While the above-ground economy in California is still struggling along, the underground economy in this state is growing and, according to the Los Angeles Times, is costing us $7 Billion dollars every year. The problem is most common in the construction industry, restaurants, hair salons, janitorial services and more.
Employers avoid paying taxes, unemployment insurance and worker's compensation insurance. Depending on the industry, such costs can amount to 40 percent of employing an individual. Employees profit by making straight cash, but if they get injured on the job without workers' compensation it costs them and the state much more.
Now a coalition of state agencies is targeting this issue. They are combing through records that show companies filing some documents but failing to submit others. The estimated size of the underground economy varies widely, but stakeholders say it's between $60 billion and $140 billion.
WEIGH IN:
Will the state be able to catch all the scofflaws? Are the fines not big enough? One violator in Sacramento who had 47 employees without workers' compensation said the fine was significantly lower than if he had paid for workers' comp. Why do employers feel so pressed to cheat? How does it hurt their workers?
Guest:
Julie Su, California Labor Commissioner
Scott Hague, Founder & Chair, Small Business California, a statewide advocacy group; Hauge is a small business owner -- an insurance brokerage