An interesting piece in the Wall Street Journal this morning in which Robert Barro, the Harvard economist, assesses various explanations for the by now notorious difference in employment figures between the Bureau of Labor Statistics’ payroll survey (the BLS calls companies to ask how many folks they employ) and its household survey (the BLS calls homes to ask if they people who live in them hold jobs).
In response to which my brother, who does a lot of business over the Internet, offers yet another explanation, this one suggesting why a lot of employment shows up in neither survey:
“[Employment is understated because] the internet has created a vast underground cash economy. The dozens of eBay sellers and independent retailers I did business with last year all got paid in cash and are not about to respond to a survey about any related activity….I just bought some things for the house [on the Internet]…and they wanted PayPal. I get computer parts the same way. It used to be that the only people that could benefit from a ‘cash basis’ were barbers and waitresses, but that is no longer the case.
“I spent more in an underground economy last year than on anything other than housing and food. How much of what I spent do you suppose the people who sold me goods and services actually reported?”