The Informal Economy

Income-generating activities conducted outside traditional employment and wage-tracking systems

More Americans turned to “off-the-books” work in 2023, but these supplemental forms of income were largely ineffective in lifting low-income workers above poverty-level wages.

True

Rate of Unemployment

Out of the Population

+ Informal Work

51.1

2023

Effect of Informal Work on

Overall Functional Unemployment

–0.8

2023

1,126,975

People worked

informally on an

average day

2021–2023

of every 10,000

working-age people

worked informally

on an average day

2021–2023

of every 10,000

working-age women

worked informally

on an average day

2021–2023

of every 10,000

working-age men

worked informally

on an average day

2021–2023

There is a widespread misconception the informal economy is booming and informal workers are thriving financially, benefiting from lucrative side gigs, tax loopholes for unreported income, or the ability to monetize their hobbies and free time in the booming digital economy.

But this perception is far from the truth. The truth is the informal economy primarily serves as an outlet for the struggling working and middle classes who are unable to secure well-paying jobs in the formal job market.

Official employment statistics fail to accurately capture the informal economy and shed light on how informal workers are truly faring. The question remains: just how pervasive is the informal economy, and how are informal workers doing?

Using data from the Current Population Survey (CPS) and the American Time Use Survey, LISEP tracks the number of people working informally in an average week and the extent to which the informal economy compensates for bad jobs.

LISEP defines informal work broadly as any income-generating activity that is not captured by the CPS. While anyone working “under the table” counts as informally employed, they remain functionally unemployed if they cannot earn a living wage and full-time status when considering both their formal and informal labor combined.

For an in-depth look at the informal economy and its impact on functional unemployment, please reference LISEP’s Informal Economy white paper.

The Informal Economy

The Informal Economy measures informal work through the lens of the True Rate of Unemployment (TRU) to determine the extent to which lower-income individuals rely on unreported income, like gig work or one-off jobs, to bridge the gap to functional employment.

Additional Resources:

Informal Economy White Paper

Informal Economy Summary

Informal Economy Methodology

Informal Economy Source Data

Impact of the Informal Economy on the Unemployment Rate

Impact of the Informal Economy

on the Unemployment Rate

Select any point on the chart to see the data for that year.

The informal economy has a limited impact on the functional unemployment rate. Overall, informal work accounts for 2.8 million more people being functionally employed, 4.5 million finding jobs, and 3.5 million joining the labor force in an average year. The informal economy’s biggest effect is felt during downturns, when workers rely more on informal work to escape poverty.

Participation in the Informal Economy by Demographic

Participation in the Informal

Economy by Demographic

Percentage of the population working informally on an average day

2003–2023

Select any point on the chart to see the data for that demographic.

Female, young, Black, and Hispanic workers are more likely to work informally.

Top Sectors for Informal Work

2003–2023

Select any point on the chart to see the data for that sector.

When informal workers are formally employed, they’re more likely to be in low-paying occupations.

Formal vs. Informal Labor Force Participation by Sector

Formal vs. Informal Labor Force

Participation by Sector

2003–2023

Select any point on the chart to see the data for that sector.

The Informal Economy

Income-generating activities conducted outside traditional employment and wage-tracking systems

More Americans turned to “off-the-books” work in 2023, but these supplemental forms of income were largely ineffective in lifting low-income workers above poverty-level wages.

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