Black is back

LAST UPDATED: 25 Feb, 2011 @ 17:40
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Black is back

FOR the last few years, the Junta de Andalucia has been working closely with the local town councils on the Costa del Sol, trying to clean up their image.

Mayors and developers have been jailed, homeowners have been ordered to demolish their properties, estate agents have been given new rules to follow and, in some towns, building permits have been cancelled pending further notice.

Apparently the days of passing bulging brown envelopes under the table, while the notary discreetly looks away, are long gone. So what is half the Costa del Sol workforce meant to do with all the cash they make each month?

Yes, I’m being ironic.

The Spanish media is reporting that Malaga is now the proud recipient of third place in the race to achieve the highest level of unemployment in Spain. Cadiz is doing even better, currently holding second place and Las Palmas (the province incorporating Gran Canaria, Fuerteventura and Lanzarote) is the winner of this auspicious prize.

These provinces are all established tourist areas with coastlines and inland areas popular with visitors from all over the world. The opportunities are huge for both workers and entrepreneurs so what’s going on?

Obviously, the global economic crisis has had a profound effect and tourism numbers are well down on previous years. But, they are still visiting and people are still working.

In our area to the west of Marbella, restaurants are still operating and shops are still selling. Event organisers and wedding planners are already reporting an increase in bookings this year and real estate agents are selling – even if the properties are sometimes 40% cheaper than they were four years ago.

Unrest in countries such as Tunisia, Egypt and further afield may result in even more tourists visiting our shores in 2011, so the outlook is not completely bleak.

But then, the Spanish media is also reporting that Malaga’s black economy is the equivalent to as much as 22% of its GDP. So perhaps these unemployment figures do not represent what is really going on.

We all know people who are working on the black market, whether they’re self employed but not declaring their earnings or being paid cash by a regular employer who can’t face the bureaucracy, ongoing and future cost of putting them on contract. Some of these workers will also be claiming dole money but very few will be paying into the social security system.

The huge problem in Spain is that the labour laws in effect right now do nothing to encourage employers to take on more staff under contract.

Even if their businesses need extra personnel right now, employers are too frightened to contract staff while the economy is in crisis. They are nervous to commit to the ongoing hefty social security contributions and petrified that if they have to lay off their staff at a later date, the penalties will bankrupt them.

So while many are losing their jobs, no new “official” positions are being created and the problem escalates.

As a member of the self employed ranks myself, I know how onerous the costs can be. The social security payments and tax retentions make life hard for many. It is no surprise that the number people working on the black economy has soared.

It’s a lose-lose situation.

The costs and risks involved in employing staff mean that entrepreneurs will continue to procrastinate over growing their businesses and honest workers will still struggle to find bona fide contract positions resulting overall in less payments being made to the social security and tax authorities.

More people will find themselves working on a cash basis, making no contributions and therefore denying themselves access to benefits when they need them in the future. Catch 22.

There’s no getting away with it – black is back and it’s here to stay until serious labour law reforms are put in place.

8 COMMENTS

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  1. “Mayors and developers have been jailed”

    Yes thay have, and some are even back again starting up new parties and standing for re-election. Only in Spain’s legal system (I use that term loosely) could such madness be allowed to occur.

    “homeowners have been ordered to demolish their properties”

    Yes, and then another higher court rules the demolitions were illegal. In Spain the left hand does not know what the right hand is doing.

    “estate agents have been given new rules to follow”

    Yes, and they are meaningless. Why? Well, because estate agents cannot verify that paperwork is correct, especially if the paperwork was signed off by a mayor in a corrupt village who is now in jail. See other threads on here where actual estate agents say this, not just me.

    “in some towns, building permits have been cancelled pending further notice.”

    Yes, and building also continues unabated in some areas as well.

    Nothing changes because Spain doesn’t want it to change. In a year or two it’ll be back to the good old days, buyers swarming around, property prices increasing, and then it’ll all go pear-shaped again later down the line. Do people really think everything is now going to change for good?

  2. The cash in hand work culture in the South is a real problem as it happens everywhere and is pretty much uncontroled. Just in my neighbourhood their are 5 bars with everyone working cash in hand (10 staff) and risk free. Their is one bar open on the seafront in Fuengirola where both staff are non-european and have no work visas but still work 6 days a week and have done now for 2 years, yet have never been inspected. I have five staff who are all contracted but lose trade to bars who undercut my prices and can only afford to so as they dont pay social security for their staff which makes it hard to stomach. I have always said i would work as a work inspector for only commission as i would make enough money in 6 months to retire. it seems here there is a different way of thinking where`people think its their right to be able to work cash in hand while claiming their PARO.

  3. Quite agree
    Social security payments are out in space. Autonomo gives you little propection when things go pear shaped and paying the ss for staff almost impossible in the present climate. People cannot afford to take on legal workers, that simple.

  4. I was talking to a customer last night who had just come back from Barcelona where she had been working. She had her contract cancelled as she couldnt do her job down to having a bad back (didnt stop her going out dancing last night). Well the company she worked for had given her 2 months off to get better which seemed to have worked until the problem came back last week. This led to them having to cancel her contract as she could do the work and she will now not only get unemploment of over 1000 euros a month for a least a year they had to pay her 14,000 euros as she had worked there for 4 years. Good for her but they wonder why this country has so many money problems. Oh by the way she said she wasnt going to look for work now until after the summer and maybe buy a car or take a trip to the USA

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