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Discussion on the Underground Economy

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The aim of this paper is to discuss the ramifications of the underground economy in the United States and the effects that this has had on the social and economic development of the country. The most logical place to start a discussion about the underground economy is with the job market. There are a growing number of people in the United States that have found themselves out of work in recent years. Still needing money to survive, however, these people turn to jobs for individuals or companies that will pay them cash for the services that they may provide. This negates the official hiring process and enables people to keep the money that they earn. Naturally, there are advantages and disadvantages to this phenomenon. There are those that make the claim that anytime a person has cash in their pockets, it is good overall for the economy. Bills can be paid, goods and services purchased and an overall feeling of economic well being and achieved realized by those who would otherwise remain unemployed. In some ways, those working on a purely cash basis provide an infusion of money into the economy on a daily basis. Such individuals are more likely to be daily purchasers of food and other sundry items, while being less likely to save. In addition, proponents of the underground economy point out that taxes are still being paid every time that cash is paid for an item or service in the marketplace. Many others claim that this part of the underground economy is harmful to society in numerous ways. First of all, employment and income taxes go unpaid and unrealized. Subsequently, those working in the underground economy go without benefits of any sort. If they are injured on the job for example, they will likely have no insurance with which to take care of their medical bills and their ‘employer’ will likely not claim responsibility. In addition, there are no guarantees of work, no implied sick or holiday time, and little recourse if there is an employment dispute. In essence, workers in the underground economy are left on their own and largely unregulated. Even though the jobs may pay them a daily wage, they are not legal and such workers would have a difficult time making a complaint should one arise. While so called day laborers depend on their daily jobs to survive, they are often paid a wage that is lower than industry standard. In addition, those that employ the day laborers end up saving money that should be going to pay employment, income, unemployment, and service taxes. This is billions of dollars annually that does not make its way back into society. In addition, if the cash that is made by working in the United States (or in other underground economies around the world) goes unspent, or is sent abroad, then there is no direct benefit to the country as a whole in terms of tax revenue. This would negate the argument that even day laborers benefit the overall economy because of the money they spend on goods and services. For that argument to carry weight, there would need to be proof that the amount of cash spent outpaces the money would have been collected in taxes. Needless to say, this would be a tough argument to win. Another aspect of the underground economy in any given country can be seen in the black market. This is a marketplace where goods or services are traded in a completely illegal manner. What makes the black market a part of the under