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Underground economy losing ground: Statscan

Undeclared tips, hidden rents, under-the-counter house cleaning and the like generated $36-billion in 2008, according to Statistics Canada.

Blair Gable/The Globe and Mail

Canada's underground economy is shrinking as a percentage of the overall gross domestic product, according to a revised assessment by Statistics Canada.

Undeclared tips, hidden rents, under-the-counter house cleaning and the like generated $36-billion in 2008, according to Statscan, which last updated its estimate of the size of the underground economy a decade ago.

It's a big number. But the underground economy is growing more slowly than the broader economy. Between 1992 and 2008, the underground economy grew 90 per cent, compared with a 128 per cent increase in nominal GDP. The underground economy is 2.2 per cent of GDP, compared with 2.7 per cent in 1992.

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Statscan defines the underground economy as "consisting of market-based activities, whether legal or illegal, that escape measurement due to their hidden, illegal or informal nature."

The underground economy is smaller relative to overall GDP because Canadians are spending less on goods and services that tend to be sold illegally or exchanged under the counter. Spending on childcare, tobacco and food and beverages has grown at a slower pace than overall personal spending, Statscan said.

Households are the biggest contributors to the underground economy, accounting for 68 per cent of expenditures. Construction accounted for about $10-billion of the underground economy, second-most after "skimming," which Statscan said was worth $18-billion in 2008.

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About the Author
Senior fellow at the Centre for International Governance Innovation

Kevin Carmichael is a senior fellow at the Centre for International Governance Innovation, based in Mumbai.Previously, he was Report on Business's correspondent in Washington. He has covered finance and economics for a decade, mostly as a reporter with Bloomberg News in Ottawa and Washington. A native of New Brunswick's Upper St. More

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