Without supporting policies, many PHS activities would be carried out within the undeclared market. This is mostly the result of the lower price of undeclared labour in comparison to the price of declared services (without supporting policies), but also because of social norms in some countries (the social acceptance of undeclared labour). Indeed, the sector is characterized by a high employment content (the price paid for the services is made up almost entirely of workers’ wages), which implies that formal provision of PHS is, in relative terms, much more costly (when taking into account taxes, and so on) than the undeclared provision.

The provision of PHS in the undeclared market instead of the formal market has several obvious negative implications for all sides of the market. The existence of an undeclared labour market means, on the one hand, an absence of social security rights for the workers in question and, on the other, economic losses for public finances. For public authorities, undeclared work represents a loss in social contributions and tax payments, and for undeclared workers it often means disadvantageous working conditions and an absence of social security and rights.