Tackling the Undeclared Economy in FYR Macedonia: a baseline assessment

Type Report
Title Tackling the Undeclared Economy in FYR Macedonia: a baseline assessment
Publication (Day/Month/Year) 2014
URL https://www.sheffield.ac.uk/polopoly_fs/1.397764!/file/WP3TacklingtheUndeclaredEconomyinFYROM.pdf
This report provides a detailed review of available evidence on the extent and nature of the undeclared
economy in the Former Yugoslav Republic of Macedonia (FYROM), as well as on the institutional actors
involved in tackling the phenomenon and their policy approach and measures used.
Extent and nature of the undeclared economy
Some widely cited international measurements that cover FYROM find that the share of its undeclared
economy is larger than in all EU Member States, estimated at 35% of GDP in 2007 (Schneider et al,
2010). Data from the most recent national Labour Force Survey suggests that in 2012 around 22.5% of
the workforce was engaged in undeclared work, and therefore was not covered by any social or legal
protection (SSO, 2013). This survey further indicates that undeclared work has been declining since
2008, in parallel to an increase in the number of formally employed persons.
The age groups most affected by informal employment are young people aged 15-24 (40% of all
employed in that age group), as well as those older than 65 years (over 85% of all employed from that
age group). When it comes to gender variations, the data reveals that men are slightly more likely to
work in the informal sector than women (23.3% of men compared to 21.3% of women for 2012).
Moreover, there is a difference in the type of informal work performed with women being mainly
informally involved in agriculture, whereas men are self-employed or employers in unregistered firms.
There is a clear link between undeclared work and job precariousness in the FYROM: undeclared
workers are less likely to hold full-time, permanent waged jobs. Furthermore, wage earners are less
likely to work undeclared than sole traders and the self-employed. These trends become even more
pronounced in rural areas compared with urban ones, and among the young and ethnic minorities.
When it comes to sectorial and business variations in the incidence of undeclared work, the main
findings of the World Bank Enterprise Survey 2013 suggests that businesses in manufacturing are more
likely that those in retail or services to face competition from unregistered firms. At the same time,
formal businesses in retail are more likely to perceive such unfair competition as a major constraint to
conducting business in the country. Medium-size enterprises, domestic firms and firms located in
South Macedonia are also more likely to face competition from entities operating off-the-books.
In general, labour-intensive, low-earning jobs in construction, transport, catering, the textile industry,
domestic services, agriculture and trade are particularly prone to undeclared work. Purchasing goods
from undeclared merchants at markets is a particularly widespread practice. The share of informal
employment in agriculture is significant – between 86.1% and 82.4% of all agricultural employment.
This sector is also largely affected by non-standard work

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