Anecdotes of an Informal Economy

"We asked Oucha Mbarbk what he would do if he had more money. He said he would buy more food. Then we asked him what he would do if he had even more money. He said he would buy better-tasting food. We were starting to feel very bad for him and his family, when we noticed the TV and other high-tech gadgets. Why had he bought all these things if he felt the family did not have enough to eat? He laughed, and said, "Oh, but television is more important than food!""

I can second VDH's observation about California, I see it all the tiime. Plus, lots of the formerly "employed" work as independents. It seems like most federal statistics only count payroll, but a large group of people earn money that never gets reported on payroll reports.

My wife very quickly became disgusted with her work as a social worker because she kept doing home visits to people who lived far better lives, with a great deal more material well-being, than she lived. If they stopped buying Hummers, high-end cell phones, big-screen TVs, tons of jewelry, high-end handbags and clothes, and stopped getting hairdos worth hundreds of dollars and their nails done weekly, they could more than afford elite schools for their children -- except they do not value education at all, of course. Those are the facts nobody wants to discuss.

I can confirm that quite a few all-cash employees take home as much (or more than) their non-underground counterparts. NYC bartenders can make a dollar per drink. Pole dancers can make four figures on a very good night, but always at least three. There's always a decent paycheck for someone with a commercial driver's license and no criminal record.

As for standards of living... Why would they be any worse than a secretary or auto mechanic in a dealership? And that's before public assistance of any kind. I know people who paid their way through college, including tuition, room, board, and their own auto by working off the books... Without taking loans.

Cash wages have meant augmented entitlement money and are competitive with those who are formally employed and who pay 30% of their money in payroll, health care, and federal, state, and local income tax deductions.

Add to the 30% the overhead of the bookkeeping. A one man operation like that does no bookkeeping. IMO we need a much simpler tax system. Some informal workers are collecting unemployment, they can do quite well at least for a while and we befit because we can get stuff done cheap.

More people are working that the official statistics show.

Also to add to the comments of Stephen W. Stanton, I managed restaurants for years and the servers and bartenders never paid taxes on most of their tip income, which was most of their income.

IMO this:

they have little in the way of health insurance

Shows that some people value health insurance than do others. Also some people are beating the system getting health insurance from the state by not showing income some informal workers have it through spouses.

BTW I do not think that this informal work is bad except that it shows an inefficiency of our tax and welfare systems.

Here in Romania where I live the cash economy is estimated to be 40% of the total economy. Don't ask me how they came up with the figure because i have no idea.

The major downside to the cash economy is that it renders uncompetitive marginal businesses and employees that are obeying the rules.

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