Employee Misclassification in New York Construction — Economic and Fiscal Costs

Abstract

Some employers, particularly in construction, misclassify workers as independent contractors in order to circumvent employer liability for payroll taxes and social insurance premiums, particularly workers compensation. This paper estimates the magnitude of employee misclassification in the New York City construction industry and the associated economic and fiscal costs. In 2005, 50,000, or nearly one in four, New York City construction workers were misclassified or employed completely off the books. Employers misclassifying workers or employing workers off the books shifted a total of $500 million in fiscal and economic costs to workers, taxpayers, social insurance systems, and other employers.