Saturday, September 26, 2009

Unemployed? Try Working for Cash

From the Marketplace story "Can't Find Work? Try Looking for Cash."

Michael: I'm getting $272 a week [in unemployment benefits]. Which is just, bare bones. It's so bad that at one time I was going to the food bank. And, you know when you're really hungry and when you're facing eviction, you've got to do something.

Marketplace: So he started looking for work on the side. He found it pretty quickly.

Michael: So right now I have Craigslist open. And what I've done is I've opened three different tabs: I've opened free stuff, all gigs and all jobs.

Marketplace: He's found all sorts of work this way: software testing, landscaping, bouncing and lots of focus groups. All have paid cash. He says some weeks he's earned three times as much as his benefits check. Like everyone on unemployment, he's meant to report any earnings to his unemployment insurance office. Then they adjust his benefits down. So how does Michael answer the question, have you earned any money this week?

Michael: I opt to say, you know, no. I opt to say no, I have not. Because this is my own hard work, this is my own ingenuity, this is my own genius, and I am still looking for work every day.

MP: We hear a lot about how the official unemployment rate doesn't count those who are "underemployed" and doesn't count discouraged workers, and therefore we are underestimating the stress and pain in the labor market. However, those unemployed workers receiving unemployment compensation who are actually working for cash would offset some of the underestimation of the official jobless numbers.


At 9/26/2009 9:10 AM, Blogger Cabodog said...

In our state, they actually continue paying unemployment benefits to people who go into business and are making money from their business.

So, we layoff an employee and they go on unemployment -- then turn around and use the skills WE taught them to go into business AGAINST us -- all the while being subsidized by the state and therefore, able to undercut our pricing and steal customers from us!

Heck of a deal.

At 9/26/2009 10:23 AM, Blogger thomasblair said...


And that's why you can't have a state.

At 9/26/2009 10:31 AM, Anonymous Anonymous said...

The more people working for cash the better off we all will be. People will see just how much government takes from us.

I was out of work and working for cash and couldn't believe the amount of money I had available. I looked back at my old pay stubs, did a little math and found that my total payroll tax was 39%. Property tax was 10%. The was while earning $15 and hour and I still had to pay more income taxes on April 15.

Government laments how Americans are living pay check to pay check. Well stop taking half our income. And we also know about the income that should be ours too, but you take from our employers.

At 9/26/2009 10:32 AM, Anonymous Anonymous said...

Why don't you retitle this? "Unemployed? Try fraud." That's what this guy is doing by collecting and working.

At 9/26/2009 11:03 AM, Anonymous Anonymous said...

We laid off a guy in February who clearly could have found a job by now with his skills. Instead, he's still collecting unemployment benefits that our company (not the government) pays him. Now that Obama says that he has extended unemployment benefits (notice how he takes credit, and companies get the bill), this guy will continue to collect, and do work on the side. And companies are portrayed as the bad guy in this situation.

At 9/26/2009 11:55 AM, Anonymous Uncle P said...

Kudos to them, but it's all just anecdotes and you fell for it. You're not seriously suggesting this mitigates the horrendous unemployment in this country, are you?

What proportion of people on unemployment are working side-jobs for cash? Care to hazard a guess?

Unemployment benefits vary by state, but they are a fraction of former income. The more you made before, the smaller the fraction. Even the few people who triple their benefits with unclaimed labor will not recover all of their previous salary and benefits. And these side-jobs are irregular employment.

You can't polish a turd.

At 9/26/2009 12:14 PM, Anonymous Anonymous said...

How much of our marginal income is taxed; do the math (and some of this is based on assumptions)? Typical tax payer is in the 28% income tax bracket, typical state income tax is 5%, social security takes 15%, medicare tax takes 3%, sales tax is 7.4% where I live so estimate that is 3.7% of family income, property and vehicle taxes are roughly 2.5% of my family income, cost of mandated auto insurance is roughly 1.5% of family income, excise taxes on things I like to buy (such as gasoline, alcoholic beverages, tobacco products, etc) are roughly 1% of family income, I have seen estimates that regulations add about 5% of to cost of what we buy (this is, I believe, probably too low of an estimate) so estimate that is 2.5% of family income. Adding the above up comes to 62.2% of my family's marginal income going to pay taxes; and, yes, some of the taxes are called insurance, user fees, etc, and some of the taxes are for things I agree that I should purchase. However, if I thought about it more, I would probably come up with more user fees, taxes, etc. Are we there yet? Is 62.2% high enough?

At 9/26/2009 12:26 PM, Blogger Fishsticks said...

Nice back of the napkin analysis from the previous post - I am in at least the same level of taxation too.

What the protagonist is doing is fairly rational. He is probably avoiding taxes that helps him make ends meet. He may also be avoiding a very high minimum wage - which acts as a price floor on labor costs. The take away is reduce taxes and reduce the minimum wage to encourage employment.

Increases in taxes decrease tax compliance. Pols love to say if we raise taxes 10% we'll have 110% more money next period. The real world is never that simple.

At 9/27/2009 2:26 AM, Anonymous Uncle P said...

There's no doubt there's benefit to working off the books. But then why didn't these people do that before? Why doesn't everyone work off the books?

The answer is that the gray labor market, though not trivial, is still small potatoes. It goes unpunished because the cost of stopping it isn't worth the benefit. The feds could find and prosecute these people as easily as these people give and get labor. All the evidence is on CraigsList. There are illegal immigrants in practically every kitchen in America. ICE just needs to walk in the door.

Fallacy of Composition: if more people did this, it would ruin it for everyone. That's why it's nothing more than anecdotal.

There are lots of cash work and goods out there. I win cash playing poker. My aunt makes cash crocheting dolls. My wife sells beaded jewelry. The recession doesn't make that exceptional or noteworthy. Neither my poker, my aunt's crocheting, or my wife's hobby would replace our regular income over a sustained period of unemployment.

A woman started a business of Divorce Cakes when her wedding cake business began to struggle. Necessity breeds invention. Necessity also breeds crime, stupidity and failure 10 times for every success but we don't celebrate those things.

At 9/27/2009 2:41 AM, Anonymous Nerywal said...

The back of the envelope calculations are somewhat accurate but fallacious.

A cash worker can't avoid sales taxes, excise taxes, property taxes, vehicle license fees or mandatory insurance. A cash worker gets no workers comp or unemployment coverage. You can call that a "tax" but they do confer an individual benefit. A cash worker has no claim to social security or medicare benefits.

Even if taxes are onerous, at least part of them is paying one's fair share of defense, fire, police, streetlights and other goods we all share. Cash jobs are theft from those of us who pay.

Mandatory insurance protects others from your haphazard driving and insufficient assets to pay for damage you cause. You are likewise protected. So that's not really a tax.

BTW, social security is 12.5%, not 15%. It's roughly 15% including Medicare. And I agree taxes should be lower, government intervention lower, and no minimum wage.

At 9/29/2009 6:00 AM, Anonymous Pete said...

Michigan Unemployment Trends - August 2009

Michigan Unemployment Situation in Heat Map form:
here is a map of Michigan Unemployment in August 2009 (BLS data)

versus Michigan Unemployment Levels 1 year ago


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