How Does The Underground Economy Impact Employmnt?

310 Words2 Pages
What impact does the underground economy have on the overall economy? The underground economy according to Mcgraw-hill is unreported or illegal production of goods and services that is not counted in GDP. There are a series of questions that economists want to know. Like what happens if the growth of the underground economy continue to increase? How big is the Underground Economy and why is it growing? These are all questions that really can not be answered accurately due to the fact that the underground economy isn't documented. The underground economy is said to cause three issues. The economic and social status of the individuals, households and country is looked at in a bias way if one is looking at official statistics. Meaning that the number of people working is undetected. The downside to this is the macro economic policies are likely to be too expansionary and social policy too excessive. The second issue is these underground economy wages are escaping taxation which causes a loss in tax revenue. Lastly it shows that the citizens and the government have an unhealthy relationship. The taxpayers are not happy with the public services from the government and seek help with out having to pay taxes. It is feared that this act will make it hard for the government to finance the public goods necessary for the economy and society. The underground economy should neither be identified with illegality. Some activities are perfectly legal but are not subject to taxes, and therefore escape measurement in official statistics. Other activities are legal as such, but taxes are evaded. Finally,on illegal activities no taxes are paid. Broader definitions of the informal and underground economy, depending on their purpose, include private household production and redistributional activities. In the following, the more narrow definition considering on unrecorded productive

More about How Does The Underground Economy Impact Employmnt?

Open Document