With the growth in unemployment, rising labor costs, rigid legal regulations, increasing numbers of layoffs and discharges, and high employer social security taxes, since the 1970s Spain has experienced the growth of an increasingly important underground economy (economia sumergida). Its rise has been of growing concern to government policymakers. Observers estimated that it accounted for 10 percent to 15 percent of the GNP, and a 1985 government study suggested that the number of those employed in the underground economy amounted to 18 percent of the entire active labor force. Other analysts believed that as many as 33 percent of those officially listed as unemployed-- about 20 percent of the working population--were actually working in the shadow economy. Workers in this sector were particularly numerous in labor-intensive industries and services. According to official estimates, agriculture accounted for the largest share, estimated at perhaps 30 percent services claimed up to 25 percent construction, 20 percent and industry, a little less than 20 percent. Most of those involved in the service sector worked as domestics.

Typically, workers in the underground economy were young people with minimal educational and professional qualifications. Many were single women, more often than not, those without family responsibilities. This sector of the economy was marked by high labor turnover its employees earned substandard wages, and they often toiled in unhealthy surroundings, frequently at home. Though wages were low, those who worked in the underground economy could avoid paying taxes and social security contributions--an aspect of the sector that made it attractive to employers as well as to laborers.

Data as of December 1988