Underground Economy Harms Us All, So the Laws Battling it Should be Strongly Enforced

April 2015 - A California newspaper recently ran an opinion essay that perfectly illustrates the mindset we are up against when we fight for the best interests of California’s working families.

The writer complained about the California laws and regulations enacted to protect consumers, public agencies, taxpayers, workers and businesses from harm caused by the underground economy. He concluded that if only those laws were not in place, then it would be impossible to violate those laws and regulations, and there would be no problem.

The solution to people breaking laws is not to enforce the laws, but to eliminate them? That is ridiculous, and scary.

What is the underground economy?  A worker or employer who does not pay state or federal taxes, disregards child labor laws, makes cash payments, avoids payment of workers compensation, Medicare, and Social Security, and fails to adhere to basic health, safety and environmental standards. It is documented that these companies have been known to make cash payments to workers of less than $50 for an 18-hour day, seven days a week, all the while laundering their money to cover their crimes. And these are crimes.

In the construction industry, workers and law-abiding contractors are on the same side when it comes to the underground economy. We all end up paying the price for those who don’t obey the law. When they cut corners, they pass along the costs to all of us.  It is all the more outrageous when you consider all the great things that law-abiding workers, contractors and employers do for our society: paying for decent wages, Social Security, Medicare, and pension plans, funding mass infrastructure such as dams for clean water, roads and bridges, and public education. All necessary to hold a society together.

The cheaters who don’t do those things should not be able to get away with it. They often dump their workers on society when they are hurt on the job site, or sickened because the company did not provide safety equipment during asbestos removal or other hazardous work duties. So the $2 million to treat the worker who has asbestosis that will eventually end his life should be picked up by society. Is that just? Is that fair? All because the employer disregarded or had helped deregulate the use of safety equipment.

Then the same employer that disobeys the rule of Social Security or Medicare payments, dumps these workers in their old age on society to be taken care of. Is this fair? Is this just? Is this sustainable for any society?

When the Legislature, under Governor Pete Wilson, deregulated the power industry, we turned our trust over to the likes of Enron, we took away the rules, and Californians were literally left in the dark while the deregulated industry manipulated blackouts to increase their profits and working families picked up the tab.

The columnist’s philosophy of deregulation or removal of standards would defund the building of dams that provide water, construction of roads for commerce and access to employment, of bridges that transport us, and the schools that educate our children. There is no bottom to the philosophy of deregulation.

The writer was blowing off a detailed report from the Little Hoover Commission, the independent state oversight agency charged with investigating government operations, which outlined the serious harm caused to all Californians by the underground economy, and called for greater enforcement of the laws and regulations in place to battle it.

The report details how law-abiding businesses cannot compete and are unfairly undermined by those who cut corners; how workers are shortchanged, how health and safety regulations are ignored, how honest taxpayers are forced to foot more than their fair share of government costs. It convincingly demonstrates how all Californians are paying the price for those illegal, unfair business practices, and how more effective enforcement would benefit everyone.

You can read the entire report here: http://www.lhc.ca.gov/studies/226/report226.html

The Commission also included business-friendly recommendations including making laws simpler and easier to comply with, and making greater outreach and education efforts to ensure businesses are aware of them. The columnist didn’t mention that.

Instead, he argued that the laws themselves are the problem, ignoring a long history of abuse of consumers, workers, honest businesses and taxpayers prior to their existence. These laws were not created in a vacuum.  Essentially, he sympathizes more with the lawbreakers than those to whom they cause harm. That’s the problem.

The Little Hoover Commission’s recommendations were right on the mark, and should be implemented, not ignored. 


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