Coronavirus destroys the underground economy – Economy
Billions of people work in jobs that are not recognized as such by governments – meaning they receive no help when Covid-19 decimates their incomes.
The lockdown that many countries have imposed to slow the spread of the coronavirus has an unfortunate side effect: Many people have suddenly found themselves unable to work. Governments around the world have struggled to find ways to ensure that these displaced workers still have an income. UK pays 80 percent of the wages of those on leave (which means that they are still technically employed by their company but do not work). The United States has increased unemployment benefits to which dismissed workers are entitled and increased the length of time they can receive them. Italy is give 500 euros to all self-employed workers.
Without such programs, society and the economy would be at risk. Companies that still lag behind selling their products online or take out would have even fewer customers with money to spend. And people who can’t pay rent or buy food for their families are unlikely to stay home for long. This is why some people fear that these government programs exclude certain groups of people. In particular, they do nothing for those working in the underground economy (sometimes also referred to as the informal sector, underground economy or black market).
The underground economy is made up of all elements of the economy that operate without government oversight or knowledge. This means that he is not bound by government regulations such as minimum wage and that he does not pay any taxes. Workers in the underground economy include outright criminals like drug dealers, but also many who do things like run a small fruit and vegetable stall without a license or do cash construction work.
While we don’t know exactly how many people work in the underground economy, we do know that it’s a lot. The International Labor Organization believes that these are 2 billion people in the world, which represents 60 percent of all workers. Some of the main motivations for these people to work in the underground economy may be to avoid giving money to the state. But others may simply find the formal economy too difficult to enter, perhaps due to their immigration status or level of education or simply the availability of jobs. Some of them may just not be aware that they are doing something wrong.
Italy, which has been strictly closed for a month, has a large underground economy. Many of these workers have seen their incomes drastically reduced – after all, few people are buying cocaine or roadside strawberries right now. But because the government does not formally know these incomes, it does not offer to replace them in the same way that formal sector employees are entitled to them.
There is now growing concern that the money problems these people are facing spill over into unrest and protests. It has even been reported that petty criminals and desperate people are recruited by the mafia that offer financial aid (on unsavory terms) that the state does not currently offer. The government now says it will announce new cash payments for underground economy workers this week.
Read our explanation on: black market.