German households largely use labor without official registration, as confirmed by the latest data from the German Economic Institute.

According to an extensive study that analyzed data from the Socio-Economic Panel (SOEP) for 2023, which served as the basis for the report by the German Economic Institute, the scale of the shadow economy in the form of domestic help is extremely high.

Out of a total of 4.4 million households that use cleaning, shopping, or garden maintenance services, only around 275,000 have registered their workers with the responsible Mini Job Office. This means that almost 92% of support staff, or approximately 9 out of 10 people, work unregistered, which in most cases constitutes 'undeclared work', generating an annual turnover of approximately 8.6 billion euros outside legal channels.

Legal status of domestic workers and the definition of neighborly help

The term domestic worker refers to a person engaged to perform various household tasks for monetary compensation. In practice, the question often arises whether this is undeclared work or so-called neighborly help (nachbarschaftshilfe). Legislation defines neighborly help as occasional and unpaid support among people who are close.

However, as soon as the help becomes regular and paid, it loses that status and becomes an employment relationship with the intention of making a profit. Considering that the average monthly earnings amount to around 180 euros, with hourly rates of 15 to 25 euros, it is clear that in most cases this is a classic employment relationship subject to mandatory registration.

The mini job model and controversies surrounding its abolition

The main mechanism for legalizing household work is the mini job. It is a specific form of part-time employment in which the worker receives a net amount without paying taxes and contributions, while the employer pays lump-sum charges to the state. Despite the simplicity of the system, a large number of employers avoid registration because they believe legal work is too expensive, although tax relief makes the actual cost of registration lower than paying under the table. Discussions are currently underway in German politics about the complete abolition of mini jobs under the pretext that they do not provide adequate pension and social protection. Experts nevertheless warn that abolishing this model could lead to even greater growth in illegal work because it would eliminate the only simple path into legal channels.

Concluding considerations on the necessity of system reform

The most important finding of this study indicates that repressive measures and complicated administration do not produce results in the fight against the shadow economy. The fact that most households do not even feel they are breaking the law suggests that the problem is deeper than mere economic calculation.

The analysis indicates that the solution could lie in introducing a voucher system, such as the one that exists in Sweden, which would further simplify the registration and payment process. Without systematic education of employers and workers about the advantages of legal work, billions of euros will continue to circulate in the gray zone, leaving workers without basic legal and health protection in the event of a workplace accident.