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Elements of a preventative approach towards undeclared work: an evaluation of service vouchers and awareness raising campaigns
(2018)
  • Colin C Williams
Abstract
1.          Introduction
The aim of this study is to review the range of preventative approaches for tackling undeclared work available to Member States, and to focus upon two types of preventative measure, namely service vouchers and the use of awareness raising campaigns.
2.          Rationales for a preventative approach
·       The rationale for a preventative approach is to shift away from resolving problems after they have occurred towards preventing non-compliance in the first place.
·       Article 1 of Decision (EU) 2016/3441, establishing the Platform, explicitly encourages such a preventative approach. It states that ‘”tackling”, in relation to undeclared work, means preventing, deterring and combating undeclared work as well as promoting the declaration of undeclared work’.
3.         Use, importance and effectiveness of preventative approaches in the EU
·       The 2017 survey of Platform members[1] provides a baseline assessment of the progress made towards such a preventative approach in EU Member States. This reveals that the current focus of Member States is still heavily upon ‘deterring’ undeclared work using measures that increase the penalties and risks of detection. Initiatives to ‘prevent’ non-compliance, and ‘promote the declaration of undeclared work’, are less common and seen as less important than deterrence measures.
·       Preventative measures are currently perceived as less effective at tackling undeclared work than deterrence measures. However, this is not an evidence-based belief. There is currently little ex-ante and ex-post evaluation of either deterrence or preventative policy measures in EU Member States, and a marked lack of pilot studies.
·       This lack of evidence on what works and what does not, discourages change.
·       The lack of priority accorded to preventative measures is not simply because Member States prefer to continue with the deterrence measures with which they are familiar, in the absence of evidence on what works and what does not. It is also due to the lack of a holistic strategic coordinated approach in Member States and the persistence of a fragmented departmental ‘silos’ approach, with many enforcement authorities not adopting strategic objectives related to preventing undeclared work and transforming undeclared work into declared work.
4.         Types of preventative measure
To prevent undeclared work and transform undeclared work into declared work, four types of preventative policy measure are available:
(1)Supply-side incentives that transform undeclared work into declared work by making the conduct of declared work more beneficial and easier for employers and workers. These include: simplifying compliance; society-wide amnesties; individual-level amnesties for voluntary disclosure; formalisation support to start-ups; formalisation support and advice to businesses; direct tax and social security incentives; indirect tax incentives, and help with record-keeping;
(2)Demand-side incentives that target purchasers of undeclared goods and services with rewards for using declared goods and services. These demand-side incentives include: targeting purchasers with direct tax incentives; targeted indirect tax incentives; service vouchers; incentivising electronic payments and deterring cash payments, and incentives for customers to request receipts;
(3)Awareness raising campaigns which change norms, values and beliefs regarding the acceptability of non-compliance;
(4)Resolving the formal institutional imperfections which lead to norms, values and beliefs not aligning with the laws and regulations. These measures seek to not only modernise governance (e.g., improving procedural and redistributive fairness and justice) but also address the structural economic and social conditions associated with a higher prevalence of undeclared work (e.g., lower levels of social expenditure, lower levels of expenditure on active labour market policies, ineffective social transfer systems; greater income inequality).
5.         An evaluation of service voucher schemes
·       26% of Member States responding to the 2017 Annual Survey use service voucher schemes, namely Austria, Belgium, France, Greece, Lithuania and Sweden. In Austria, France, Greece and Sweden, the institution responsible was a social insurance/social security institution, but the tax revenue administration was responsible in Lithuania and federal ministries in Belgium.
·       Overall, such demand-side incentive measures have a low take-up across Member States and are perceived as one of the least effective types of measure for tackling undeclared work.
·       Service voucher schemes are not all the same, and there are significant differences between the schemes used in different Member States. It is necessary to differentiate between enterprise voucher (EV) schemes used by companies, and social voucher (SV) schemes used by households.
·       The emergent good practice is that Social Voucher (SV) schemes should be used to: pay for regular and occasional labour; to formalise household services (including caring services), with service vouchers limited to the specific tasks where undeclared work is prevalent in each Member State, and allow the direct employment of a private individual by a household, as well as establish authorised provider organisations which employ service voucher workers.
·       Enterprise voucher (EV) schemes, meanwhile, should: only be used to pay for occasional labour; and target the agricultural sector and only be used in other sectors if they protect workers’ rights.
·       Both Social Voucher (SV) and Enterprise Voucher (EV) schemes should: be targeted only at spheres where undeclared work is prevalent; target spheres where labour inspection is difficult (e.g., households); set a limit on the number of service vouchers an employer can purchase, not on the level of income of a service voucher worker; allow users to acquire and submit vouchers online; the price of a service voucher should be the minimum price an employer pays for one hour’s work; be based on prior research to decide the price of service voucher for a user (and level of subsidy required), so that they are competitively priced compared with using undeclared work; and enable workers to gain access to key social security benefits comparable to those held by people employed, and cover unemployment benefits, accident insurance, pension benefits, sickness benefits, maternity leave and health benefits, and ex-ante and ex-post evaluations should be conducted of the extent to which service vouchers reduce undeclared work, and whether they substitute for permanent formal employment contracts.
·       Although service voucher schemes are an investment by the state (rather than a cost to the state) to transform undeclared work into declared work, with the return on the investment being higher levels of declared work, their wider adoption in the EU is limited by budget constraints.
6.         An evaluation of awareness raising campaigns
·       An awareness raising campaign is an organised communication activity that aims to create awareness on a topic (in this case undeclared work), and thus behavioural change.
·       The most common type used across the EU is that which informs suppliers of the risks and costs of working undeclared (used by 83% of Member States responding). Other types that either inform suppliers of the benefits of declared work, or else target users by either marketing the costs of purchasing from the undeclared economy or the benefits of using the declared economy, are less common (with each used by around half of Member States responding).
·       Awareness raising campaigns vary in their effectiveness in influencing people’s beliefs and changing behaviour. Given the lack of detailed evaluations in the field of tackling undeclared work, lessons can be learned from other related thematic areas, where more detailed analysis and evaluation has occurred of the key features of successful awareness raising campaigns.
·       In the field of occupational safety and health (OSH), the European Agency for Safety and Health at Work (EU-OSHA) haveproduced detailed practical advice on how to plan and run campaigns to help Member States (see http://toolkit.osha.europa.eu/tools/). This provides firstly, a step-by-step guide to planning an awareness raising campaign and secondly, templates, as well as exemplars of good practice, of dissemination tools that can be used and tailored to the national context.
·       A similar toolkit on how to prepare and run successful awareness raising campaigns on tackling undeclared work could be developed to help Member States in this regard. 
7.         Recommendations
The report provides a series of recommendations for Member States and the Platform.
Recommendations for Member States
·       Governments should shift away from resolving undeclared work after it has occurred and towards preventing non-compliance in the first place.
·       Governments should engage in ex-ante and ex-post evaluation of both deterrence and preventative policy measures, as well as pilot studies, to develop an evidence-base on what works and what does not.
·       Governments should consider conducting pilot initiatives using some variant of voucher schemes and evaluate its effectiveness at tackling undeclared work.
·       Government and social partners should pilot and experiment with different types of awareness raising campaign, drawing upon good practices developed in other Member States but tailored to their specific context, and should actively contribute examples and evaluations of good practice to enable the Platform to develop a repository of good practice as part of its Online Toolkit (see below).
Recommendations for the Platform
·       The Platform should further facilitate a holistic coordinated strategic approach at Member State level, as per the legal decision establishing the Platform, not least through mutual learning. This will speed up the process of modernisation and shift beyond a fragmented departmental ‘silos’ approach, which results in many enforcement authorities remaining focused upon deterrents and not adopting strategic objectives related to preventing undeclared work.
·       The Platform could support the use of evaluation and ‘pilot exercises’ to identify which preventative measures are most effective and in what circumstances, to foster a culture of evidence-based practice.
·       The Platform could adopt as a future activity in its work programme the development of an Online Undeclared Work Awareness Raising Campaign Toolkit. This would provide practical advice on how to prepare and run successful awareness raising campaigns and practical examples of various communication tools with tips for their use. 
·       The Platform should consider the feasibility of planning, developing and executing an EU-wide awareness raising campaign on tackling undeclared work, perhaps based on a ‘hub and spoke’ model with a generic EU-wide campaign running alongside coordinated more ‘tailored’ Member State and social partner campaigns.
 


 
Keywords
  • informal sector,
  • informal economy,
  • industrial relations,
  • business,
  • business ethics,
  • shadow economy,
  • undeclared work,
  • european studies,
  • economics,
  • sociology,
  • public policy
Publication Date
May 18, 2018
Publisher
European Commission, Brussels
Citation Information
Colin C Williams. Elements of a preventative approach towards undeclared work: an evaluation of service vouchers and awareness raising campaigns. (2018)
Available at: http://works.bepress.com/colin_williams/87/