ACCA finds ‘shadow economy’ is smaller in U.S. than abroad

The United States has the smallest “shadow economy” of underground trade in goods and services, compared to 28 other countries, according to a new report from the Association of Chartered Certified Accountants.

The U.S. shadow economy represented 7.8 percent of gross domestic product last year and is likely to decline to 6.9 percent by 2025, according to the report. Around the world, the report estimates, the shadow economy represents an average 22.5 percent of GDP at the end of this year. In Canada, the shadow economy is expected to represent an average 14.15 percent of GDP in 2017, but as in the U.S., it is expected to drop to 13.8 percent by 2025. The part of the world with the expected highest percent of the shadow economy is Azerbaijan, at 66.12 percent in 2017.

“While it is great to see that the U.S. has a relatively small, and declining, shadow economy, its presence does throw up considerable practical and ethical issues for both business and government,” said Faye Chua, head of business insights at ACCA, in a statement.

The U.S. has a slightly growing GDP and increased employment levels to thank for the decline in shadow economy activity, Chua noted, as workers have more opportunities for employment in the legitimate sector and are less likely to work in the shadow economy.

“Government, business and society can take steps to restrict the shadow economy, ensuring all workers and businesses retain the rights associated with the legal trade of goods and services,” said ACCA USA head Warner Johnston in a statement. “To continue seeing a decline in the U.S. shadow economy, the government needs to invest in creating opportunities for the most marginalized in society.”

Shadow economy

For reprint and licensing requests for this article, click here.