Monday, August 29, 2011

The Underground Economy

The underground--or informal--economy, once thought to be a relic of the third world, may be growing in the first world thanks to globalization, according to a report by the Urban Institute.

The "informal" economy is defined as economic activity that operates outside the tax and regulatory systems. It includes black market and illegal activity as well as legal work for which income is not reported. How many people do you know who have a little business on the side? That's the informal economy.

In the United States, the informal economy may generate 5 to 10 percent of the GDP, notes the Urban Institute report. Some academics estimate that 11 to 20 percent of American workers operate at least partly in the informal economy--a proportion that has been growing along with the immigrant population.

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