Unfair competition in the construction industry in Belgium : a business survey on social fraud

1. SUBLEC International workshop on A survey instrument for revealing social and Fiscal Fraud Brussels, 25 February 2008, Federal Public Service Social Security HIVA Catholic University of Leuven - CREPP University of Liège - Centre de sociologie du Travail, de l’Emploi et de la formation, University of Brussels Federal Public Service Social Security and Federal Science Policy Unfair competition in the construction industry in Belgium : a business survey on social fraud Jozef Pacolet & Katleen Baeyens HIVA Higher Institute of Labour Studies, Catholic University of Leuven

2. 1. Content • Mission • Method • Population of sector • Limits of administrative information • Survey: organization • Content • Results • Conclusions • Summary • Relevance for further continuation

3. Mission • Taking awareness of mechanisms unfair competition in the construction industry, their size and their consequences for the industry • Unfair competition: fact of no following or backing out of legislation (for example: no respect for labour and wage conditions, no respect for safety measures, false independent, undeclared work, …) to create by this way a competition advantage

4. Method • Contacts with “stakeholders” • Analysis of administrative information • Survey • Conclusion

5. Population of sector • Observation: Great number of small businesses: 82% of businesses have less than 10 employees

6. Population of sector • Observation: Highest percentage of occupation in sector 45.2

7. Limits of administrative information • Little sectoral information available • No univocal registration • within the framework of inspection services • by inspection services • Double counting (communal inspections) • No up-to-date information

8. Survey: organization • Taking awareness of (subjective) opinions concerning the phenomenon by the active persons in the construction industry • Additional questions: • to existing surveys: Vlaamse Confederatie Bouw & Bouwunie • to the first executed survey : Confédération Construction Wallonne

9. Survey: organization • Posing questions about : • business characteristics • proposals of unfair competition • frequency of unfair competition • consequences of unfair competition • effect of the measures on unfair competition • Number of questioned people: • Vlaamse Confederatie Bouw : 211 • Bouwunie : 78 complete answers • Confédération Construction Wallonne : 117

10. Results • Sample • Important proportion of small businesses • Bouwunie : highest % of small businesses

11. Results • Sample : • Highest % in the sectors 45.2, 45.4 and 45.3. • Comparable to different under-samplings

12. Results • Sample : • average age : highest by VCB and CCW • median age : comparable to different under-samplings

13. Results • Sample : • average and median % of assignments in the big cities: VCB > CCW > Bouwunie

14. Results • Sample : • average and median turnover new estate of houses: VCB > CCW > Bouwunie

15. Results • Proposal of unfair competition: • % of respondents already received a proposal of unfair competition: importance (Bouwunie > VCB > CCW)

16. Results • Proposal of unfair competition: • % of unfair proposals in proportion to total proposals: importance (Bouwunie < VCB < CCW – contrary to % received unfair proposals) • =>12 – 13% of all proposals: one can assume they are unfair

17. Results • Proposal of unfair competition : • Agreeing an unfair proposal, yields a substantial price advantage

18. Results • Proposal of unfair competition: profile • VCB > CCW : foreign (construction) firms and foreign temporary employment agencies • CCW > VCB : Belgian and foreign moonlighters

19. Results • Frequency of unfair competition: • % firms of which respondents inside the sector supposing they are using unfair competition: importance (VCB & CCW > Bouwunie)

20. Results • Frequency of unfair competition : • Great % of respondents: size of firm has no qualifying influence • In Flanders, one is thinking independents are profiting, in Wallonia the big firms

21. Results • Frequency of unfair competition: • Great % of respondents: age of firm has no qualifying influence

22. Results • Forms of unfair competition:

23. Results • Consequences of unfair competition : • More than a half of the respondents experience disadvantages (CCW > VCB)

24. Results • Consequences of unfair competition : • Estimate loss of work: average 1,8 – 2,5 FTE (25% - 31% of the total number in employees)

25. Results • Consequences of unfair competition

26. Results • Consequences of unfair competition

27. Results • Effect of the recent measures on unfair competition – new legislation about the application for a labour work permit : • VCB & CCW : more than 60% - no effect • VCB : if effect: positive as well as negative • CCW : if effect : almost exclusive negative • Bouwunie : 36% - no effect if effect : especially negative • Effect of the recent measures on unfair competition – activation and suspension measures on the unemployed: • no effect, or negative effect by visiting ‘applicants no prepared to work’

28. Results • Relationship between characterizations of a firm – unfair competition

29. Conclusions • Survey of unfair competition in the construction industry • Analysis administrative information: little sectoral information  limited possibilities to analyse • Posed questions to sector: • 12% of all proposals are unfair • Loss of work: 1,8 – 2,3 FTE / 25 – 31% of the total number in employees

30. Conclusions • Survey of unfair competition in the construction industry • Posed questions to sector : • Major problem: for small businesses (durable development vs. stagnation) as well as for big businesses (proposal and consequences) • More importance in the regions of the big cities and in the underdeveloped regions negative trend to undeclared work, illegality, lack of competition and economic decline

31. Summary • Survey was on unfair competition …or undeclared work • Organized as an electronic survey • With the support of the business organizations in Flanders and Wallonia • Willingness to collaborate : 406 respondents • Some remarkable responses • 12 % of all the offers are suspect • The industry thinks it is used by 27 to 29 % of the firms • 50-60 % say they are confronted with damage because of unfair competition • They observe some 30 % of price cutting • And some 25-30 % loss of volume (1,8 – 2,3 FTE in an industry with especially small firms of 6 FTE) • Underdeveloped regions are more confronted with it • Leaving us with a picture of a vicious circle of underdevelopment, unemployment, undeclared work, lack of control

32. Relevance for further continuation • Depends on willingness to collaborate with stakeholders • Could stimulate the collaboration and involvement of stakeholders • Advantage of doing combined or mirror research with employers and trade unions • Could be an action research • Could be easily integrated in regular business surveys • Limited questions could be added to regular business surveys • Might be interesting to be replicated in certain Belgian industries (in collaboration between the controllers, the employers and the employees) • Already suggested industry is catering industry; other thinkable industries are transport, cleaning, independent workers • could be organized in international perspective • could be concentrated on unfair competition and competitive advantages and disadvantages