Experts expect an increase in undeclared work in Germany. According to a forecast, more than 480 billion euros will be generated in the so-called shadow economy this year.
The size of the shadow economy in Germany is expected to increase in 2024. This emerges from a forecast by the Institute for Applied Economic Research in Tübingen (IAW). According to this, the value of benefits earned illegally through undeclared work increases by 38 billion to a total of 481 billion euros.
This means an increase of 8.4 percent. The share of the forecast shadow economy in gross domestic product will therefore rise to 11.3 percent. After a phase of decline, this is the first increase since 2021. According to economists, the shadow economy is likely to reach the 2014 level again this year.
The forecast assumes that gross domestic product shrank by 0.6 percent last year and that the number of unemployed averaged 2.6 million. Furthermore, an expected inflation rate of 2.7 percent was included in the scientists’ calculations. According to preliminary data from the Federal Statistical Office, the German economy fell by 0.3 percent last year compared to the previous year, adjusted for prices; According to previous data, inflation averaged 5.9 percent in 2023.
Influence of citizen money and gastronomy
The experts expect that the introduction of citizens’ money with an increased standard rate will reduce undeclared work overall. The improved salaries will then also mean that some of those receiving citizen’s benefit will have less desire to take up a legal job. However, the effect is that the increased citizen’s allowance payments mean that fewer recipients feel the need to earn money illegally on the side. The introduction of citizens’ money will therefore probably reduce the output generated through undeclared work by 2.4 billion euros.
However, the return to the full VAT rate in the catering industry will have the opposite effect. The scientists assume an increase in undeclared work to the tune of 1.9 billion euros.
IAW researchers have been calculating the extent of undeclared work since the late 1990s. The forecasts use a complex procedure that combines several variables that are indirect indicators of the shadow economy. These include tax morale, the unemployment rate, the inflation rate and the demand for cash.