, the Institute of Labour and Social Studies, Maguire Policy Research Ltd, and the Institute of Public Finance.