Question

What is the informal economy? how many people in the world's economy work in "system d"? what are some of the advantages of the informal economy? what are some of the disadvantages of the informal economy? does the united states have an informal economy? why or why not?

Answer 1

Answer:

Depending where you look for information, informal economy can cover a lot of different jobs and industries. The informal economy doesn't pay taxes and it is excluded in the gross domestic product. Some organizations include other industries under the informal economy, specially those that are not regulated or adequately controlled by the government. This includes many people who are self-employed or even employees that perform unprotected jobs. E.g. companies that hire poor or illegal immigrant workers and pay them on a daily basis.

According to the International Labor Organization, more than 61% of the world's population works under informal economies.

Some advantages of informal economies are:

• higher income resulting from not paying taxes (even on a personal level, if you are able to work and earn a living but do not pay taxes, your personal net income will be higher than if you actually paid taxes).
• a lot of people are part of it, that means large scale employment.

Informal economies tend to have serious disadvantages because the most powerful tend to abuse form the least powerful:

• child labor or even forced labor
• unprotected jobs, e.g. no social security, no health care benefits, no safety at work, etc.

Approximately 11-12% of the US economy is considered informal, and that represents almost $2.5 trillion per year. Some normal activities are included in the informal economy although we never think about them as being out of the system, e.g. babysitting, landscaping and cleaning services, etc. Other informal activities are more obvious, e.g. prostitution, drug dealing, theft, etc.