The Albanian government has taken a firm stand against undeclared wages, warning businesses to report actual earnings or face tough penalties. This initiative aims to strengthen the pension scheme and tackle the growing issue of informal work in the country.
Recent data paint a concerning picture of informality in Albania’s labor market, where about 60% of informal employment is found in low-wage sectors. Another 20% each pertains to average and high earners.
So, what drives the trend of underreporting wages? For many low-wage workers, the reality is that they often have basic skills and are employed in sectors that require little expertise, leading them to operate in the shadows. On the other hand, those in higher wage brackets—often very productive individuals—may choose to underdeclare their earnings to dodge hefty tax bills. With Albania’s tax rate for high salaries set at 23%, it’s no surprise that many seek ways to reduce their tax burdens.
The implications of widespread informality extend far beyond financial losses. Many low-wage workers miss out on crucial social security and healthcare benefits, and there’s a real concern that the cycle of undeclared work may continue for future generations.
In response, Prime Minister Edi Rama has announced plans to leverage artificial intelligence to track down wage informality. However, tackling this issue isn’t just about technology—it’s also about addressing the root cause, namely the high tax rates that push people toward avoidance.
As the government intensifies its efforts to promote wage transparency, the effects on Albania’s pension scheme and the social fabric will unfold over time.
