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The underground construction economy (UCE) consists of all economic activities in construction that would be legal if fully reported to authorities as required. It includes employees misclassified as independent contractors or being paid under the table and independent contractors and businesses unregistered or underreporting their activity. Each type of UCE activity produces losses to workers, consumers, businesses, and state and federal government programs. Past research has found that underground activity is common in the construction industry.
We estimate the size and cost to workers, Washington state, and the federal government of Washington’s underground construction economy by year from 2011-2021. We find that an average of 14.2% of construction workers in the state are part of the UCE each year. We estimate average annual total costs to be $142.6 million to Washington construction workers, $59.8 million to the state, and $315.4 million to the federal government.
We provide an overview of the many actions taken by Washington state agencies to detect and enforce UCE activity and comment on barriers to collaboration between them. Finally, we survey common underground economy-related programs and policies in other jurisdictions that may improve the detection and enforcement of UCE activity.