A Peep into the Parallel Economy of USA could be an Eye-Opener

As the economy of America falters with increasing foreclosures and unemployment a shadow or parallel economy is emerging. The faster one shrinks the quicker does this other informal economy grow carving out a living for the deprived.

Professor Fredrich Schneider of Johannes Kepler University (Linz at Austria) focuses on economy. He said, “People have less ability to earn money in the official economy. They work in the shadow economy. It will grow this year by 5 percent, at least.”

Walking down Malcolm X Boulevard in Harlem one gets to see the thriving street economy. Vendors are peddling incense, nuts, reading material etc. Some have licenses as they occupy the sidewalks on sunny days. Few of them trundle carts dodging the pedestrians because he has to keep walking so as to avoid the law.

These vendors are par excellence entrepreneurs – surviving during challenging days. These are the findings of economist Robert Fairlie of University of California. He has calculated an upshot in business activities amongst the lowest income group in USA since the recession. In an interview he explained, “When the recession hit, you got a lot of people going into necessity business.”

The parallel economy can be looked upon as a safety cushion for the poor to fall back on. He said, “The informal economy is really something that emerges out of necessity,” says Carolina Valencia, associate director of research of Social Compact, a Washington-based nonprofit that estimates shadow economic activity to show low-income neighborhoods’ market strength to new businesses. It makes sense that poor people and [immigrants] without the necessary paperwork would be more involved in these activities.”

In Harlem nearly 10% of the earnings are informal. From July 2008 till the close of June 2009 the small shops in the locality have taken a severe beating and downed shutters as per the findings of Greater Harlem Chamber of Commerce.

Gene Fairbrother who is one of the leading advisors in small scale business said “competition is competition.” But he thinks that competition coming from those who do not pay taxes and licence fees is not fair to those who are struggling by following the rules. He observed an increase in the number of callers to his Shop Talk who wanted to know about home based enterprises. Some said they want to give up their jobs in salons and like to start their own businesses from home. His advice is that regulation should come in to make operations more smooth and hassle free.

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