Study Looks at Costs of Growing Global Underground Economy

No one knows how large the underground economy is, but it functions in countries throughout the world at considerable direct and indirect costs, according to a new study.

“Under the table and off the books, millions of persons worldwide are engaged in jobs that evade the relevant tax and labor laws--frequently with an official scowl but a tacit wink from their governments,” says the report released Monday by Johns Hopkins University.

Titled “The Informal Economy: Studies in Advanced and Less Developed Countries,” it includes essays by 19 authors from Italy, Spain, Uruguay and Bolivia as well as the United States.

One author estimates the size of the underground economy at 4.4%, another puts it at 10%, and a third one says its 33% of total production. The size also varies by place and industry.

“Negative consequences of the process are endured not only by workers--who must cope with low wages, insecure jobs and lack of occupational safeguards--but also by entire industries,” they say.

Bolivian cocaine processors, Soviet vodka distillers and thousands of unregistered cabdrivers in New York City all are considered part of a growing underground world economy that the study says skews statistics as well as producing huge unreported and untaxed profits.

A decade ago the size of the underground economy in New York City alone was estimated at more than $16 billion.

Saskia Sassen-Koob, director of the urban planning program at Columbia University’s Graduate School of Architecture and Planning, says a 1981 survey of four blocks in Manhattan found 90% of all interior construction being done without permits. She estimates that there are 21,000 “gypsy” taxicabs not licensed by the city, twice the number of legal cabs.

A study based on a survey of 1,000 recent Soviet immigrants to the United States estimates that in Soviet cities of the late 1970s, 40% of the households received more than a quarter of their income from informal activities. These ranged from distilling vodka to market gardening, and from bootleg medical services to repairing private cars with parts stolen from government garages, according to former residents.

In Latin America, about 40% of the work force is believed to be informally employed, editors say.