Unreported Employment - Harm Caused By Unreported Employment

Harm Caused By Unreported Employment

Unreported employment can have harmful effects on a government, and can negatively impact employers and employees.

Unreported employment directly affects the government's ability to fund resources (government spending) by creating a tax gap. This refers to the loss of tax revenue a government makes due to unreported income.

A 2005 UCLA study showed that a then-particularly weak economy in the state of California was the result of more than two million workers who were receiving their pay off the books without paying taxes.

Those who are employed under the table, including illegal immigrants, may be denied rights that legally employed workers have, such as minimum wage, various benefits (particularly unemployment benefits), and fair treatment.

Under-the-table employees who lose their jobs may not be entitled to collect unemployment benefits. They have limited causes of action against their employers for issues such as mistreatment, on-the-job work accidents or lack of payment. Employers have limited cause of actions against employees who commit crimes such as embezzlement, theft, or abuse of employer.

Local government revenue agencies (IRS/CRA) look for lifestyles not inline with the income reported. They possess tools that aid in assessing unreported taxes which can result in large fines or jail time for the employer.