Grey economy, social dumping and tax evasion


A tripartite network BSLF was established three years ago for good reasons. Labor mobility is considerable in the Baltic Sea region. It is both beneficial and problematic and it concerns enterprises, employees and societies. We need many stakeholders to develop the potential of our region and solve the challenges. Let’s tackle some of the issues a bit closer.

It is difficult to get exact figures of the share of the grey economy. In the Nordic countries it is estimated to be about 5-7 percent of the GDP. The share is bigger in many other countries of the region. The European union has started to follow how its member states are preventing grey economy and corruption. It has been estimated that in the EU countries the losses of tax evasion are 1000 billion euros and corruption 120 billion euros a year.

Social dumping goes hand in hand with the grey economy. They are harmful for all the partners: honest entrepreneurs who cannot compete with the illegal actors, societies which lose tax incomes and workers who lose part of their salary and social security.

Taxation is a good example of how globalisation challenges national decision making. Not even cooperation in the EU is enough, we need the global level cooperation as well. Think if the Baltic sea region could be a successful pilot area to prevent grey economy, social dumping and tax evasion!

In order to have better mobility our region needs several things. A joint BSLF manuscript was presented in the Action Plan, which BSLF Round Table Conference accepted last year.

The acceleration of globalization is affecting the Baltic Sea region as well. It is changing the international distribution of work and is increasing the speed of technological development. Professional structures, workplaces, organisations and the nature of work itself is constantly being transformed.

A more qualified and more skilled workforce, along with the career paths, are needed in the world of work to ensure increased productivity and the ability to face all those challenges which the increasing ageing of the population brings with it.

BSLF in a nutshell

BSLF has not membership fees or permanent funding. The CBSS functions as a secretariat for it taking care of web pages and delivery of information. The substances are tackled via projects. Very recently we have received support  for an ESF –project BSLF Mobility Flagship initiative. It has tree elements:

Better provision of information, advice and support to foreign workers and employers
Prevention of undeclared work and promotion of working conditions
Vocational mobility

Today BSLF has 25 member organisations and 10 observes. Network is still young. The time will show if it can become a useful tool for developing our region through social dialogue and project activities. We need more members in order to have a stronger voice and better legitimacy. BSLF welcomes to cooperation all the partners who want to develop well functioning and fair labour markets.

How to improve fairness in the labour markets of Baltic Sea region?

How to improve fairness in the labour markets of our region? Could we be a model for the rest of the world? (as president Ilves seems to think already). Key words for sustainable and fair labour markets besides fairness are mutual trust and gaining. I like to think that we all are in the same boat.

I know there are no quick solutions. Understanding the consequences of unfair procedures in the long run is a good start, though. Here you have a short listing of reasonable aims and acting fields:

First: more information

Mobile labour is more vulnerable for exploitation than the domestic one. There are several reasons for that. This group needs special information. We all can have a role in it. A lot of information is available but often it is difficult to find relevant and user-friendly information. We need more synergy and long lasting solutions.

Secondly: more and better EU

We need EU-legislation in regulating labour mobility. Directives at EU-level have to be explicit. Economic freedoms should not be the number one priority. Prevention of social dumping should come first.

Thirdly: more serious approach

We have to take seriously the exploitation of migrant workers. Inspection has to carried out by the police. Societies should give enough recourses to that work. In cases of abuse the level of sanctions should be enough big in order to be effective. We need better statistics concerning mobility. We could also look at the mirror: do we care enough about mobile workers? Could we cooperate better across the borders?

In the global world we have to maintain and develop the competitiveness of our region. In order to succeed we need creativity as well as committed and educated work force. I do believe that decent working conditions and wages, sufficient social security and stability are important aspects of the competitiveness and the well-being of the Baltic Sea region.

Antti Palola STTK – Finland
Speech in the BASTUN round table seminar 19.11.2014