Spain's Black Market Economy Hampers Economic Recovery

July 28, 2015Spainby EW News Desk Team

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Spain's economic recovery started in 2013, after five years of economic stagnation, but analysts say that approximately 1.7 million people earn a living through jobs not taxed by the government. Even though Spain is in the midst of a recovery, the country still has the second highest unemployment rate in the European Union, with Greece coming in first. The unemployment rate went from 23.8 percent in the first quarter to 22.4 percent in the second quarter, according to The Economic Times.

Officials claim that the Spanish economy is improving, but many locals are not feeling the benefits. Spaniards are hard-pressed finding steady work, which is why many are turning to jobs that offer undeclared income. The black economy does not mean the trade in question is illegal. For instance, a person in Spain may work in a shop where an employer pays cash, allowing workers to keep any income hidden from the government. Black market jobs are the strongest in such sectors as tourism, agriculture and domestic labor.

According to a study by Esade, a business school in Catalonia, one out of 10 employees have worked for income they never reported to tax officials, including one in five unemployed citizens. Overall, the black economy equates to a quarter of Spanish GDP. A bad economy is a primary factor that fuels the black market economy, but Spain has dealt with this issue for decades. During Spain's prosperous years, companies routinely offered sub-contracts to workers and paid them in cash as a quick way of meeting demand. The government could afford to lose some revenue during booming times, but the sluggish economy needs additional tax income that could fund social programs and reform efforts.

On the flip side, Spain could not survive without Spain's black job market, and experts warn that the country would face a national uprising if authorities cracked down hard because many are trying to survive. In fact, many Spaniards are searching for full-time employment but they are unable to find decent work in an economy that is not offering enough jobs that uplift people out of poverty. Part-time jobs have become the norm, many of which offer meager pay, and these jobs offer a fast way for people to earn money.

This is not to say that the government is not making progress. Prime Minister Mariano Rajoy stated that Spain's economy fostered the creation of 400,000 jobs in 2014, with an additional 60,000 jobs for 2015. Spain has made various structural reforms in regards to the job market, but it is unclear if officials can create a necessary atmosphere that creates long-term, sustainable jobs.

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