So-called 'casual' workers are vulnerable because of the lack of social and legal protection. While the informal employment rate in Europe is lower than the global average, it is still high in a number of countries.
ADVERTISEMENTInformal employment, otherwise known as work without a contract, legal protection, or social security, remains prevalent worldwide. According to 2023 estimates by the International Labour Organisation (ILO), 58% of the global workforce is engaged in informal employment. After excluding agricultural workers, the figure drops to 50%.
In Europe and Central Asia, informal employment accounted for 1 in 5 workers until recently. Although the rate of such employment is lower in EU countries compared with other regions, a considerable number of workers across Europe still participate in the casual or zero-hours contract economy.
According to the ILO dataset for 2023 or the latest available figures, Hungary and Poland had the highest rates of informal employment among EU countries, with 17.8% and 9.8%, respectively. In contrast, the informal economy is much less prevalent in other EU member states, with informal employment rates falling below 2% in a third of EU countries.
Malta recorded the lowest informal employment rate at 0.7%, followed by Slovenia at 1%, and both Belgium and Bulgaria at 1.3%.
However, when considering the Free Trade Association (EFTA), EU candidate, and potential candidate countries, the picture changes significantly. Georgia and Moldova emerge as outliers with informal employment rates of 56% and 52%, respectively.
Why is informal employment so high in Turkey?
Beyond these outliers, Turkey recorded the highest informal employment rate among these nations, at 27.3%. The high share of agricultural employment in Turkey is a key factor contributing to the country's elevated informal employment rate, according to Professor Aziz Çelik of Kocaeli University.
"While agricultural employment averages around 4% in European countries, it stands at approximately 15% in Turkey," the professor noted.
He emphasised that casual work in Turkey is particularly rampant within the agricultural sector, where 81% of employment is informal, compared with 17% in non-agricultural sectors. "Another reason is that the rate of informal employment is higher among women than men. While this rate is 23 percent for men, it rises to 32 percent for women," Prof. Çelik added.
As the share of agricultural employment has been decreasing in recent years, the overall informal employment rate in Turkey has also been on the decline, down from slightly over 50% in 2004, as reported by Turkey's Social Security Institution.
Çelik also pointed to institutional and legal factors as significant contributors to the persistence of informal employment in Turkey. He highlighted that the effectiveness of measures to combat unregistered employment plays a crucial role.
However, in Turkey, frequent tax and insurance premium amnesties (restructurings) and the lack of stringent inspections have allowed unregistered employment to remain high.
Informal employment is particularly high among EU candidate and potential candidate countries.
UK has the highest number of among Europe's top economies
It is striking that informal employment is more prevalent in the UK compared to several other European countries. Among Europe's top five economies, the UK had the highest rate of informal employment at 6.5%, followed by Italy at 3.8% and France at 3.6%. In contrast, the informal employment rate was 2.6% in Spain and 2.5% in Germany.
Reasons behind disparities: Social norms and legislation
Social norms, traditions, and legislation are key factors contributing to the disparities in informal employment across Europe, according to Professor Mihails Hazans from the University of Latvia, who has extensively researched informal work across the continent. For instance, in Poland, the prevalence of small enterprises, which often rely on informal workers, may partly explain the higher rates of informal employment.
Additionally, the sectoral composition of employment plays a significant role. Hazans highlighted that informal employment tends to be higher in countries where the hospitality and construction sectors represent a larger share of total employment. These industries are particularly prone to informality due to the nature of their work and the ease with which informal labour can be integrated.
ADVERTISEMENTRegarding the higher informal employment rate in the UK, Mihails Hazans noted that "a written contract is not required in the UK", which can contribute to the prevalence of informal work. He also pointed out that the gig economy might play a significant role in influencing these higher rates, as gig work often lacks formal contracts and protections.
UK has higher informal employment rate in another calculation
Based on the European Social Survey dataset, Professor Hazans found that the informal employment rate in the UK is actually higher than the ILO's estimate. In 2018, the informal employment rate in the UK was 8.5%. This rate increased to 13.3% between mid-2021 and 2022, before declining to 8.9% in 2023.
In his calculations, a similar trend was observed in Ireland, where the informal employment rate was 12.6% in 2018, significantly higher than the 1.8% reported by the ILO. This pattern also applied to Portugal, with Hazans' estimate at 9.3%, compared with the ILO's figure of 4.6%.
Conversely, he identified lower informal employment rates for Hungary and Poland than those reported by the ILO.
ADVERTISEMENTIn informal economies, also known as underground or shadow economies, workers lack social and legal protection, leaving them vulnerable. Additionally, the risk of household poverty increases with the degree of informality within a household.
