Rise of the Off-the-Books Workforce
Native-born workers are being displaced by new immigrants.
By Andrew M. Sum and Paul E. Harrington
Andrew M. Sum is director and Paul E. Harrington is associate director of the Center for Labor Market Studies at Northeastern University in Boston.

February 22, 2004

BOSTON — If you scrutinize the U.S. labor market numbers from the last two years of economic recovery, you're left with what seems to be a paradox. Since the recession's low point, in November 2001, the number of employed people 16 and older has risen, but the number of jobs on the formal payrolls of employers remains below recessionary levels.

The different numbers have conveniently provided politicians with a choice, depending on which points they wanted to make, but they've perplexed economists.

Some analysts have concluded that this gap must represent the different ways in which statistics are kept by the two main sources of national data on employment developments.

But here's a more likely explanation. The number of people on formal payrolls remains low because new jobs tend to be ones that don't show up on payrolls. Employment gains are among the self-employed and contract workers, or in the informal "gray" and "black" labor markets. People are doing temporary day work or contracting that's kept off the books. These don't tend to be highly paid jobs or jobs with benefits like health insurance, and they are often performed by immigrants, especially undocumented immigrants.