Sinking Underground: The Growing Informal Economy in California Construction

Abstract

An analysis of California's construction industry found that 143,900 construction workers were employed in the informal economy in 2011. This was comprised of 104,100 construction workers who were not reported by their employers and 39,800 who were misclassified as independent contractors.

Construction is a $152 billion industry in the California, employing 895,000 workers, of whom one out of six has sunk into the informal economy. A quarter of employees in the specialty trades (including drywall and flooring) were informal.

Informal employment in California construction has increased by 400 percent since 1972. The ranks of the informal have increased with each economic recession, but most recently a larger share of workers have stayed in the informal sector because formal sector jobs have not been recovered.

Keywords: Abuse, California, Carpenters, Construction, Decline, Economy, Enforcement, Geography, Immigrant, Impact, Income, Informal Economy, Jobs, Misclassification, Payroll, Skills, Stimulus, Tax Revenue, Under the Table Jobs, Underground Economy, Unfair Competition, Unpaid Taxes, Unreported, Wages, Work

JEL Classification: C81, D63, H11, H26, I31, J21, J23, J24, J38, J64, J68, L52, M55, O15