Svart Arbete (Sweden)

Svart Arbete 🇸🇪
Location: Sweden
Definition: Unregistered and untaxed labour and services
Keywords: Sweden – Europe – EU – Payment – Money – Employment – Tax avoidance
Clusters: Survival – Informal entrepreneurship – Market
Author: Lotta Björklund Larsen
Affiliation: Research Associate, Tax Administration Research Center, University of Exeter Business School, UK

By Lotta Björklund Larsen, Research Associate, Tax Administration Research Center, University of Exeter Business School, UK

Svart arbete (‘black work’) is the Swedish colloquial term for any informal work performed for remuneration or direct exchange. The actual service (typically construction, home, or auto repair) is mostly legal in content, whereas the illegality consists of unreported income and tax evasion. Svart arbete is deeply ingrained in Swedish culture, yet as a response to societal changes it continuously takes new forms. Historically svart arbete refers to hard, tiring and dirty work such as in the old proverb svarta händer gör vita pengar, literally ‘black hands make white money’, indicating that a good deed came from hard physical labour (Holm 1964). This moral overtone stands in blatant contrast to the current public connotation of svart arbete as a shameful, subversive, or abusive practice that cheats the welfare state. The label svart signifying economic activities in relation to justice came into Swedish usage after World War I (SAOB 2006). Svart concerned illegal transactions, especially of rationed products, which took place on svarta börsen, the black market. Svart arbete was probably imported from German and Danish and the expression svart arbetsmarknad, black labour market, was used in Sweden for the first time in 1932 (SAOB 2006 referring to an article reporting on Germans’ economic hardship in the newspaper Svenska Dagbladet 5.10.1932).

Nowadays svart arbete denotes any work in which the required income tax, social fees, pension contributions and even labour laws are evaded. Its spectrum is broad: from the everyday exchange of mundane services between neighbours to organised activities on a large scale, and sometimes even outright criminal transactions. Paying the teenager next door to look after the kids on a Friday evening or offering a plumber 500 krona to fix a leaky faucet are typical forms of svart arbete. Besides cash payments, many exchanges of svart services occur as barter between professionals: a carpenter helps build a wall in exchange for an electrician’s installation of a sauna oven; a hairdresser needing a car repair offers free haircuts to the mechanic’s family. These everyday exchanges, common in all Swedish communities, strengthen social relations while being considerably cheaper than those on the market. For the purchaser of svart arbete, the obvious benefit is saving the 25% sales tax on transactions, while the seller, if paid in cash, can avoid declaring income. Practices recalling svart arbete can be found in France travail au noir and Italy (lavoro in nero).

Svart arbete takes place outside the realm of public institutions. It is hidden, informal and technically illegal. The Swedish Tax Administration plays a large part in distinguishing ordinary, legal exchange of favours between neighbours and acquaintances from more systematic svart arbete where the intent is to avoid paying VAT or avoid reporting taxable income. Economically, such exchanges of work become svart in aggregation, when the economic value of labour provided to others exceeds 20,000 SEK annually. Svart arbete is technically illegal but is not always viewed as criminal. The boundary between informal practices of svart arbete and unabashed criminal activities is crossed when svart arbete is organised and continuous, of big proportions and affects large numbers of people (Riksrevisionsverket 1997:59). It then becomes an economic crime (Lindgren 2001).

Svart arbete is common in the construction sector (Skatteverket 2017). A developer might appear to be formally compliant, yet the firm will outsource certain tasks to a subcontractor, who in turn finds another subcontractor in an increasingly informal chain of cash payments to foreign workers with insecure contracts. The establishment of the EU single market in the 1990s led to an inflow of skilled craftsmen and other menial workers from neighbouring Eastern countries open to working for considerably lower wage levels. Although much of this low-skilled work takes place according to laws and regulations, there is also a slippery slope of paying lower wages in cash to people and avoiding safety regulations when deadlines approach. At its extreme, svart arbete also includes mistreatment of immigrants working without permits with no other choice of income – a relationship close to slavery. For instance, Sweden has increasing numbers of seasonal guestworkers picking wild berries, and they have little means to contest inadequate compensation when contracts are breached by unscrupulous employers. Svart arbete might also encompass criminal activities such as smuggling, prostitution, or the fencing of stolen goods, although in principle. such illegal work is not subject to taxation (Skatteverket 2006:4:21).

Purchasing svart arbete can be seen as a smart move, a way to accomplish cheap and simple transactions (Björklund Larsen 2013). Exchanging svart can be a sign of being well-connected. As a form of citizen protest, it articulates a form of individual opposition to an encompassing state that is seen as meddling in people’s everyday life (Gudeman 2001:12, Leonard 1998:1). Danes had a saying during the 1980s – ‘eat green, vote red, work black’ (Sampson 1986:21). The Danish participants in such an alternative economy can be described as rebels with a cause, since the explicit choice to participate was based on political contempt for all authorities. Svart arbete is thus also a form of protest: the individual experiences a discrepancy between society’s moral norms and the authorities’ laws and regulations (Björklund Larsen 2010: 176, Hart 2001b:146, Pardo 1996:165, Skatteverket 2006:4:36).

Yet, not any exchange of svart arbete is morally acceptable; people who simultaneously receive public benefits while earning income from working informally are seen with contempt (Björklund Larsen 2010: 197). By receiving and not providing, theirs is a double abuse of the Swedish state. In contemporary welfare states like Sweden and neighbouring Denmark, svart arbete is always viewed as problematic (cf. OECD 2004:225, Olwig 1986:7, Viby Mogensen 2003). In so far as citizens are perceived to be buying svart services (thereby avoiding taxes, official regulations, and union agreements), they are undermining welfare institutions and solidarity (cf. Smith 1989). The impact on society and its institutions is seen to be detrimental, for example as swallowing part of a macroeconomic recovery (Carlberg 2005). Svart arbete is often seen as thriving and even growing in devious immoral circles of exchanges. However, this type of work cannot be entirely regarded as a drain on the economy, since much of it would never have taken place if performed formally, with VAT and formal invoices (Skatteverket 2008:221). With the high-income Swedish taxes, the total payment would have been too expensive. The illegality within svart arbete is usually defined in the way it is recompensed, when and to whom, and not within the content of the tasks themselves.

The legal definition of svart arbete is in theory quite straightforward, but it is not easily applicable because many labour exchanges are without cash or take place in a neighbourly context. It follows that the extent of svart arbete is hard to measure. The Swedish Tax Administration has estimated that its level in 2021 is about the same as it was 15 years ago (Skatteverket 2021) – 6-7% of total income from work. State authorities have applied carrot and stick approaches to diminish svart arbete. One strategy has been to introduce tax deductions for documented purchase of services such as home repair or household cleaning (known as the ROT and RUT schemes). Simultaneously, the Swedish tax authorities have attempted to combat svart arbete through mobilization campaigns and third-party reporting making it increasingly difficult to hide such incomes. Without doubt, the political and moral campaigns, simplified tax reporting, restrictions on cash payments, the increase of legal tax deductions, as well as tax deductions for hiring household services have made svart arbete less attractive and less acceptable. It has instead taken more abusive forms, such as exploiting refugees without residence permits or disenfranchised migrant workers.

Acknowledgment

The author is grateful to Steven Sampson for his comments on an earlier draft of the entry.

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