# **1. Introduction**

The phenomenon of shadow employment in Poland is monitored by the Polish Central Statistical Office (CEO). The estimates of the number of the shadow employees in Poland are published annually in the Statistical Annuals. Apart from that, more detailed assessments were performed three times between the years 1995 and 2004 by the dedicated irregular module of the Labor Force Survey (LFS) performed in Poland on a quarterly basis. According to CEO estimates, the number of shadow employees in Poland in years 1995-2006 fluctuated between 663,000 in 1998 and 1,079,000 in 2006 - from 4.3% to 7.3% of total employment in Poland.

Unfortunately, the micro-data from the dedicated survey tend not be made available for researchers for further analysis and therefore anyone willing to analyze this issue more deeply has to either conduct an additional dedicated survey or try to estimate the number of shadow employees using the existing information.

As a result, a number of dedicated, mostly one-off surveys of the shadow employment in Poland have been performed by other institutions. In 1994 and 1997, such surveys with samples of 1,000 people each were performed by The Gdansk Institute for Market Economics and published in Grabowski (2002). Another survey was performed by the CEBOS company in 2004 (CEBOS, 2005). The former indicated that the share of shadow employees in Poland decreased from 29.6% in 1994 to 14.1% in 1997. According to the latter, the estimated share of shadow employees amounted to about 13% in 2004.

The two biggest dedicated surveys of shadow employment in Poland were performed in 2007. They were run independently by two institutions, both commissioned by the Polish Ministry of Labor and Social Affairs.

One of surveys was performed by the Institute of Labor and Social Affairs in cooperation with CEBOS institute. According to its results out of the total sample of 9,038 persons aged 15+ interviewed 4.8% answered that they performed any unregistered work within 12 months before the interview. Taking into account that according to the LFS, the employment rate in Poland in 2007 was 48.6% it means that the share of shadow employment in total employment amounted to about 9.9%.

The second survey was performed by CASE (Center for Social and Economic Research) in co-operation with Millward Brown SMG/KRC institute. The number of people interviewed during this survey was 18,121. Following the best practice for similar surveys, the respondents of this survey were not asked directly about their shadow activities. The status of their jobs has been identified by the researchers based on a series of questions concerning the kind of working agreement, wage arrangements and tax and social security payments. According to the results obtained, 9.3% have been identified as having fully or partially unregistered jobs either in their main or additional working place. Although the size and the methodology of the two surveys differed, the results obtained have been surprisingly close suggesting that they reveal the actual figures more or less.

This paper presents the results of an attempt to use the results obtained by the CASE survey in order to: (a) analyze the development of the shadow employment in Poland in years 20032008 and, (b) analyze the transition probabilities in and out of shadow employment. This analysis will allow us to verify the hypotheses about the nature of shadow employment. Is it the way to registered employment or a closed avenue leading either to the next shadow