The nexus between unemployment and the shadow economy in Lithuanian regions during the COVID-19 pandemic

Under the current extreme conditions, with an increasing number of the unemployed, the size of the shadow economy is also growing. The competitiveness of municipalities depends to a large extent on their ability to manage unemployment and reduce the size of the shadow economy. A strategy selected for improving the municipal economy significantly affects the establishment and development of business. The article aims to assess the extent to which the unemployed are involved in the informal activities in Lithuanian regions during the COVID-19 pandemic. The research is based on the method of a representative quantitative survey. The research has revealed that the main critical issues are hiding income, work in the shadow labour market and “envelope” wages, while the major areas of shadow activities cover healthcare services, hairdressing and childcare. The research has also disclosed that the unemployed not only participate in the shadow labour market, but also justify income hiding and consumption of smuggled goods. The measures recommended for reducing the number of the unemployed are raising the average wage, exempting business start-ups from taxes for several years, and reducing the unemployment and other social benefits with consideration of one’s health condition.