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.