"Going Underground:The shadow economy is about to top $1 trillion"

From Barron's (subscriber only):

America has two economies, and one is flourishing at the expense of the other. First, there's the legitimate economy, in which craftsmen are licensed and employers and employees pay taxes. Then there's the fast-growing underground economy, where millions of nannies, construction workers and others are paid off-the-books, their incomes largely untaxed. The best guess as to the size of the output of this shadow economy is about $970 billion, or nearly 9% that of the real economy. It should soon pass $1 trillion.

What is largely fueling the underground economy, experts say, is the nation's swelling ranks of low-wage illegal immigrants. The government puts this population at 8.5 million, but that may represent a serious undercount. Robert Justich, a senior managing director at Bear Stearns Asset Management in New York, makes a persuasive case in a forthcoming paper, "The Underground Labor Force Is Rising to the Surface," that illegal immigrants actually number 18 million to 20 million. If true, the economic implications are profound and could help shape debates slated in Washington this year over both immigration policies and tax reform...

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