New Evidence on the Prevalence and Implications of Contract Work
Friday, Jan. 5, 2018 10:15 AM - 12:15 PM
- Chair: Susan Houseman, W.E. Upjohn Institute for Employment Research
The Rise of Alternative Work Arrangements: Evidence and Implications for Tax Filing and Benefit Coverage
AbstractA growing number of American workers earn income outside of traditional employee-employer relationships through self-employment and business ownership. This paper draws on administrative tax records to provide a more complete picture of the self-employed, including how they differ from employees (which we define as workers receiving wages reported on Form W2) and how their numbers have increased over time. Administrative data provides new information that can help address certain shortcomings of survey-based measures. Looking at trends over time, we find that essentially all of the increase in self-employment is due to increases in sole proprietors who have little or no business-related deductions, and who therefore appear to almost exclusively provide labor services (i.e. the contractors or misclassified workers). In contrast, the share of filers that were small business owners was essentially unchanged. These trends have important implications for the income, health insurance coverage, and retirement security of self-employed workers. In 2014, individuals who earned a significant share of their earnings from self-employment were less likely to be covered by health insurance or to participate in or make contributions to a retirement account. The Affordable Care Act—specifically the availability of marketplace coverage—appears to have provided insurance for a large share of self-employed individuals, particularly for middle-income workers. Nevertheless, gaps in coverage for health and, especially, retirement benefits remain for this growing group of workers.
Domestic Outsourcing of Labor Services in the United States: 1996-2015
AbstractOver the last decades large firms across all sectors have been increasingly relying on contractors and temp-agencies to provide labor services that were formerly provided by regular employees in-house. This phenomenon of domestic outsourcing has thoroughly transformed the nature of the employment relationship for a vast number of jobs, ranging from relatively low skilled tasks such as cleaning and security to high skilled tasks such as human resources and accounting. While a growing amount of anecdotal and qualitative evidence suggests that outsourcing causes a deterioration of many aspects of job quality, quantitative evidence on the prevalence and consequences of domestic outsourcing in the United States is very scarce. To fill this empirical gap, one needs access to a large matched employer-employee panel, as well as a research design that can credibly control for job and worker characteristics when comparing outsourced to non-outsourced jobs.
In this paper, we use the Longitudinal Employer Household Dynamics (LEHD) data to provide credible causal estimates of domestic outsourcing on a number of important job characteristics. The main empirical strategy builds on Goldschmidt and Schmieder (forthcoming), who develop a new design to identify domestic outsourcing based on worker flows in linked employer-employee data. Using German data, Goldschmidt and Schmieder show that it is possible to identify events where firms outsource labor services by spinning off parts of their workforce into either new or existing business service providers. In this case, it is possible to observe the same worker before and after outsourcing and compare job characteristics to a comparable job that is not being outsourced. Our research will address two main questions: (1) What is the time series of domestic outsourcing events in the United States from 1996 to 2015, and (2) How does domestic outsourcing of labor services affect the earnings of the outsourced jobs?
University of Massachusetts-Amherst
Federal Reserve Board
- J0 - General
- A1 - General Economics