The ‘cash-in-hand’ economy in Sheffield

Winter 2003 11 The Yorkshire and Humber Regional Review The ‘cash-in-hand’ economy in Sheffield Colin Williams investigates the implications of targeting deprived populations when seeking to eradicate the so-called ‘cash-in-hand’ economy. T he eradication of ‘cash-inhand’ work is now high up the policy agenda. The European Council meeting in the spring of 2003 made its eradication Colin Williams one of the top ten University of priorities for action in Leicester the EU. The UK Government, reflecting this, is currently busily involved in considering how this can be achieved. Given that such work represents somewhere between 7 and 16 per cent of GDP (European Commission, 1998), it is perhaps unsurprising that it has become the focus of attention. In this article, the intention is to evaluate how its eradication can be best achieved. Conventionally, cash-in-hand work has been viewed as concentrated in deprived populations and the use of more punitive measures targeted at such areas has been seen as the most effective way of eradicating this work (Grabiner, 1999; Williams and Windebank, 1998). Reporting data gathered through structured face-to-face interviews with 261 households in two deprived neighbourhoods and an affluent suburb in Sheffield, however, this paper evaluates critically whether this is the case. Before commencing, a definition of cash-in-hand work is required. Such work involves the paid production and sale of goods and services that are unregistered by, or hidden from the state for tax and welfare purposes but which are legal in all other respects (European Commission, 1998; Williams and Windebank, 1998). This definition thus includes activity that is illegal solely because the earnings are not declared to the state for tax and social security purposes. Activities in which the good and/or service itself is illegal (e.g., drug trafficking, prostitution) are not included. This is the common definition used throughout the advanced economies. Examining cash-in-hand work in Sheffield To analyse the level and nature of cash- in-hand work, households were interviewed about their ‘coping practices’ in two deprived urban neighbourhoods (Pitsmoor and the Manor) and an affluent suburb (Fulwood) in Sheffield. In each neighbourhood, a spatially stratified sampling methodology was employed to select 100 households in each deprived neighbourhood for interview and 61 households in the affluent suburb (261 face-to-face interviews in total). Given the sensitive nature of the data, face-to-face interviews were used. Although some might assume that respondents are unlikely to inform interviewers about their cash-in-hand work, previous research reveals that this is not the case. In past studies, similar levels of such work were identified when people were asked people about the extent to which they both used and supplied cash-in-hand work, suggesting that suppliers do not hide their participation from the interviewer. To identify the extent and character of cash-in-hand work in Sheffield, a pilot study using unstructured interviews showed that interviewees found it difficult to recall where such work had been used and supplied. Consequently, and similar to previous studies, a relatively structured interview was designed centred around 42 common activities covering home improvement and maintenance, routine housework, gardening, car maintenance and caring activities. To identify where households used cash-in-hand labour, interviewees were asked whether each of the 42 activities had been undertaken in the household during the previous five years/year/month/week (depending on the activity). If so, they were asked: who had conducted the task (a household member, kin living outside the household, a friend, neighbour, firm, landlord); whether the person had been unpaid, paid or given a gift; and if paid, whether it was cash-in-hand or not, as well as how much they had paid. They were also asked why they had decided to use that source of labour so as to enable their motives to be understood. Following this, the supply of cash-inhand work by household members was examined. Interviewees were asked whether a household member had conducted each task for another household and if so, who had done it, for whom, whether they had received money, how much they had received and why they had decided to do the task. To capture other cash-in-hand work received and supplied, meanwhile, a series of open-ended questions were used, focusing particularly on cash-inhand work conducted for firms (rather than other households) and why they had decided to do it. Below, the results are reported. Extent of cash-in-hand work Contrary to the popular view that cash-inhand work is concentrated amongst deprived populations, this study found that this is not the case. Households in the affluent suburb employed cash-inhand workers to a greater extent and did more cash-in-hand work than their counterparts in deprived neighbourhoods. Analysing the type of labour used to undertake the 42 tasks, over one in ten (11 per cent) were last conducted on a cash-in-hand basis in the affluent suburb but just one in twenty (5 per cent) in the deprived neighbourhoods. People in the affluent suburb are thus much more likely to use cash-in-hand compared with those in deprived neighbourhoods. Turning to their earnings from cash-inhand work, for the 40 per cent of households in the deprived neighbourhoods who did cash-in-hand work, the mean annual household income from such work was £108 compared with £2,240 in the 17 per cent of households who supplied such work in affluent suburbs. Even though households are more likely to undertake cash-in-hand work in deprived neighbourhoods, therefore, the monetary rewards are very heavily skewed towards the residents of affluent suburbs. If deprived neighbourhoods are targeted, in consequence, then little headway will be made in eradicating this work from contemporary society. The nature of cash-in-hand work Until now, it has been assumed that by targeting deprived populations, one is eradicating some of the most exploitative types of cash-in-hand work organised by unscrupulous employers seeking to profit from those in need of such work so as to get-by. This study suggests, however, that this paints only half of the picture. In deprived neighbourhoods, although some cash-in-hand work is organised by unscrupulous employers who exploit employees on very low wages below the minimum hourly wage (e.g., in restaurants, on building sites), the vast majority is not. As Table 1 reveals, ‘employers’ are usually friends, kin and neighbours. Is it really the case, therefore, that such 12 The Yorkshire and Humber Regional Review AFFLUENT SUBURB DEPRIVED AREA Firm/previously unknown self-employed individual 76.6 33.3 Friend/neighbour - cash-in-hand - gift 18.4 1.4 25.4 3.3 Kin - cash-in-hand - gift 0.7 0.0 13.6 7.0 Household member - cash-in-hand - gift 2.8 0.0 14.6 2.8 PERCENTAGE OF CASH-IN-HAND WORK CONDUCTED BY: Table 1. Character of suppliers of cash-in-hand work in Sheffield exploitative employer-employee relations still prevail even in these instances where close social relations are involved? To answer this, the motives of both users and suppliers of cash-in-hand work were analysed. Analysing the motives of those employing cash-in-hand workers, the finding was that although in affluent suburbs, some 80 per cent of cash-inhand work is used as a cheaper alternative to formal employment, this is the reason in just 18 per cent of cases in the deprived neighbourhoods. In nearly every instance where this is the rationale, moreover, it is firms and/or self-employed people not known by the household who are employed to do this work. In those cases where friends, neighbours and kin were employed, however, saving money was seldom, if ever, the primary rationale for using cash-in-hand labour. On the one hand, and particularly in deprived neighbourhoods, there was a culture of paying cash for favours. This was done so as to avoid relations turning sour if a favour was not returned. On the other hand, paying people on a cash-in-hand basis was seen as a way of giving them money and avoiding any connotation of charity being involved. As a man in a dual-earner household stated, “my brother was skint and we needed it [decorating] doing so it was natural to ask him”. Or, as a single employed woman put it, “it was a little job to give him [her uncle] some pocket money”. As Kempson (1996) has previously revealed, people avoid accepting charity at all costs. This was well understood by the respondents in this survey. Anybody wishing to give aid paid them for doing a task to ‘help them out’. As such, the vast majority of employers of cash-in-hand labour in deprived neighbourhoods did so for purposes other than saving money. Not-for-profit rationales also prevailed amongst suppliers of cash-in-hand work. Only half of cash-in-hand tasks in deprived neighbourhoods were undertaken primarily to make money (90 per cent in the affluent suburb). The rest was conducted to help somebody out by doing them a favour. As suppliers asserted, “I helped out because they couldn’t afford to do the job any other way” (male employed electrician), “they have not got any money so the least I could do was help them out” (male self-employed decorator) or “they don’t have the time so I offered to do it for them” (unemployed woman). In no cases, however, was this work offered for free because the supplier was conscious that this would be unacceptable to those receiving the work. Rather, a fee was charged which, although well above constituting a token gesture, was well below the normal market price. Indeed, 74 per cent of all one-to-one aid between friends and neighbours was done for a monetary payment, indicating how mutual aid in deprived neighbourhoods is imbued with a payment ethic so as to avoid relations turning sour if a favour is not returned. Winter 2003 suburbs who both use and conduct the vast majority of cash-in-hand work. To target these populations would be the most effective means of reducing the amount of cash-in-hand work in society. Secondly, and so far as deprived neighbourhoods are concerned, it is obvious that something needs to be done. Although there exists exploitative cash-inhand work that needs to be eradicated through more punitive measures, the vast majority of such work is an economy of favours that if destroyed, will eradicate what little social capital remains in deprived neighbourhoods. There thus appears to be a case for combining more stringent regulations with the development of alternative mechanisms that people can use as a substitute for cash-in-hand work when helping each other out. Given how the norms of reciprocity are based on cash payments, this study clearly displays that these substitute mechanisms will need to adopt some form of tally system or payment. Two possibilities in this regard are local exchange and trading schemes (Williams et al., 2001) and time currencies (Seyfang and Smith, 2002). Whether these are, or might be, effective in providing a substitute for cash-in-hand work is beyond the scope of this paper. The key point is that unless substitutes are developed, deprived urban populations may well find themselves ever more deterred from engaging in mutual aid with friends, kin and neighbours by a Government intent on eradicating what it erroneously views as an exploitative lowpaid form of employment. References Conclusions and policy implications This study of Sheffield thus reveals that if attempts to eradicate cash-in-hand work target deprived neighbourhoods, they will be concentrating on a neighbourhoodtype in which the value of total cash-in-hand work is relatively small and populations where the vast majority of cash-in-hand work is not conducted for profit. Although the residents of these neighbourhoods do indeed engage in exploitative forms of cash-in-hand work, the vast majority appears to be a type of mutual aid. The prevailing culture is to pay cash whenever somebody does you a favour due to the absence of trust in these neighbourhoods. Eradicating cashin-hand work through more punitive measures is thus likely to lead to the demise of the little social capital that remains in such deprived neighbourhoods. What, therefore, is the way forward? First of all, there is a need to refocus attention on the populations of affluent European Commission (1998) On Undeclared Work, COM (1998) 219, Commission of the European Communities, Brussels. Grabiner, Lord (2000) The Informal Economy, HM Treasury, London. Kempson, E. (1996) Life on a Low Income, York Publishing Services, York. Seyfang, G. and Smith, K. (2002) The Time of Our Lives: Using Time Banking for Neighbourhood Renewal and Community Capacity Building, New Economics Foundation, London. Williams, C.C., Aldridge, T., Lee, R., Leyshon, A., Thrift, N. and Tooke, J. (2001) Bridges into Work? An Evaluation of LETS, The Policy Press, Bristol. Williams, C.C. and Windebank, J. (1998) Informal Employment in the Advanced Economies: Implications for Work and Welfare, Routledge, London.