Rad na crno

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Rad na crno
Informal practice commonly found in Serbia
Serbia map.png
Map of Serbia, where Rad na crno commonly takes place.
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Flag of Serbia.
Entry written by Kosovka Ognjenović.
Kosovka Ognjenović is affiliated to Institute of Economic Sciences, Belgrade.

Original Text: Kosovka Ognjenović, Institute of Economic Sciences, Belgrade

Rad na crno, literally ‘black labour,’ is a Serbian term that describes socially acceptable ways of coping with the problems experienced by ordinary people during Serbia’s turbulent transition from socialism, that is, away from the system of worker-managed enterprises that characterised the Yugoslav economy from the late 1940s until the late 1980s. Specifically, rad na crno denotes payment for jobs that are not officially registered or that are only partially reported to the state authorities, and which are therefore not subject to taxation, social insurance or labour law. While the term has negative connotations in formal and legal contexts, ordinary people use it routinely and generally accept it as legitimate.

The term was commonly used in all the republics that, until the beginning of the 1990s, constituted the Socialist Federal Republic of Yugoslavia. For instance, rad na crno is translated in Slovenian as delo na črno and in Macedonian as работа на црно, while similar phrasing is used in Bosnian, Croatian and Montenegrin. The term was not included in the early editions of the Economic Encyclopaedia (published in Belgrade in 1984 and 1986 [1]) or the Economic and Business Encyclopaedia (1994)[2], but it did appear in dictionaries of the Serbian language published in 1986 and 2003. These define rad na crno as bespravni rad—that is, ‘work without a permit,’ ‘illicit’ or ‘illegitimate work.' While the term predates the end of socialist Yugoslavia, however, the post-socialist transition can be seen as shaping its subsequent use and meaning.

Informal practices such as rad na crno are associated with the ‘black,’ ‘grey,’ ‘shadow’ or ‘hidden’ economy in Europe and elsewhere[3]. These terms are used interchangeably and surface in the media to denote activities in the informal economy. In the social sciences, the informal economy is defined as ‘all economic activities that contribute to the officially calculated gross national product, but are currently unregistered’ [4]. According to this definition, illegal activities such as the production and distribution of criminal or forbidden goods and services, or legal activities such as unpaid household work, are excluded. In common usage, however, ‘informal’ may be seen as a euphemism for other adjectives in ‘coloured markets’ [5]. Accordingly, rad na crno encompasses all wage-earners in principal, secondary or self-employment who work without or outside labour contracts.

One of the first researchers into the workings of the informal economy and rad na crno in Serbia and the other former Yugoslav republics has concluded that, as a result of anonymity and lack of data, it is difficult accurately to measure or even approximately to estimate the incidence of rad na crno practices [6]. This is also because the lines are not clearly defined: rad na crno may denote not only economic activity that is illegal because it is not officially reported, but also work that is legal but which is only partially reported. For example, the activity of only some of the employees may be reported to the authorities, or workers may be reported to have received only the minimum wage, whereas in reality they have been paid above that rate (see Latvian alga aploksnē in this volume). Such ‘informal’ employment is seen as beneficial by wage-earners since their income is not taxed, but it may also be detrimental, since those who earn money in this way are not covered by the social security system. The ambivalence surrounding such practices makes them hard to pin down and creates avenues for tax-avoidance and social-protection fraud.

The transition from Yugoslavia’s socialist economy began in the late 1980s, when the system of worker-managed enterprises was abandoned and new legislation on business enterprises came into force. However, ethnic tensions, which were already high throughout the 1980s, provoked widespread conflict and declarations of independence by Yugoslavia’s constituent republics, resulting in the break-up of the federation. The conflict disrupted Serbia’s transition to the market and its economy was pushed into depression by political and economic sanctions imposed by the international community from 1992-2000 and by NATO’s bombing campaign of 1999. Serbia suffered heavy economic disruption throughout the 1990s.

In these circumstances, rad na crno became the ‘last resort’ for people who had suffered the loss of the socialist principles of guaranteed employment and pension provision. How people behave in such circumstances may also be explained through the prism of creating distance between the official and actual norms that make up a particular social structure [7]. In circumstances where official norms are not clearly enough defined to provoke sanctions when they are broken, people may instead follow actual norms that are generally accepted by the majority. This mirrors the conditions of disadvantaged urban communities in Third World countries, where informal employment studies originated[8]. In this sense, rad na crno is part of a global phenomenon of informal employment and shares many of the features observed elsewhere, though of course the specific dynamics and scale of the practice vary across countries and regions.

One of the most important shared characteristics of informal employment is its paradoxical relationship with state control. The scope of informal practices increases as levels of state regulation increase, meaning that market economies tend to be less burdened with informality[9]. While people may consider informal employment an opportunity, it has negative implications for social and economic development. What people perceive as a solution is seen by the state as a problem. Researchers of Serbia’s informal economy in the transition period branded it as ‘a kind of mirror in which we can see all too clearly the reality and relationships in our society’[10]. The ‘reality’ embraces informal practices, while the ‘relationships’ refer to people’s responses to the situation created by the political establishment, often viewed as corrupt and incompetent. It may perhaps be concluded that, where they are pervasive, informal economic activities are indicators of existing contradictions between official and actual norms.

Under socialism, small-scale rad na crno was widely practised in the agricultural sector and in traditional crafts. In the post-socialist period, when the labour market has been re-oriented toward business and job-seekers have been pushed from the public to the private sector, rad na crno serves to accommodate surplus labour and ‘hidden unemployment.’ One of the new practices associated with rad na crno in this period is wages ‘in hand.’ This involves an oral agreement reached between a private employer and a worker that part of the worker’s wages will be paid formally, ‘on the books,’ and that part will be paid in cash and will not be officially recorded. Such an arrangement allows enterprises to misreport how much they have spent on wages and thereby reduces their social tax payments and mandatory contributions to the state pension and health funds; it also enables them to pay workers a certain sum of tax-free income over and above the minimum wage. Other common forms of rad na crno include paid household work (cleaning, cooking, looking after children or the elderly), street vending, the sale of goods on green or flea markets, private tutoring, small repairs and other forms of moonlighting[11][12][13].

The role of rad na crno practices may be interpreted in different ways. According to one interpretation, it is a way to cope with unemployment and supplement the household budget. Another interpretation focuses on the state budget. While these practices directly contribute to an increase in employment and personal consumption, they do not have an effect on collective consumption.

The International Labour Organisation recognises two forms of informal employment[14][15]. The first is enterprise-based, such as paying workers in cash as described above, but also including the operations of those enterprises and employees who are not registered with the official authorities. The second is a broader, job-based concept. Given that an employee may have more than one formal and/or informal job, this concept comprises informal jobs in formal sector enterprises, in informal sector enterprises, or in households. Research on rad na crno is usually based on surveys that cover respondents' participation records, scaled up to reflect the population as a whole and with economic effects estimated on the basis of expert assessments. The most important effects of rad na crno are the under-reporting of gross domestic product and the loss of tax revenue from under-reported economic activity, meaning that the whole society loses out.

In post-socialist Serbia, rad na crno practices have come increasingly to be associated with corruption. Nowadays, it is often necessary to pay in order to get either a formal or informal job; one must also give a kickback to the ‘right person,’ or exploit one’s personal connections in order to secure employment for one’s relations. Pursuing one’s economic interests individually, through informal and illegal payments or as part of ‘informal groups,’ is symbiotic with systemic corruption and organised crime[16]. In such circumstances, the capacity for elites to reinvent themselves is limited and reforms of formal institutions remain ineffective, while the burden of reform falls on the individual practitioner of rad na crno.

Notes

  1. Ekonomska enciklopedija. 1984, 1986. Belgrade: Savremena administracija
  2. Ekonomska i poslovna enciklopedija. 1994. Belgrade: Savremena administracija
  3. European Commission. 2014. ‘Undeclared work in the European Union.’ Special Eurobarometer 402. Brussels: TNS Opinion and Social
  4. Schneider, F. and Enste, D. H. 2000. 'Shadow economies: size, causes, and consequences,’ Journal of Economic Literature, 38(01), 77–114
  5. Katsenelinboigen, A. 1977. 'Coloured markets in the Soviet Union,’ Soviet Studies, 29(01), 62-85
  6. Božović, G. 1992. ‘The Hidden Economy in Yugoslavia in 1986,’ Methodology Studies and Documentation 27. Belgrade: Federal Statistics Office
  7. Collins, R. 1981. ‘On the microfoundations of macrosociology,’ American Journal of Sociology¸ 86(05), 984-1014
  8. Hart, K. 1973. 'Informal income opportunities and urban employment in Ghana,' The Journal of Modern African Studies, 11(01), 61-89
  9. Portes, A. and Haller, W. 2005. 'The informal economy,’ in N.J. Smelser and R. Swedberg (eds.), The Handbook of Economic Sociology, 2nd edition. New York and Princeton: Princeton University Press, 403-425
  10. Marinković, D. 2004. 'The shadow economy and the grey market in Serbia: The parallel world alongside us,' South-East Europe Review for Labour and Social Affairs, 3, 33-44
  11. Alter Chen, M. 2006. 'Rethinking the informal economy: Linkages with the formal economy and the formal regulatory environment,' in B. Guha-Khasnobis, R. Kanbur and E. Ostrom (eds), Unlocking Human Potential: Concepts and Policies for Linking the Informal and Formal Sectors. Oxford: Oxford University Press, 75-92
  12. Radović-Marković, M. 2007. 'Informal economy: possibilities for working at home,’ in P. Achakpa (ed.), Gender and Informal Economy: Developing, Developed and Transition Countries. Lagos: ICEA and PRENTICECONSULT, 136-144
  13. Schneider, F. 2012. 'The shadow economy and work in the shadow: what do we (not) know?', IZA DP (Institute for the Study of Labor Discussion Paper) No 6423
  14. Hussmanns, R. 2004. 'Measuring the informal economy: from employment in the informal sector to informal employment,’ Integration Working Paper 53
  15. International Labour Organisation (ILO). 2013. Measuring Informality: A Statistical Manual on the Informal Sector and Informal Employment. Geneva: ILO
  16. Ekonomska enciklopedija. 1984, 1986. Belgrade: Savremena administracija. 1154.
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