The number of illegal workers in Germany is increasing and while some employers gain in lower wages, the government loses more in lost tax revenues. A crackdown started this week in the state of North Rhine-Westphalia.
In the first half of 2017, 65,755 investigations into undeclared — illegal — work were started in Germany, a rise of 5 percent over the same period of the previous year, Welt am Sonntag reported, citing a confidential report by the German Customs' Financial Investigation Unit.
Foreign, non-EU, workers found to be working illegally in Germany, recorded as being on "unauthorized stays," increased 28 percent year-on-year to 941 in the same period, according to the report. The police and foreign ministry also worked on the confidential report.
The report did not focus on the approximately one million refugees that have come to Germany in the last three years.
Where and where from?
The majority of workers under investigation were employed in the construction, hospitality and other service sectors without the necessary authorization, according to the report.
Most of those working in Germany without a permit come from 10 countries: Ukraine, Albania, Serbia, Vietnam, Bosnia-Herzegovina, Macedonia, Turkey, Kosovo, Moldova and Ghana, it noted.
A report by DW's Nemanja Rujevic noted this week that tens of thousands of people from the western Balkans work illegally in Germany and that an "intermediary" industry of illegal traffickers is flourishing.
A swoop by German customs and police in North Rhein-Westphalia (NRW) this week saw eight people arrested in connection with creating bogus papers for hundreds of construction companies in Germany.
The companies allegedly obtained the funds via money laundering to provide papers for illegal workers mainly from south-eastern Europe.
Hundreds of police and agents with a special customs task force took part in raids on Tuesday, searching 140 properties in 31 cities in the populous German state.
Among those arrested were three Serbs and one Bosnian. Investigators confiscated weapons, including two automatic crossbows, cash and vehicles. The treasury was deprived of an estimated €35 million ($43.5 million), local media reported.
Goran Zrnic, the president of Delavska svetovalnica — a Slovenian organization that deals with workers' rights told DW that the naivety of desperate workers from poor Balkan countries was "cataclysmic."
"There are people who have been cheated many times and have sought our help, and these workers, in their own interest, should finally understand that they need to be well informed," Zrnic said.
Winners and losers
From illegal workers alone, the German state loses roughly €3.5 million in taxes and missing social security payments, Friedrich Schneider, a professor at the Research Institute of Banking and Finance at the University of Linz in Austria, said.
"For the shadow economy as a whole in Germany this figure is much higher," he added.
Professor Dominik Enste from the University of Cologne estimated the upper limit could be around €27 billion, including lost social security payments.
About 25 to 33 percent of this lost revenue is compensated by lower labor costs, Schneider estimated. "But this is very difficult to calculate, because we have different winners — the economy, households — and the state is the loser."
Tip of an iceberg
The increase in part also reflects more official resources being directed at the issue.
"We have more investigations and due to the refugee and illegal immigrant crises more illegal workers," Schneider said. The real figures could be higher, he added.
Frank Buckenhofer, chairman of the District Customs Department of the Police Association (GdP), agrees. "The numbers go up because customs are carrying out more checks to combat illegal work. However, in our view, these are still far too infrequent," he told the Welt am Sonntag newspaper.
Thomas Liebel, vice president of the GdP, also complained that there were still significant staff deficits in units investigating undeclared work.
"This is particularly noticeable in the field of very complex investigative work against illegal mafia structures," Liebel told the Welt am Sonntag.
Solutions on the table
Enste suggests a 'two-pillar' strategy of reducing incentives to working illicitly by reducing the gap between net and gross wages and also taking on organized crime.
"This leads to fewer incentives to use the 'exit option' [the shadow economy] and to use the 'voice option,' that is creating better official institutions," he said.
"We are actually observing some decline in activities in the shadow economy due to the positive development in the official economy," Enste said. "Illegal workers are almost fully booked in the official economy and therefore have less time for illicit work," Enste said.