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Working paper

The rise of alternative work arrangements: evidence and implications for tax filing and benefit coverage

1 Jan 2017
Description

A 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.

Publication Details
Issue: 
Office of Tax Analysis Working Paper 114
Access Rights Type: 
Language: 
License Type: 
CC BY
Published year only: 
2017
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