Regulation

1 in 6 California Construction Workers Labors 'Informally.' Can't Be the Lousy Business Environment, Can It?

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California's Governor Jerry Brown signed a law last week threatening punishment for handymen who advertise their services for jobs larger than $500, and giving state enforcers free access to job sites to check on contractors' licenses. As Steven Greenhut noted for Reason, a big push for the law, which prescribes criminal time for unlicensed work that previously drew administrative penalties, came from the state's contracting industry. In a state that continuously ranks toward the bottom of assessments of economic (and social) freedom, contractors seem dead-set on penalizing competitors who flee into the shadow economy to escape burdensome taxes and regulations. That's a lot of competitors, considering that one in six of the state's construction workers labors "informally."

Just weeks ago, Economic Roundtable released a report noting that "Informal employment in Californian construction has increased by 400 percent since 1972." Formal employment—that is, work subject to the state's growing web of red tape and taxes—has increased too. But the biggest growth has been in self-employment, "independent contractors" who aren't, and outright off-the-books work.

A new report by the Economic Roundtable, a public benefit research organization, released on Labor Day, found that 143,900 construction workers in California fell into the informal economy in 2011. This was comprised of 104,100 construction workers who were not reported by their employers and 39,800 who were misclassified as independent contractors. Construction is a $152 billion industry in the Golden State, employing 895,000 construction workers, of whom one out of six has sunk into the informal economy. A quarter of employees in the specialty trades (including drywall and flooring) were informal.

California work

The report is full of hand-wringing over lost taxes and those poor mistreated workers sweating through the day with low pay and no benefits. Don't knock yourself out looking for any acknowledgment that many of the jobs might not exist at all if the work was done by the rules.

In its 2014 rankings of best and worst states for business, Chief Executive magazine bluntly announced, "California is the worst state for business for the tenth year in a row." The state gets one star out of five for taxes and regulation. One executive is quoted saying, "California could hardly do more to discourage business if that was the goal. The regulatory, tax and political environment are crushing."

Californians should probably be glad that they still have so many informal jobs, even if that means regulators and tax collectors get their feelings hurt. Travis H. Brown, author of How Money Walks, points to IRS figures indicating that California was a net loser of $46.32 billion in adjusted gross income from 1992-2011 that fled to other states.

But instead of lobbying for relief, the state contracting industry successfully persuaded politicians to subject their businesses to even more onerous rules and enforcement, just to punish competitors who have the nerve to try to survive in an inhospitable environment.

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  1. Informal employment = selling ass???

  2. California is just a few bans, boondoggles, and regulations away from getting back on track. Just you wait.

    1. After all, California’s been getting back on track for 40 years!

      1. The corner, turning it they are!

        1. I remember Gorbachev saying just this…but think they turned the corner, or jumped off a cliff, can’t remember.

    1. California. Come for the sunshine. Stay for the liberty.

    2. You misspelled bitchez.

      1. A Banjos sighting! This is a rare treat.

    3. Ain’t nothin’ wrong with the beaches or the bitches.

      Definitely, there are other problems.

      I suspect a lot of Americans, libertarians in particular, would like to think that the U.S. is still more capitalist than it really is. So, they need something to make fun of for being more socialist.

      The USSR and China served that purpose nicely back during the Cold War, and when that went away, we still had the Canadians to laugh at, what with their socialized healthcare system and everything.

      Now Obama’s taken that away…

      I guess we could make fun of Detroit, but that’s sort of like beating a dead horse, and, besides, they’re really close to Canada, close enough that hockey is a big thing there. Being so close to Canada makes the U.S. look bad relative to Canada–and that defeats the whole purpose of stoking our own egos.

      So, yeah, laugh at California by default, but at the same time, take note that the rest of the country is becoming more and more like California all the time. Don’t like what you see happening in California, chances are there’s a policy comin’ to your neighborhood (by way of local, state, or federal government) that’s bringing the same thing to your house. Laughing at California is like whistling past the graveyard…

      California is your future, and when the rest of the country goes California like that, at least we’ll still have the beaches and bitches, y’all.

      https://www.youtube.com/watch?v=ou5OFEWj9Jg

      1. Don’t count on it. After the Big One, your beaches will be in Arizona & Nevada.

  3. No, it can’t be the lousy business environment. These are immigrants who have not been given the noble and patriotic privilege of paying oppressive income taxes. Once that is fixed, utopia will reappear.

  4. What a complete turd of an article.

    Sure, it is the crappy business environment that makes 1 in 6 “informal” and the fact that there are millions of the “undocumented” has nothing to do with it? Millions of low educated workers also don’t affect the business environment? Please. Regulation does suck in Cali and everywhere else, too. It hurts business. It is hardly the sole basis for the economy of California or the “informally employed”.

  5. California labor force size: 18.6 million. Number of illegals in California: 3 million

    Gee, this is a tough one. (yes, I know not all of the illegals are in the labor force, but they have a high LFPR)

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