Illegal Work Plans

Berlin continues to be a city where construction projects never sleep. Even though the post-unification building boom has subsided in recent years, there still seems to be no shortage of renovation and regeneration sites across the German capital.

While the number of building sites suggests that Berlin is an expanding city, the construction craze is also a reminder of a more serious malaise: Almost half of those laboring on these sites are illegal workers.

According to figures released earlier this year, income from illegal work in Berlin makes up about a fifth of the city's total gross domestic product (GDP) and construction contributes to a large part of that.

But the days of off-the-books construction workers and firms escaping tax and social security contributions may soon be at an end.

A government sponsored crackdown on illegal construction workers in Berlin could be the start of a nationwide purge on so-called Schwarzarbeit (black work).

Chip cards and increased financial transparency

From the Jan. 1, 2007, a new registration procedure will be introduced where workers will have to carry a chip card that stores their tax and social security details. Businesses will also have to declare all cash transactions and working hours of those on site instead of the combined wage bill and number of employees companies previously needed to file.

Berlin's authorities have been cracking down on the illegal job market, but their efforts have had little impact. In 2005, the authorities carried out 17,700 inspections, and guilty parties were required to pay 2.6 million euros ($3.5 million) in penalties and 10.8 million euros in back taxes. But, despite these successes the illegal market has continued to grow.

The new plan's organizers said they hope that the pilot project in Berlin will help unmask all those companies that profit from unlawful employment and make it difficult for under-the-table transactions to go undetected. The Berlin city authorities, backed up by union and employer organizations, said the project could be rolled out across the whole of Germany within the year.

Nationwide problem with illegal workers

While Berlin's illegal building work network is the focus of the latest measures, the problem is endemic throughout Germany, and it isn't just the construction industry that is harboring off-the-books workers. Hotels and restaurants, the trade and repair sector housecleaning, hairdressing and tutoring are also strongly represented in the "shadow economy."

National estimates show that illegal work generates around 350.4 billion euros, almost 17 percent of the national GDP.