Anecdotes of an Informal Economy
By Arnold Kling
There is a vast and completely unreported cash economy in Central California. Tile-setters, carpenters, landscapers, tree-cutters, general handymen, cooks, housekeepers, and personal attendants are all both finding work and being paid in cash. Peddlers (no income or sales taxes) are on nearly every major rural intersection. You can buy everything from a new pressure washer to tropical fruit drinks. For this essay, I stopped at one last week and surveyed their roto-tillers, lawn mowers, and chain saws, new and good brands.
New “restaurants” are sprouting all over the highways — mobile stainless-steel encased canteens with awnings and chairs set up along the road. And yet for all the cash economy, it seems almost everyone in the food stores and doctors’ offices are on food stamps, Medi-Cal, and rent subsidies. A carload of people drove in last week, inquiring about a house nearby; the occupants assured me that they had county housing vouchers.
…Cash wages have meant augmented entitlement money and are competitive with those who are formally employed and who pay 30% of their money in payroll, health care, and federal, state, and local income tax deductions. The result is an odd sort of poverty, in which superficially the unemployed and poor to the naked eyed are almost identical to the upper middle classes.
My guess is that those in the informal economy do not get to send their children to elite primary and secondary schools, and they have little in the way of health insurance. But otherwise, they enjoy what I call Diamond Age access to the more basic goods and a few luxuries.
When I took the subway home the other night, I noticed how many people wearing clothes that signified low incomes were playing with smart phones. A few years ago, the smart phone went with a business suit. Now it goes with lots of tattoos and grubby t-shirts.