If the 'black economy' is running 4 times the normal economy.?

Question

do official statics mean anything? Example, if someone worked cash in hand they wouldn't show up on any offical statistics. Unemployment could be 8 million, the government might say 1.5. your thoughts.

Answer 1

Even if the black economy is four times the size of the official economy, official statistics are still good for some things. For starters, they help estimate the extent of tax evasion.

Answer 2

The black economy being 4 times the size of the 'normal' economy is a statistic in itself which makes the question rather contradictory.

You can look at it from a philosophical perspective, i.e. do any statistics mean anything, or from a logical perspective.

If the black economy is four times the size of the normal economy then seriously, switch them around and make all the illegal dealings legal and you've got a recipe for economic success.

Besides which, unemployment isn't officially measured by the government, it's done by the International Labour Organisation to ensure that governments don't accidentally send out false figures. Just because somebody is unemployed doesn't mean they are a black market dealer - do you think everybody who lost their job after the miner's strike of the 1960s or Black Wednesday just figured they'd deal smack and bootleg DVDs instead?

This is nonsense from the outset, there is no way to accurately measure the size of the black market and even if there was it wouldn't even be half the size of the legal economy, let alone 400% larger.

Answer 3

Official statistics are a little more sophisticated than you are giving them credit for. Whilst there are certainly large black (illegal) and grey (informal) sections of the economy the official estimates attempt to take this into account.
For instance, the unemployment estimate is calculated not through job office data (that figure is known as the claimant count as is widely recognised to be a poor measure of unemployment), but through telephone surveys conducted over a wide sample of the population. This is then adjusted to allow for misreporting etc. This is of course far from perfect, and almost certainly contains errors, but provides the best estimate of true unemployment (thus hopefully excluding those who are in black market employment). This is based on the ILO (International Labour Organisation) methodology as is used by most respectable countries now to calculate unemployment.
If it was true that the black market was 4 times the size of the legitimate market and this was not included in official figures then this would imply that there are 145.5 million people employed in the UK at the moment (official figures suggest 29.1m). This would require a population the same size as America! - UK population is actually around 60.5m.
Current estimates for the size of the UK black economy is somewhere around 10% of the total economy.

Answer 4

I can only speak for Canada, but even if you don't work in Canada and thus have a reported Income of $0, you'd still send in your taxes and claim certain benefits like GST returns (about $200 a year even if you didn't work.) So it should be rather accurate... that or a lot of people are passing up the chance for free money.

I assume the US probably has similar benefits that can be claimed (not GST of course)...

Answer 5

Official statistics means what the people in power want us to believe.