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Nội dung chi tiết: National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

AN EMPIRICAL METHODOLOGY TO ESTIMATE THE INCIDENCEAn Empirical Methodology to Estimate the Incidence and Costs of Payroll Fraud in the Construction In

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINALndustryRussell OrmistonAllegheny CollegeDale BelmanMichigan State UniversityMark ErlichHarvard University1AN EMPIRICAL METHODOLOGY TO ESTIMATE THE INC

IDENCEExecutive SummaryFor decades, the American construction industry has represented a viable pathway for noncollege educated workers to develop emp National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

loyable skills and secure the types of blue-collar, middle-class jobs that have been the backbone of families and communities around the country. Many

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

corners of the construction industry feature some of the best labor practices in the American economy, including family-supporting wages and benefits

AN EMPIRICAL METHODOLOGY TO ESTIMATE THE INCIDENCEAn Empirical Methodology to Estimate the Incidence and Costs of Payroll Fraud in the Construction In

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINALiform. In stark contrast, other corners of the construction sector feature some of the worst labor practices in the United States: meager wages, no be

nefits, unsafe working conditions, wage theft, and payroll fraud.These unethical and illegal labor practices are largely the result of construction em National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

ployers' single-minded pursuit of reducing labor costs. This has a cascade of effects. Most directly, these actions degrade the standard of living for

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

workers in those jobs. But they also make it difficult, if not impossible, for honest and law-abiding contractors to remain in operation in a market

AN EMPIRICAL METHODOLOGY TO ESTIMATE THE INCIDENCEAn Empirical Methodology to Estimate the Incidence and Costs of Payroll Fraud in the Construction In

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINALng to a "race to the bottom" that represents an existential threat to fair-minded employers and workers whose best practices have helped build the Ame

rican economy and its blue-collar middle class.One of the most pervasive and caustic of these illegal practices is payroll fraud. This encapsulates tw National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

o types of employer actions: (a) misclassifying employees as independent contractors and (b) paying workers "off-the-books" in cash-only arrangements.

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

Employers exploit these practices to evade their legal responsibilities of paying workers overtime rates and contributing to social insurance program

AN EMPIRICAL METHODOLOGY TO ESTIMATE THE INCIDENCEAn Empirical Methodology to Estimate the Incidence and Costs of Payroll Fraud in the Construction In

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINALnce, workers compensation, Social Security and Medicare benefits. These practices also harm taxpayers more generally. Payroll fraud defunds these soci

al programs, leading to higher U1 and workers compensation tax rates on law-abiding businesses and increased stress on other income-supporting social National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

programs.Despite the incredible harm to workers and taxpayers, only a handful of states have engaged in aggressive legislative action to combat payrol

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

l fraud. There are many reasons for this relative inaction. But one likely factor is that estimating the scope of payroll fraud in construction—and ac

AN EMPIRICAL METHODOLOGY TO ESTIMATE THE INCIDENCEAn Empirical Methodology to Estimate the Incidence and Costs of Payroll Fraud in the Construction In

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINALt hidden from the purview of government regulators and data collectors. The lack of direct evidence of payroll fraud thereby inhibits studies from dev

eloping accurate estimates of its incidence and costs. This is a substantial barrier to legislative action: without sufficient accounting of payroll f National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

raud, it is more difficult for engaged parties to rally political support for public policy that seeks to curb illegal behavior in the construction in

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

dustry.This study has been commissioned to address this issue, as the authors have been tasked with developing an accessible empirical methodology tha

AN EMPIRICAL METHODOLOGY TO ESTIMATE THE INCIDENCEAn Empirical Methodology to Estimate the Incidence and Costs of Payroll Fraud in the Construction In

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINALO ESTIMATE THE INCIDENCEpublicly-available data. This report develops such an approach, relying on economic tools to estimate the scope of payroll fra

ud in the industry using indirect measures. As outlined in considerable detail in the body of this report, the foundation of this approach is a compar National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

ison of household surveys and employer payroll records. Household surveys such as the American Community Survey (ACS) and the Current Population Surve

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

y (CPS) provide worker-provided answers to job and employment questions; from these large-scale, nationally-reprcsentativc surveys, researchers arc ab

AN EMPIRICAL METHODOLOGY TO ESTIMATE THE INCIDENCEAn Empirical Methodology to Estimate the Incidence and Costs of Payroll Fraud in the Construction In

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINALrograms that are published via the Quarterly Census of Employment and Wages (QCEW) and the Bureau of Economic Analysis (BEA); these offer projections

of legal wage-and-salary construction employment.The starting point of this report is to focus on the difference between estimates of total employment National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

and legal wage-and-salaty employment in the construction industry. The differential includes law-abiding self-employed construction workers, workers

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

misclassified as independent contractors, and those who are working off-the-books in cash-only arrangements. None of these workers would appear on off

AN EMPIRICAL METHODOLOGY TO ESTIMATE THE INCIDENCEAn Empirical Methodology to Estimate the Incidence and Costs of Payroll Fraud in the Construction In

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINALs study applies a scries of empirical tools to estimate the proportion of illegality in this group. This includes, but is not limited to, aggregate in

come underreporting rates by self-employed construction workers as reported by the Internal Revenue Service (IRS), which this study advances as the be National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

st publicly-available measure of illegal activity in the industry.This report was written in the hope that it may serve as a cornerstone for future re

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

search efforts on payroll fraud in the construction industry. First, this report includes a comprehensive literature review of prior research on this

AN EMPIRICAL METHODOLOGY TO ESTIMATE THE INCIDENCEAn Empirical Methodology to Estimate the Incidence and Costs of Payroll Fraud in the Construction In

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINALion industry over the last two decades. This study also provides Step-by-step detail in outlining the development and application of its preferred met

hodology to estimate the incidence of payroll fraud in construction; this includes a supplemental table that facilitates state-level analyses.Finally, National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

this report applies this statistical approach to 2017 data to produce national estimates of the incidence and cost of payroll fraud in the constructi

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

on industry. As outlined in more detail in the body of the report, the use of indirect measures leads to a wider range of potential outcomes than the

AN EMPIRICAL METHODOLOGY TO ESTIMATE THE INCIDENCEAn Empirical Methodology to Estimate the Incidence and Costs of Payroll Fraud in the Construction In

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINALstimates include:Incidence• In an average month of 2017, between 12.4% and 20.5% of the construction Industry workforce were either misclassified as i

ndependent contractors or working "off-the-books." These represent national rates and do not rule out substantial differences across states and region National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

s. Overall, these results suggest that between 1.30 and 2.16 million3AN EMPIRICAL METHODOLOGY TO ESTIMATE THE INCIDENCEworkers were misclassified or w

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

orking in cash-only arrangements in an average month OÍ2017.•The hiring of seasonal workers increases these rates during times of peak industry employ

AN EMPIRICAL METHODOLOGY TO ESTIMATE THE INCIDENCEAn Empirical Methodology to Estimate the Incidence and Costs of Payroll Fraud in the Construction In

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL This amounts to 1.45 to 2.41 million workers.•The estimated ranges offered above are corroborated by the results of a number of statespecific studies

, including direct evidence offered by unemployment insurance audit reports. Some of the methodologies explored in this report produced lower estimate National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

s, however these rates were contradicted by a preponderance of these prior studies and were thus not included in the most feasible ranges offered abov

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

e. Further, as outlined in the report, there are methodological reasons that do not preclude the possibility that payroll fraud is even more extensive

AN EMPIRICAL METHODOLOGY TO ESTIMATE THE INCIDENCEAn Empirical Methodology to Estimate the Incidence and Costs of Payroll Fraud in the Construction In

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINALthe number of workers directly affected (1.30 million) by the average income of these workers. Unfortunately, empirical data on annual earnings for mi

sclassified and off-the-books workers do not exist. As a result, this study examines the aggregate cost effects through the lens of three possibilitie National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

s: that these workers would earn, on average, (a) $30,000, (b) S35,000, or (c) $40,000 on an annual basis if employed legally. These income assumption

National-Carpenters-Study-Methodology-for-Wage-and-Tax-Fraud-Report-FINAL

s were examined as they approximate the 30Th through 50th percentiles of income among private-sector wage-and-salary workers in the 2017 ACS.To develo

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