Greeks flock to informal work as recession deepens

By Renee Maltezou

ATHENS | Fri Dec 21, 2012 9:59am EST

(Reuters) - Greek dietician Reggina knew she had little choice when her boss told her she could keep her job at a health center only if she agreed to getting part of her salary off the books.

With Greece sinking deeper into recession and no other jobs to be found, she meekly agreed last year to monthly pay of 160 euros in cash and 700 euros on the books - allowing her struggling firm to pay lower social security contributions.

At 26, Reggina had joined the ranks of a growing number of young Greeks resorting to informal work to get by during an economic crisis that has left Greece with a youth unemployment rate of 56 percent - the highest in the euro zone.

"It's not just psychological war, it's abuse," said Reggina, who like others declined to give her full name because of the illegal nature of her work.

"I get fewer social security vouchers and I can't get a loan because my salary on paper is so low. But they tell us if we talk about this, we'll lose our jobs."

Data suggests informal work in Greece - which already has one of the largest grey economies in the euro zone - is rising quickly, fuelled by both cash-strapped businesses trying to save on contributions to the state and desperation among job-seekers.

In the first half of the year informal workers accounted for 35 percent of about 30,000 employees during checks by the SEPE agency that inspects firms, up five percentage points from 2011. More than half of them were Greeks and 41 percent were migrants.

Most of them were employed in the construction sector or in family businesses like restaurants, cafes, bars and shops. The number of self-employed in Greece - another indicator of the rise in informal work - now stands at 31 percent of workers, twice the euro zone average, says Athens-based think-tank IOBE.

"When the recession is so deep, labor rights are among the first to be sacrificed," said SEPE Director Michalis Kandarakis.

"They become less important for employers."

TAKING ADVANTAGE

Unionists allege businesses have become so innovative in finding ways to cut costs during the crisis that some companies have even deposited salaries but demanded part of the money back in cash a few days later or paid workers in supermarket coupons.

They argue the efforts of Greece's international lenders to loosen strict labor laws have only made matters worse, allowing employers to use part-time or flexible contracts to pay workers the minimum possible on the books and the rest under the table.

"Many businesses, even profitable ones, are taking advantage of the crisis to make money out of it," said Nikos Kioutsoukis, general secretary of private sector union GSEE.

"The government's policies prescribed by the lenders are wrong and push young people to the black market for labor. Informal work will spiral out of control if this continues."

He estimates as many as 35 percent of Greek workers toil off the books in one form or the other, with some self-employed workers turning to it to avoid high taxes and others forced into it by businesses aware of the limited choice job-seekers have.

At the other end of the spectrum, young Greeks say conditions in the job market are so dire they consider themselves fortunate to have even an informal job - despite not knowing if they will ever get the money they were promised.

Costas, a 23-year-old university student, became a waiter this summer on the agreement he would get a paltry 35 euros for working an 8-hour day. In the end, he says he was only paid 70 euros a week and kicked out three months later when he spoke up.

"When I dared to speak up I was simply fired. There are so many people looking for a job out there, why should they keep me?" he said.

"The negotiation with every potential employer starts from the amount that he is willing to give, not the contract terms. It's obvious that it will be off the books."

AN UPHILL BATTLE

The rising levels of informal work come at a heavy price for a cash-strapped state reliant on aid loans to stay afloat.

With unemployment and informal work both rising, the country's largest pension fund IKA-ETAM expects welfare contributions to fall about 7.5 percent this year - depriving the state of about 800 million euros compared to a year earlier.

A report by an EU task force this week also cited undeclared work as a "major issue" affecting Greece, saying it "endangered" the viability of the country's social security system.

Greece's conservative-led coalition - under pressure from lenders to boost tax revenues - has promised to crack down on the phenomenon by increasing fines and reinforcing the SEPE agency that inspects businesses on compliance with labor laws.

"We have declared war against informal work and benefits evasion," Labour Minister Yannis Vroutsis told Reuters.

"The crisis cannot be an alibi for those violating the law. Businesses breaking the rules have no excuse anymore."

But the government is fighting an uphill battle.

Despite reforms making it easier to hire and fire workers and lowering the minimum wage, Greeks still pay the highest social security contributions in Europe - giving them an incentive to sidestep formal labor contracts, IOBE says.

Lack of trust in a political system seen as corrupt and unfair, strong family bonds that encourage work in family businesses and a long history of a flourishing grey economy have all allowed informal work to grow, IOBE says.

Yannis, a 38-year old construction worker who has always worked informally, is one Greek who sees no incentive to change.

"We all work like this and so do I. We can't keep paying a state that takes 40 or even 50 percent off our wages through taxes," he said. "I'm sorry but I have children and I have to pay to feed and dress them."

Others like Reggina still bristle at the ignominy of being paid under the table. But a lack of alternative jobs has meant she too has moved further into the same informal economy she blames for her misfortunes.

"Now I do it myself: I see clients at home and don't give them receipts," she said. "I'm not ashamed about this, I have no choice."

(Editing by Deepa Babington and Philippa Fletcher)