Unreported employment facts for kids
Unreported employment, also called working under the table or off the books, is when someone works a job but doesn't tell the government about it. This is usually against the law. People or businesses might do this to avoid paying taxes or to get benefits they shouldn't, like unemployment money while they are actually working.
When someone works "under the table," they often don't get important benefits. These can include health insurance, paid time off for new parents, paid vacation, or money saved for their retirement. This type of work is part of what people call the underground economy, the shadow economy, or the black market.
Payments for these jobs are usually made in cash. Often, the employer doesn't check the worker's background or qualifications. This means they might not check if the worker has a license or special training, even if it's normally required for the job. While the job itself might be legal, the problem is that the employer or employee intentionally breaks one or more laws by not reporting it. In many countries, unreported work helps people avoid paying income tax and is part of the informal sector (jobs not officially recognized).
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Common Unreported Jobs
Many different types of jobs can be unreported. Here are some common examples:
- Housekeeping, babysitting, or helping with foodservice at home.
- Construction work, landscaping, or farm work.
- Taxicab driving (sometimes called "hacking" if it's not official).
- Many types of self-employment, like plumbing, being an electrician, window cleaning, painting, selling things at a street market, or gardening.
- Jobs that last only a short time, like for a day or a few hours.
- Short-term jobs for young people.
- Helping out in restaurants or bars (like a barback).
- Fixing cars, motorcycles, and mopeds.
Why People Work Unreported Jobs
There are several reasons why someone might work "cash-in-hand" or pay someone this way:
- To avoid having their wages taken to pay for things like child support.
- To pay workers less than the minimum wage or to get paid more.
- It can be easier and quicker for both the person working and the person hiring.
- It avoids lots of paperwork, record-keeping, and following many rules.
- It saves money because they don't need to hire experts like accountants or lawyers.
- To avoid checking or showing a criminal record.
- To avoid paying for insurance that is normally required.
- It allows businesses to hire people for short times without a lot of hassle.
- To earn money without losing unemployment or disability payments.
- For people who are fleeing from the law, undocumented immigrants, or involved in organized crime.
- To avoid paying taxes or social security contributions.
- To hire people who might be skilled but can't get official jobs (like if they were fired from a previous job).
- To hire teenagers or those below the official working age for short projects without following strict child labor laws.
- It can be a much faster way to get a job or hire someone.
Disadvantages of Unreported Work
Working or hiring "under the table" can cause problems for governments, employers, and employees.
When jobs are not reported, the government collects less tax revenue. This means there is less money for public services like schools, roads, and hospitals. For example, a 2005 study in California showed that over two million workers were paid without taxes. It's estimated that over US$214.6 billion was not reported to the IRS in one year alone.
Workers who are paid "under the table" often miss out on important rights. They might not get the minimum wage or benefits like unemployment pay. They also have fewer ways to get help if they are treated unfairly, get hurt at work, or don't get paid. Similarly, employers have fewer ways to deal with workers who might steal or cause problems.
If many businesses hire people illegally, it can be hard for honest businesses to compete. They follow all the rules and pay taxes, which can make their services more expensive.
Governments often look for people whose lifestyles don't match their reported income. If caught, employers can face big fines or even jail time for not reporting income or employees.
Advantages of Unreported Work
Sometimes, unreported work can have benefits, especially for small businesses or short-term jobs.
Many new business owners might not report their first few part-time workers. The rules for hiring can be complicated, especially if someone is only needed for a few hours. This early "underground" work can sometimes help a small business grow into a successful, official one.
Day laborers, who work for just a day or two, can help fill immediate needs. Doing background checks and lots of paperwork for such short jobs can be too much trouble. This often leads to hiring these workers without reporting them.
Even for a few hours of work, businesses usually have to do a lot of paperwork. This makes it hard for very small jobs to be reported officially. However, these small jobs can be very helpful for many small businesses.
In fields like architecture or marketing, unreported work is often how people start their own official businesses. The paperwork and rules can be too much for small amounts of work. Even though it's technically illegal, these side jobs usually don't make a lot of money. So, tax collectors often don't focus on them. Eventually, these professionals get enough work to start their own official businesses. Then, they usually file paperwork and pay self-employment taxes, becoming a legitimate part of the economy.
People who might struggle to find official jobs, like those with past criminal records or undocumented immigrants, can still be productive. Unreported work allows them to earn money and support themselves.
Small businesses run from home, called cottage industries, often start unreported. For example, a home cook might sell a few pies to friends without reporting the sales or paying taxes. While this is usually against the law, it can often lead to a successful, official business.
In some countries, there are rules about how much money you can earn before you have to report it. But even then, there's often paperwork to prove you don't need to report it.
Short-term jobs for young people are often unreported but can be very good for them. A teenager helping to build a shed, for example, learns valuable skills and responsibility. Most young people wouldn't get these short jobs if they had to be officially reported. Governments often don't enforce rules for these helpful, unreported jobs. For instance, police stopping kids' lemonade stands has often caused a lot of public anger.
Enforcement
Often, both the employer and employee agree to cash payments. Many times, the employer is also running an unreported cash business. These methods make it hard and time-consuming for authorities to find out about them. Most small unreported jobs happen without much effort from law enforcement. Landscaping is a good example of a cash-based business that is often unreported.
In the United States, authorities have focused on larger operations. They look for big companies that hire many undocumented immigrants. Finding and stopping small-scale unreported employment usually happens if there's another problem, like fraud, tax issues, or other legal problems with the employer or employee.
Even though governments can arrest and punish people for doing business without official approval, it's very expensive to do so. This means they usually only go after the most serious cases.
Examples in the United States
In February 2013, a New York Times report said that the Obama administration had a new plan. They wanted to stop the hiring of undocumented immigrants by focusing on the companies that hired them. By targeting these businesses, the number of undocumented immigrants working in the US would likely drop. This approach was less confrontational than past methods.
American Apparel Incident
In 2009, the U.S. Immigration and Customs Enforcement (ICE) checked the employment records of American Apparel, a clothing company. They found problems with the paperwork for about 25% of the company's workers. This suggested that many of them were undocumented immigrants. As a result, American Apparel fired about 1,500 employees that September. ICE did not say that American Apparel knew they were hiring workers without permission, so the company did not receive any fines.
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