http://www.businessweek.com/articles/2013-03-28/more-americans-work-in-the-underground-economy#r=nav-fst
4.8 Million Americans have been out of work for more than 27
weeks. This is nearly 40% of the total number of Americans that are currently
unemployed. Many of these people have turned to the underground economy to find
way to bring in any income. The underground economy includes things such as drug
trafficking, and prostitution, but also includes things that are not seen as
“wrong” such as babysitting, selling material property, or mowing lawns for
money. Most Americans enter the underground economy doing tasks of the latter
sorts.
Economists
are now estimating that 18-19 percent of national income is not reported, and
therefor would be considered in the underground economy. This would total to
about $2 trillion in unreported income. If this income was reported economists
estimate that it would generate around $500 billion in tax revenue.
If the
underground economy is becoming this large, we would see and increase in cash
liquidity as more money in cash dollars would be needed to obtain these
services. As expected, the Fed has reported such a growth. Today $1.18 trillion
bills are out on the street, greatly increased from the $803 billion in 2007.
All indications say that the underground economy is growing. The question that
needs to be asked is how we can move this underground revenue to the surface to
help our real economy.
With people resorting to anything necessary to try and support their families they have to make sure that they get money any ways they can, this means people need to start hiring to allow for more tax revenues.
ReplyDeleteThis is one of the main problems for the Pakistani economy that I have noticed living there. A huge amount of the transactions that take place are a part of the underground economy and tax collection is full of corruption which greatly impairs economic progress. There was an article that estimated over 60% of the transactions in Pakistan are in the underground economy which is a staggering number. I definitely agree with you that policy makers need to adress how the US underground revenue can be moved to the surface.
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