The 'New' Economy?

As the economy tanks and unemployment jumps to 6 percent nationwide--the highest since July 1994, the "underground economy" option is looking pretty good to many Americans.

Forget the get-rich-quick "Work at Home" ads promising "$300-$1,000 per week. There is an entire realm of underground economy activities alive and well keeping many individuals and families above water by dealing in cash payments or services under-the-table and off the books. Also called "shadow economy" and the "informal economy," it's a segment many are consigned to at a time when trolling for a decent paying job has become arduous.

According to a June 2002 International Labor Organization (ILO) Conference Report: Decent work and the Informal Economy, "There are, of course, criminal activities in the informal economy, such as drug trafficking, people smuggling and money laundering. But the majority in the informal economy, although they are not registered or regulated, produce goods and services that are legal."

One of the attendees of the June ILO conference was Karin Uhlich, of the Tucscon-based Southwest Center for Economic Integrity.

"One of the recommendations from the conference was that the ILO really ought to ensure that specific information is gathered, and by industry," says Uhlich. "So, I think there is an acknowledgement that currently there is no private or governmental entity that is doing a good job of tracking."

And that's the rub: While there are organizations tracking the underground economy internationally, there is nothing but estimates domestically.

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.

The easiest money for healthy individuals who don't want the hassle of the day labor halls is giving blood.

"We have every range," says Margaret Kolar, front office supervisor at Aventis Bio-Sciences, Inc., an international plasma collection company. "We've got computer programmers, engineers, college students and moms and dads."

Honey Bee Recycling is a metal collection yard open seven days a week that caters to mostly individuals.

Honey Bee owner Diane Harris says that in her 17 years, she has seen every walk of life imaginable, from those living on the street to one customer who drives a Rolls Royce.

"They're coming in on Wednesday or Thursday," says Harris. "One of the most common comments you'll hear is 'This will get me gas money until pay day, or diapers for the baby, or milk.'"

The underground economy isn't all about cash. There is also a minor movement toward barter for services and trading in old stuff for newer old stuff.

"In stretching their dollar, they're much more inclined to make use of resale products: used cars, used homes, furniture and clothing," says Diane Kramm, CEO of the used clothing chain Twice as Nice.

"Yes, there has been a steady increase in that kind of activity," says Kramm. Tucson's five Twice as Nice stores see 50 people per day per store selling or trading while another 130 people per day come to buy.

All these examples result in quick, unreported cash or services to those on the ragged edge. The National Center for Policy Analysis points out: "Economists estimate that as many as 25 million Americans earn a large part of their income from underground activities."

While economists have long estimated that the U.S. underground economy equals about 10 percent of the gross domestic product (GDP), there are reasons to believe the number may be larger. According to a recent International Monetary Fund survey of 21 countries, the shadow economy has been growing for 30 years--the fastest in the 1990s--doubling from less than 10 percent of the GDP in 1970 to 20 percent or more by 2000.