The underground economy isn’t just drugs and sex work–and it touches all of our lives.
By Sarah Jaffe
September 16, 2011
The United States continues to suffer from mass unemployment. People have had to adjust their lifestyles to the new reality—fewer jobs, lower wages, mortgages to pay that are now more than their homes are worth. Millions have dropped out of the job hunt and are trying to find other ways to sustain their families.
That’s where the underground economy comes in. Also called the shadow or informal economy, it’s not just illegal activity like selling drugs or doing sex work. It’s all sorts of work that doesn’t get regulated by the government or reported to the IRS, and it’s a far bigger part of the economy than most of us are aware—in 2009, economics professor Friedrich Schneider estimated that it was nearly 8 percent of the US GDP, somewhere around $1 trillion. (That makes the shadow GDP bigger than the entire GDP of Turkey or Austria.) Schneider doesn’t include illegal activities in his count– he studies legal production of goods and services that are outside of tax and labor laws. And that shadow economy is growing as regular jobs continue to be hard to come by—Schneider estimated 5 percent in ’09 alone.
The Young Women’s Empowerment Project [PDF] describes the “street economy” as “… any way that girls make cash money without paying taxes or having to show identification. Sometimes this means the sex trade. But other times it means braiding hair, babysitting, selling CDs/DVDs, drugs or other skills like sewing and laundry.”
D.A. Barber explained:
“This underground economy goes beyond the homeless collecting aluminum cans or clogging day labor halls. It includes the working poor getting cash for all forms of recycling: giving plasma, selling homemade tamales outside shopping plazas, holding yard sales, doing under-the-table work for friends and family, selling stuff at pawnshops, CD, book and used clothing stores, and even getting tips from restaurants and bars–to name a few.”
That means nearly all of us have participated in some way in the underground economy.
Yet little is known or discussed about this area of our lives, even though it touches many of us as we try to make ends meet.