The Underground Economy
Some social analysts make a distinction between the legitimate and the underground economies in the United States. For the most part. the occupations previously described in this chapter operate within the legitimate economy: Taxes on income are paid by employers and employees. and individuals who hold jobs requiring a specialized license (such as craftspeople or taxi drivers) possess-the appropriate credentials for their work. By contrast. the underground economy is made up of a wide variety of activities through which people make money that they do not report to the government, and in some cases, their endeavors may involve criminal behavior (Venkatesh, 2006). Sometimes referred to as the “shadow economy; the underground economy is made up of workers who are paid “off the books,”which means that they are paid in <ash, their earnings are not reported, and no taxes are paid. Law full jobs, such as nannies, construction workers, and landscape/yard workers. are often part of the shadow economy because workers and bosses make under-the-table deals so that both can gain through the transaction: Employers pay less for workers’ services. and workers have more money to take home than if they paid taxes on their earnings. According to some financial analysts, the underground economy is increasing rapidly because of the growing number -wage, undocumented immigrant workers who come to the United States hoping for a better life for themselves and their families (Mc’Iague, 2005). Fear of apprehension by immigration authorities is enough to drive many undocumented workers into the underground economy. The underground economy also involves trade in lawful goods that are sold “off the books- because no taxes are paid on the sales. In his study of the underground economy of the urban poor. the sociologist Sudhir Venkatesh (2006: 9) explains how these transactions take place
Most underground exchanges are short-term efforts to make a buck, but they can nevertheless follow .
follow strict patterns. Individuals know where to meet one another to trade off the books; there are usually particular places where this trading occurs and particular
people who are known t o be involved. Peoplewill have a rough idea of prices or rates of barter and trade before initiating the exchange. And it is not difficult to predict when conflict may arise; nor are people entirely unaware of the means for addressing disputes over quality, pricing, and service.In other words, while there are endless reasons to participate in the underground (or to stop doing o). there are always rules to be obeyed, codes to be followed. and likely consequences of actions.
The selling of goods in the underground economy may have increased in recent years due to the popularity of online commerce. Although individual sellers are responsible for paying taxes 011 items sold on websites such as eBay,it is unknown how many of the sellers actually report income from their sales. According to one way of thinking, operating a business in the underground economy reveals apitalism at its best because it shows how the. ufr~ market” might work if there were no government intervention. However. from another perspective, selling goods or services in the underground economy borders on-or moves into-criminal behavior. Some estimates of the output of the underground economy place it between $970 million and $1 trillion, and analysts believe that increasing numbers of people work or sell goods in this shadow economy (McTague. 2005). For some individuals, the underground economy offers the only alternative to unemployment, particularly in poor communities where people often feel alienated fromthe wider world and believe that they must use shady means to survive (see Venkatesh, 2006).