“Grey economy” is worth 211 billion euros in Italy

An Istat analysis calculated how much the “unobserved” economy in Italy is worth, that is to say that set of underground and illegality (drugs, prostitution and cigarette smuggling) which amount to 211 billion euros (11.9% of the Gross Domestic Product). The numbers updated in 2018 highlight a slight decrease (-3 billion) compared to the previous year, “confirming the downward trend in the incidence on GDP after the peak of 2014”, when the grey economy accounted for 14% of national wealth. Not much to celebrate, if we look at the report: as regards the employment sector, for example, there are 3 million and 652 thousand illegal workers (a decrease of 48 thousand people compared to 2017).

The reduction of the overall value actually contains two different dynamics: the underground economy – which basically adds up the under-declaration of added value (intentionally incorrect communications on turnover and costs) and irregular work, in addition to other minor issues – slightly decreases to 191.8 billion, while illegal activities growth over the 19 billion threshold, maintaining the incidence on GDP at 1.1%.

As for the non-observed economy, as explained by Istat in the report, “in 2018 the decline was 1.3% compared to the previous year and was in contrast to the trend in value added, which increased by 2.2%. This trend is due to the decrease of the value added hidden by under-declaration (-2.9 billion in 2017) and by the use of irregular labour input (-1.7 billion), while the other residual components are increasing (+1,4 billion).

The illegal economy marked a limited increase in absolute value, with an incidence fixed at 1.1%. Compared to 2017, there is a slight change in the relative weight of the different components of the non-observed economy: a reduction of the shares resulting from under-declaration (from 46% to 45.3%), the use of irregular labour input (from 37.5% to 37.2%, the units were 3.652 million), and an increase of those attributable to the other components of the underground (from 7.6% to 8.3%) and the illegal economy (from 8.8% to 9.1%). There are small signs of improvement concerning work, with a decrease in irregular workers both in relation to total workers and in absolute value.

Istat indicates that in 2018 3 million and 652 thousand were full-time working units in irregular conditions, mainly employed as workers (2 million and 656 thousand units). The reduction of the non-regular component (-1.3% compared to 2017) shows a reduction of a phenomenon that had extended in 2017 (+ 0.7% compared to 2016). The irregularity rate, calculated as the percentage incidence of non-regular working units on the total, has decreased in the last year, reaching 15.1%, after 15.5% noticed in the last two years. The drop of the irregularity rate is due to the effect of the connection between the negative dynamics of irregular work and the increase of the regular work input, attributable to the employees component (+ 1.8%). The rate of irregularity is higher among employees than self-employed (respectively 15.5% and 14.2%).

From 2015 to 2018, non-regular work presents an opposite dynamic compared to that of regular work: irregular workers decreased by approximately 47 thousand units (-1.3%), while regular workers increased by 723 thousand units (+3.7%), causing a drop in the rate of irregularities from 15.8% in 2015 to 15.1% in 2018. Whereas illegality is growing, it is 1.1% of GDP. The under-declaration of added value and irregular work account for almost 192 billion, and illegal activities (drugs, prostitution, smuggling) for 19 billion. Irregular work, which affects 3.6 million people, goes slightly down. “Compared to 2017, there is an increase of 1.8% (342 million euros), less significant than that of the previous two years, when the illegal economy had increased by over 800 million per year. Final consumption of illegal goods and services amounted to 21.6 billion euros (corresponding to 2.0% of the total value of final consumption cost) and is increasing.

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