Taxes Lost, Workers Abused in “Informal Economy”

0

Taxes Lost, Workers Abused in ‘Informal Economy’

By JEREMIAH MARQUEZ

Staff Reporter

A large “informal economy” of unreported workers being paid low wages under the table exists in Los Angeles County, leading to a loss of tax revenue, unfair business competition and abuse of workers, a new study has found.

Between 9 and 29 percent of the county’s labor force went unreported in 2001, according to the non-profit group Economic Roundtable, which made the estimates in its first-ever study on the matter. This translates to between 400,000 and 1.5 million workers out of the total 4.1 million work force in the county who were paid off the books.

Several factors went into estimating the unreported work force, including the number of unauthorized Latino immigrants in the area, cash vs. total transactions and interviews with workers. One measure, the gap between the number of jobs reported by employers vs. that reported by workers, widened dramatically from 100,000 jobs in 1990 to 450,000 jobs last year.

“The evidence suggests that Los Angeles County is indeed undergoing a transformation of its economy, whereby a large number of jobs are going ‘underground,'” the study concluded.

Daniel Flaming, president of the Economic Roundtable and co-author of the study, said the underground economy not only gives companies that sidestep labor laws unfair advantages against competition, but also denies workers basic employment protections. Governments lose millions of dollars in tax revenues.

“If fewer and fewer of our workers in the county cannot make those (tax) contributions, that’s bad for all of us,” Flaming said. “It ultimately does undercut our ability to support a decent quality of life.” He put the total loss from the county’s informal employment at more than $1 billion each year.

Many unreported jobs were concentrated among low-salaried industries that require few skills, such as manufacturing, construction, restaurant and retail services. Other areas of high underground employment included gasoline stations, hotels and janatorial services.

A number of factors are spurring the expansion in underground employment. The county’s sprawling size, for one, allows companies to “disappear” and makes enforcement of existing labor laws difficult, said Jack Kyser, chief economist for the Los Angeles Economic Development Corp.

As the number of unreported jobs increases, the number of reported positions today remains roughly the same as in 1990. But the population of unauthorized immigrant workers has swelled, Flaming said, flooding the market and powering growth in illegal employment.

No posts to display