Informal Employment in California

C HAPTER 4 I NFORMAL E MPLOYMENT IN C ALIFORNIA E NRICO A. M ARCELLI The purpose of this chapter is two-fold. After first estimating the number of persons employed informally from 1990 to 1999 in California by occupation, I next investigate (1) whether informal employment (IE) is simply an economic survival strategy; (2) whether those employed informally hold multiple jobs and pay income taxes; (3) the gender, ethno-racial, and immigrant composition of IE; (4) the geographic distribution of IE; and (5) whether those employed informally use public assistance programs. IE is here defined as “the paid production and sale of goods and services that are unregistered by, or hidden from, the state” in an effort to avoid complying with environmental, health, safety, labor, and tax regulations (Williams and Windebank 1998). The purpose is not to estimate the total amount of IE in the state, but to investigate how lower- to middle-income workers are coping economically in a context where work and welfare have been radically restructured by design (Champlin and Knoedler After reviewing some literature and the analytical approach that will guide our analysis in the next section, I explain why the estimated proportion of unauthorized Mexican immigrants by occupation is used to tag specific occupations (and all persons employed in them) as informal. A fourth section reports our findings, section five discusses some policy implications, and we conclude by summarizing the study’s major findings. The study’s results indicate that the number of those employed informally is estimated to have fallen from the early to mid-1990s, and to have risen slightly thereafter. Overall, the level of estimated IE dropped from 2.7 to 2.3 million workers, representing 17 and 14 percent of California’s total labor force respectively. Thus, contradicting the prediction of rising informality, more commonly known as the “informality thesis,” a smaller fraction of California’s workforce appears to be working informally than was the case in the early 1990s. Analysis of data covering the previous decade reveals that informal workers in California were more likely (1) to have worked for a private enterprise in the Agriculture/Mining or Personal Service sectors, (2) to have resided in southern California or the Bay area, (3) to have been younger, less-educated, ethno-racial minorities, and foreign-born, and (4) to have been impoverished, used welfare, and earned lower hourly wages compared with those working formally. Fully 94 percent of those employed informally, however, filed tax returns. Rejecting both traditional conservative and liberal approaches, it is here argued that what is needed to ameliorate the negative effects of IE is a combination of top-down (e.g., developing public Acknowledgements I would like to thank Laura Benson, Urban Planning, UCLA, for her valuable research assistance, as well as Paul Ong and Colin Williams for suggestions on an earlier draft.