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ROBERT SIEGEL, host:

This is ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.

MICHELE NORRIS, host:

And I'm Michele Norris. We're a month away from tax day in the U.S., but not everyone pays what they owe the government. Some underreport their income. Others don't report their earnings at all. Buying and selling in the shadows, work that goes unreported, untaxed; it happens everyday.

SIEGEL: Precisely calculating the size of an underground economy is by definition impossible. But it is estimated that nine percent of the total U.S. economy, or nearly $1 trillion, takes place off the books. We're going to spend some time looking at the underground economy and hearing from people involved in it.

NORRIS: Sociologist Sudhir Venkatesh says there's a huge amount of economic activity in inner cities that isn't reflected in government statistics. He's written a book about it. NPR's Jim Zarroli spent time with Venkatesh recently in Harlem. The author says the underground economy enables a lot of people to survive, but it also exacts a toll.

JIM ZARROLI: 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.

Mr. SUDHIR VENKATESH (Author, "Off the Books"): And the guy said, well, why don't you go to my friend who's a tailor on 117th Street. And he said, but when you go in there, tell him that your cat keeps creeping up your leg.

ZARROLI: Your cat keeps creeping up your leg?

Mr. VENKATESH: My cat keeps creeping up my leg. So I walked in to the tailor. I said, hi, Joe sent me, and he said - and you know, my cat keeps creeping up my leg. He says, oh, okay. So he takes me in the back where there's another whole store that's completely off the book.

ZARROLI: Venkatesh is a sociologist at Columbia University who studies the inner city. And he decided to return to the vendor and ask more questions.

Mr. VENKATESH: He said, well, do you need somebody to clean your apartment? Do you need somebody to fix your car? Do you need a Social Security card? Do you need a plane ticket to Haiti? What do you need?

ZARROLI: Venkatesh is standing on St. Nicholas Avenue in Harlem. As he speaks, he tells the story to illustrate how big the underground economy is in neighborhoods like this. Outsiders come into the inner city and see only unemployment and idleness, he says. But many people are actively making money 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(ph) (Harlem Resident): You can't go to school by yourself, right Monique(ph)?

ZAROLLI: Take, for instance, 43-year-old Sharelle, who lives in subsidized housing nearby. She doesn't want her last name used. Sharelle hasn't had a job in years, but she works all the time. She takes care of kids in her apartment after school while their mothers work.

She also looks after an elderly woman in her Harlem neighborhood twice a week.

SHARELLE: I do the house cleaning, clean her bedroom, do the kitchen, the living room, the bathroom.

ZAROLLI: Sometimes Sharelle 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 of the work she does is under the table.

SHARELLE: Yeah, Ryan is off the books, Courtney is off the books, Ms. Mack is off the books.

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

Mr. VENKATESH: There was a phrase in the late '80s: we live in an age of flexibility and globalization, right? And these are flexible entrepreneurs. These are people who have enormous kinds of skills and who will go where the market takes them.

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

Mr. VENKATESH: 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. You may have to go and punish people who don't pay you or don't deliver a good or service.

ZAROLLI: In that kind of environment, personal relationships matter, even more than in the mainstream economy. In his book "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 is 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.

Professor WILLIAM JULIUS WILSON (Harvard University): And the book just does an outstanding job of providing information on the way people have to make ends meet, how people survive, and the importance of using different strategies to make ends meet.

ZAROLLI: "Off the Books" portrays a neighborhood where economic need can blur the lines between legitimate business and criminals. A beauty parlor might rent out its back room to prostitutes at night. A pastor lends money to help start a gypsy cab service.

It's also a world where business owners cooperate with each other 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.

Mr. VENKATESH: 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 anybody, he's not going to have friends, he's not going to have a network of people who support him. So he turns down jobs. I mean it's a very peculiar, sort of thing to watch.

ZAROLLI: Venkatesh says that in the end is one of the big problems with 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.

Jim Zarroli, NPR News, New York.

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