Negative Effects of an Informal Economy on G7 Economies

As noted in the previous blog post, informal economies can help a certain number of people within a developing nation or an economy in transition.

However, a large informal economy can hamper and disrupt government policies and regulations.

In fact, all four industries within an advanced economy—primary (extraction and agriculture), Secondary (manufacturing and construction), Tertiary (services like healthcare and education), and quaternary (knowledge and information sectors)—can be destabilized by a grey economy or, as some authors suggest, a collaborative economy.

Whenever an individual gets into a side gig to improve household spending power, we should always be cognizant and aware if regulatory rules to protect the workers are being ignored.

As the author of the book Raw Deal suggests, an informal economy can destabilize regulatory government policies that protect workers, moreover, such policies protect all four major industries too.

He suggests that many collaborative economic platforms actually destabilize and harm not only workers' wages but also many platforms on the collaborative economic model lack worker benefits such as healthcare and employment insurance for these workers.

Some economists suggest that if this collaborative model continues to grow with different platforms in all four sectors, many workers will lack benefits, and government policies and regulations may be weakened.

Governments and economic policy advisors need to become very educated and creative in regulatory policies that encourage collaborative companies, at the same time, protect workers' rights, and do not hamper all four major industry sectors of the economy.

Time will tell.