Buddhist Catholic Contemplative Evangelical General Christian Hindu Jewish Latter-day Saint Muslim New Visions Progressive Christian

Beliefs

Topics

Columnists

Resource Library

Research Tools

Video

Podcasts

Thought Readers

Faith In Media Tracker

Newsletters

Ad-Free & Subscriber Log-In Subscription Support

Follow Patheos

Home
Catholic
Politics and Religion
The “True Minimum Wage” = the Shadow Economy wage

The “True Minimum Wage” = the Shadow Economy wage

Last updated on: June 5, 2016 at 8:18 am by Jane the Actuary

The “True Minimum Wage” = the Shadow Economy wage 2016-06-05T08:18:17-06:00 Jane the Actuary

LOGO Patheos Explore the world's faith through different perspectives on religion and spirituality! Patheos has the views of the prevalent religions and spiritualities of the world.

So I checked my twitter feed this morning and saw a link to an article on the impact of the $15 minimum wage in New York on car washes. According to the article, New York, unlike much of the rest of the country, relied on manual labor rather than automated car washes because of the abundance of cheap, immigrant labor, which, until a decade ago, worked under the table for small hourly wages plus tips. But, as the Reason article describes,

The situation started to change in 2008, when state investigators conducted the first car wash sweeps in recent memory. The following year, the U.S. Department of Labor settled a lawsuit against one of the city’s largest operators, with cumulative back wages and damages totaling $4.7 million. In 2012, the retail workers union and two affiliated labor groups launched WASH New York, a campaign to organize employees of the city’s more than 200 car washes. Last year, Mayor Bill de Blasio signed the Car Wash Accountability Act, which created a punitive new licensing regime.

The article goes on to say that, inevitably, New York car wash companies will move to automation, and, instead of $15/hour jobs, the employees will have no jobs at all.

And that may indeed be true for these particular companies, because the close attention from the city, and the unionization, means they won’t be able to just slip back into the shadow economy.

But it seems to me that for a large number of small businesses, the impact of a dramatic increase in the minimum wage will be exactly that: a move to paying (some of) their employees off the books.

Back many, many years ago, I had a part-time job at a dry cleaners in high school, and it was well-known that the white high school girls who worked at the counter for minimum wage were paid on the up-and-up, but that the black men in the back were paid in cash, off the books, or paid a mix of cash and properly-recorded time. (Remember, this was a Detroit suburb, in the 1980s; in other times and places, it’d be immigrants, but there, it was men from Detroit coming to the suburbs for work.) How much they were paid, and whether they accepted a lower-than-market wage, because they didn’t need to pay taxes (and could keep welfare benefits, or perhaps pay less in child suport), I don’t know. Whether this still continues there, or how prevalent it is, I also don’t know, and there’s not much out there to be found via google, with the largest number of links saying, “it’s hard to measure.”

But here are a couple links:

A study from 2011, which was footnoted in the Wikipedia article on the topic, the key bit of which is this table:

6-5-2016 8-56-41 AM

The details behind the calculation of these two figures are in the article itself, but they seem to track each other well, and whichever method is correct, this is a high level of unreported income.

and a CNBC article from 2013, which reports:

“I think the underground economy is quite big in the U.S.,” said Alexandre Padilla, associate professor of economics at Metropolitan State University of Denver. “Whether it’s using undocumented workers or those here legally, it’s pretty large.”

“You normally see underground economies in places like Brazil or in southern Europe,” said Laura Gonzalez, professor of personal finance at Fordham University. “But with the job situation and the uncertainty in the economy, it’s not all that surprising to have it growing here in the United States.”

Estimates are that underground activity last year totaled as much as $2 trillion, according to a study by Edgar Feige, an economist at the University of Wisconsin-Madison.

That’s double the amount in 2009, according to a study by Friedrich Schneider, a professor at Johannes Kepler University in Linz, Austria. The study said the shadow economy amounts to nearly 8 percent of U.S. gross domestic product.

Absent from this latter article, or similar ones, is any attempt by the feds to stop the practice. In fact, it wasn’t all that long ago that we read about communities establishing “day worker centers” that explicitly accomodate such practices when it comes to immigrant workers.

So what happens if more work shifts to the underground economy, or a hybrid like the dry cleaners workers receiving their pay partly in cash? Would the government be more willing to ramp up its efforts to eliminate it if it otherwise risks being an even larger share of the economy?

Image: a car wash. https://commons.wikimedia.org/wiki/File%3ACar_Wash%2C_San_Bernardino%2C_CA.jpg; By Cogart Strangehill (Ext. Car Wash, San Bernardino, CA) [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

Previous Post

June 4, 2016

How to earn $100 million

Next Post

June 6, 2016 Should Islam abandon the Hajj?

Browse Our Archives

Select a Category Actuarial/Retirement Issues Politics Uncategorized

Select a Month September 2026 August 2026 July 2026 June 2026 April 2026 March 2026 February 2026 January 2026 December 2025 November 2025 October 2025 July 2025 June 2025 May 2025 April 2025 March 2025 February 2025 January 2025 December 2024 November 2024 October 2024 September 2024 August 2024 July 2024 June 2024 May 2024 April 2024 March 2024 February 2024 December 2023 November 2023 October 2023 September 2023 August 2023 July 2023 December 2022 September 2022 August 2022 July 2022 June 2022 May 2022 February 2022 January 2022 December 2021 August 2021 June 2021 April 2021 February 2021 January 2021 December 2020 November 2020 October 2020 September 2020 August 2020 July 2020 June 2020 May 2020 April 2020 March 2020 February 2020 January 2020 December 2019 November 2019 October 2019 September 2019 August 2019 July 2019 June 2019 May 2019 April 2019 March 2019 February 2019 January 2019 December 2018 November 2018 October 2018 September 2018 August 2018 July 2018 June 2018 May 2018 April 2018 March 2018 February 2018 January 2018 December 2017 November 2017 October 2017 September 2017 August 2017 July 2017 June 2017 May 2017 April 2017 March 2017 February 2017 January 2017 December 2016 November 2016 October 2016 September 2016 August 2016 July 2016 June 2016 May 2016 April 2016 March 2016 February 2016 January 2016 December 2015 November 2015 October 2015 September 2015 August 2015 July 2015 June 2015 May 2015 April 2015 March 2015 February 2015 January 2015 December 2014 November 2014 October 2014 September 2014 August 2014 July 2014 June 2014 May 2014 April 2014 March 2014 February 2014 January 2014 December 2013 November 2013 October 2013 September 2013 August 2013 July 2013

TAKE THE

Religious Wisdom Quiz

Who is described as the "son of encouragement" and traveled with Paul?

Select your answer to see how you score.

Barnabas Silas Luke Mark