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Urban Poor Cope with Help from Informal Economy

Almost 10 years ago, sociologist Sudhir Venkatesh was interviewing poor people in Chicago about unemployment when he noticed something: Many of them seemed to spend more money than they earned each month.

That's because they were doing odd jobs, working off the books.

He ended up writing a book out of his research called Off the Books: The Underground Economy of the Urban Poor.

Venkatesh says there's a huge amount of economic activity taking place in the inner city that isn't reflected in official government statistics about income and employment. He says this underground economy enables a lot of people survive — but it also exacts a toll.

His research continued when he moved to Columbia University in New York.

A few years ago, Sudhir Venkatesh was talking to a vendor at a newspaper kiosk in Harlem. Venkatesh realized that he'd somehow torn the pants he was wearing.

"And the guy said, 'Well, why don't you go to my friend who's a tailor on 117th Street, and tell him that your cat keeps creeping up your leg.'

"And I said, 'Well, hi, Joe sent me and my cat keeps creeping up my leg.'

"And he said, 'Oh, OK,' and he takes me in the back where there's another whole store that's completely off the books. And I pay in cash, and I get treated fairly and it's completely off the books."

Venkatesh returned to the vendor and ask more questions.

"And he said, 'Well, do you need someone to clean your apartment? Do you need someone to fix your car? Do you need a Social Security card? Do you need a plane ticket to Haiti? What do you need?'"

Venkatesh tells the story to illustrate how big the underground economy is in neighborhoods like Harlem. Outsiders come into the inner city and see only unemployment and idleness, but many people are working off the books. Some of this is criminal — drug dealing and prostitution — but much of it exists in a kind of moral gray area.

Sharelle, 43, lives in subsidized housing in Harlem. She hasn't had a job in years – but she works all the time. She runs an after-school day care in her apartment, where children are laughing and playing cards. She also looks after an elderly woman in her Harlem neighborhood twice a week.

"I do the housekeeping, clean her bedroom, do the kitchen," said Sharelle, who didn't want her last name aired.

Sometimes she gets a few extra dollars helping her neighbors fill out state tax forms or babysitting. If Sharelle reported this income to the government her rent would go up, so almost all the work she does is under the table.

"Miss Hinxson is off the books, their mother is off the books, the little girl Courtney that I went to pick up is off the books," she said.

Venkatesh says there are countless people like Sharelle in the inner city, scraping by on odd jobs. They make and sell box lunches at construction sites, or fix cars in an alleyway. Venkatesh admires the entrepreneurial drive of people like Sharelle.

"These are flexible entrepreneurs who have enormous skills, and will go where the market takes them," he said.

But Venkatesh says there's also a big downside to the underground economy. Because this kind of work is unregulated, people can't go to the authorities for help when they need it. That means there's no one to resolve disputes.

"There's no government that's enforcing contracts, so you have to simultaneously solve the disputes you have, to simultaneously create the norms and expectations for what's fair and what's right," he said. "You may have to go out and punish people who don't pay you or don't deliver a good or service."

In that kind of environment personal relationships matter, even more than in the mainstream economy. In Off the Books Venkatesh writes about the complex web of loyalties and obligations that hold up the economy in a neighborhood in Chicago. He gives the neighborhood a fictitious name but it's a real place. Venkatesh spent years there trying to get people to open up to him about how they made money. Harvard sociology professor William Julius Wilson, who served as Venkatesh's dissertation adviser, says the book reveals a world most Americans know little about.

The book just does an outstanding job of providing information on the way people have to make ends meet and how people survive," Wilson said. "And the importance of using different strategies."

Off the Books portrays a neighborhood where economic need blurs the lines between legitimate business and criminals. A beauty parlor rents out its space to drug dealers to run dance parties. A pastor lends money to help start a gypsy cab service.

It's also a world where business owners cooperate with one another to a surprising degree. They lend one another money and workers, and swap information about money-making opportunities. Venkatesh talks about a pastor he met who ran a school janitorial service. He was given the chance to take a contract in another neighborhood — one that would have brought in a lot more money.

"But he won't do it because it's the ghetto that enables him to survive, and he feels that if he goes out to a neighborhood where he doesn't know anyone, he's not going to have friends, he's not going to have friends who support him," Venkatesh said. "I mean, it's a very peculiar sort of thing to watch."

Venkatesh says that is one of the big downsides to the underground economy. People who work off the books for long periods can end up afraid to leave that world and isolated from the broader economy — which limits how much money they can make. He says that's an issue that society will have to address if it ever wants to bring real growth to the inner city.

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Jim Zarroli is an NPR correspondent based in New York. He covers economics and business news.