Half of Berlin’s construction workers are working illegally. You know, no “papers”, no Abgaben (taxes and social insurance contributions), and this in a city with one of the highest unemployment rates in all of Germany. And in a city as broke as Berlin, off-the-books firms and workers dodging taxes and other social contributions like this, regardless of how high these payments are (and this is of course the real problem), certainly isn’t making matters any easier here.

But it doesn’t just stop in Berlin. All across the nation, whether it is in hotels and restaurants, housecleaning, hairdressing, repair or tutoring, the German “shadow economy” of Schwarzarbeit (black as in illegal work) is booming. Some national estimates show that illegal work accounts for as much as 17 percent of the national GDP.

Somebody has to do something about this, right? Right, it’s only been a problem for a few years (one example) – like sixteen or seventeen, ever since the fall of the Berlin Wall at least. No government ever really lowers taxes or Abgaben once they’ve been introduced, however, so the city of Berlin is taking a big plunge and is going to überwinde (overcome) its fear of technology and introduce chip cards next year.

Starting January 1, 2007, construction workers will have to carry a chip card that stores their tax and social security information and construction businesses will have to declare all cash transactions and working hours for every individual working on their sites (they only had to show a combined wage bill with the number of employees in the past).

Will this work? On paper, sure, but I’m sure that the counter-scams have already been worked out in detail by those who plan to keep dodging the law. Maybe the real solution is in lowering taxes and Abgaben after all? Nah.

Come visit me at Observing Hermann…

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