Norway: Strategies to tackle work-related crime
Work-related crime and ‘social dumping’ are growing problems that are seriously affecting vulnerable workers. Two reports investigating the issue were published in the first half of 2017, shortly after the Norwegian government introduced a revised strategy for combating work-related crime.
Work-related crime is not a legal term and has no clear definition in Norwegian law. In the government’s definition, work-related crime involves intentional and systematic violations, with a certain degree of organisation, of legislation concerning wages and working conditions, social security and taxation; exploiting workers or distorting competition and undermining the social structure. Hence, work-related crime is closely related to social dumping, that is where foreign workers are offered unacceptable wages and working conditions compared with domestic workers. Social dumping also includes breaches of regulations relating to health, environment, safety, working time and the standard of housing. Exploitation of foreign workers is often combined with economic crimes such as fraud, tax evasion and serial bankruptcy.
Types of work-related crime
A report published in June 2017 by the National Interdepartmental Analysis and Intelligence Centre (NTAES), provides a description of the situation in Norway. According to the report, enterprises involved in work-related crime are likely to be short-lived. Businesses are established rapidly and closed down as soon as the authorities start investigations or when tax liabilities or debt make bankruptcy profitable. Several strategies, identified below, are used by criminals.
Non-transparent business structures
Nominees, who are controlled by the person in charge of the operation, are used to receive payments, registered as an owner, or placed in other positions of liability. Money and employees are transferred quickly between different companies, many without any real activity, to make it difficult to trace the beneficiaries. Criminals operate in networks where cooperation and assistance facilitate unlawful activity and minimise the risk of detection.
Another method identified in the NTAES report is the covering of undeclared work through fabricated invoices. The use of false identities is combined with the use of fictitious employment contracts and working conditions.
Reduced wage costs and tax evasion
High wage levels in Norway make it profitable to reduce wage costs, avoid employers’ contributions and other costs related to wages. Vulnerable employees can be tempted or even forced to accept illegal wages and working time conditions. Foreign workers without good knowledge of local regulations are particularly exposed to such activities. Criminal employers may try to hide illegally low wages from inspectors by demanding that workers repay wages or pay illegal fees for transport, board and lodging, Thereby an apparently correct payroll can conceal the actual wage level.
Avoidance of employer liability
Another method is to avoid an employer's liability and the associated costs. If employees register as sole traders, they will be responsible for their own enterprise and will have no right to sickness allowance, unemployment benefit or benefits provided by the employer. Such an arrangement is illegal if it covers up a de facto employment relationship in which the worker is subjected to the employer’s control and management.
Scope of the problem
Work-related crime has for a long time been present in the construction industry, but it can now be seen expanding into new industries and business sectors. NTAES reports that actors previously known for serious and extensive crime in the construction industry have recently been found selling child welfare services and youth work to Norwegian municipalities. The same pattern has been seen in other European countries. Europol, the European Union’s law enforcement agency, warns of the possibility of corruption when criminals infiltrate public and private sector organisations. Illegal activities can threaten fair competition and economic growth and will, over time, erode public trust in authorities.
Because work-related crime is in essence a hidden activity, it is difficult to measure. A second report, issued in May 2017, produced by Economics Norway and commissioned by The Ministry of Labour and Social Affairs, estimates the scope and growth of work-related crime in Norway through direct as well as indirect measurement. Based on micro data numbers from Tax Norway, the Norwegian Labour Inspection Authority and the Norwegian Labour and Welfare Administration, the report estimates that the total amount of tax evasion and social security fraud is 0.5 % of mainland Norway’s gross domestic product (GDP), or NOK 12 billion (approximately €1.3 billion, as at 9 October 2017).
The report also gives an estimate of the hidden value created by work-related crime. Since work-related crime is a complex phenomenon and involves multi-criminality, the created value of the illegal activity exceeds the value of tax evasion and social security fraud. For 2015, the report estimates that the hidden created value of work-related crime was 1.2% of GDP, or NOK 28 billion (approximately €3 billion). This is the first published estimate of the economic impact of work-related crime in Norway, and might also be the only reported estimate of the hidden created value of work-related crime.
Strategy to combat work-related crime
The government has seen a rapid increase in combined organised crime infiltrating Norwegian working life. In February 2017, it launched a revised strategy to reinforce and better target the fight against this type of crime. The measures listed in the strategy include better cooperation with the social partners: a regulated labour market that makes it difficult to exploit vulnerable workers is regarded as important in the fight against work-related crime. Employer organisations and unions are taking part in industry-specific programmes designed to reduce violations of the law and to improve working conditions. Another measure involves public and private procurement. Following advice from several organisations and agencies in the public and private sector, the government recommends using tendering procedures, especially in the construction sector. From 2017, these requirements form part of public procurement regulation.
Work-related crime seems to follow in the wake of social dumping. This year, two reports have explored the issue and the government has introduced a strategy to combat the problem. Work-related crime is complex and difficult to define and measure. Measures needed to tackle the problem include harsher penalties and better coordination between the public agencies involved in surveillance of the labour market and the economy.