UNDERGROUND ECONOMY SKEWS B.C. STATISTICS

If the Campbell government feels like it's taking a pounding from a
child of its own creation, the B.C. Progress Board, over the state of
social conditions in the province, then at least the black eye is well
deserved.

In a new report, the board, set up to report on how B.C. fares
compared to other provinces and states on a number of performance
indicators, added a social-conditions ranking to the mainly economic
measures it reported on in past.

Although most economic indicators are at least holding steady, if not
getting better, the social-conditions comparison shows us to be a
dismal ninth of 10 provinces, just a hair's breadth ahead of
last-place Quebec.

If you, like me, are concerned about growing homelessness, ashamed of
our government's handling of the child-welfare file, and distressed by
the chronic failure of education and the resulting poverty in many
aboriginal communities, this will be no surprise. The government has
urgent work to do in all these areas and more, and I hope this report,
embarrassing as it must be, pushes them to get cracking.

But even if Victoria starts doing all the right things, don't expect
B.C. to soar in the social-conditions rankings any time soon. I say
that not only because it will take time to turn around persistent
poverty problems. It's also because -- I suspect, though no one really
knows for sure -- that these figures are sharply skewed against our
province thanks to the huge, but unmeasured, underground economy.

The Progress Board's report touches on this ever so lightly. It's a
data-based report, and there's simply no data on the subject.

The report says estimates for the size of the underground economy
range from 11.7 to 15.3 per cent of GDP, or between $20 billion and
$25.6 billion.

If those estimates are right, that would make undeclared earnings in
the province roughly equal to 60 to 80 per cent of what the provincial
government spends every year.

Try to imagine the lion's share of the money spent on civil-service
salaries, not to mention what Victoria spends on rent and procurement
and contracted services, divvied up among all the waiters and
waitresses who don't declare their tips, the tradesmen who work for
cash, the grow-operators, the thugs who push heroin or pimp girls,
etc.

In some cases, a few hundred or a few thousand under-the-table bucks
are supplementing what looks on paper like a low income and this might
or might not push someone's income into a comfortable range. In other
cases, it creates stinking-rich criminals, who might still show up in
poverty statistics because they have no recorded wealth.

The range of published estimates I've seen for the underground economy
are even wider than what the Progress Board reports -- from a
ludicrously low 3.7 per cent of GDP to an unbelievable 28 per cent.

Estimates of the value of the marijuana industry alone run as high as
$20 billion a year -- almost as much as the Progress Board is guessing
the whole underground economy is worth.

The board's report broaches only timidly -- because it has no data --
the speculation that B.C.'s underground economy might be the largest
in Canada. I'll stick my neck out further and assert that it almost
certainly is.

For one thing, there's that huge marijuana industry, which pumps
billions -- though we can only guess how many -- into the economy. For
another, about 17 per cent of our workers, the highest proportion in
Canada, are self-employed, which makes it easier for them to make
unrecorded transactions. And our legal economy is dominated by the
service sector, the area where it's easiest to cheat the taxman
because there's no paper trail of goods changing hands.

If you could figure out how many dollars from these activities were
landing in whose pockets, how would it affect those statistics on
social conditions? Nobody knows.

But, while it would certainly leave plenty of serious social problems
crying to be addressed, it might nevertheless be enough to move us up
to a somewhat more respectable ranking.

So there's another reason to crack down on organized crime, and get
the underground provision of legal services under control. The way
they skew the stats is making the government look bad. And, even if
poverty and crime can be tolerated, embarrassment of officials should
never be allowed.