Failure to Contribute: An Estimate of the Consequences of Non-and Underpayment of Self-Employment Taxes by Independent Contractors, and On-Demand Workers on Social Security

Bruckner, Caroline; Hungerford, Thomas L.

doi:10.2139/ssrn.3273492

Cited by 4 publications

(4 citation statements)

References 31 publications

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“…Or, in terms of price: A worker's Social Security benefits are a function of their lifetime earnings. However, independent contractors underreport their income in filing taxes (Bruckner and Hungerford 2021;Schreur and Veghte 2018), suppressing their future benefit. If the nontraditional type is a function of labor market barriers, then they by extension present a potential barrier to accessing Social Security or fully benefitting from it.…”

Section: Nontraditional Type As a Function Of Barriersmentioning

confidence: 99%

Traditional and Nontraditional Earnings: Demographic, Financial, and Beneficiary Patterns

Edwards

Schwam

2023

SSRN Journal

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Section: Nontraditional Type As a Function Of Barriersmentioning

confidence: 99%

Traditional and Nontraditional Earnings: Demographic, Financial, and Beneficiary Patterns

Edwards

Schwam

2023

SSRN Journal

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“…Findings from other countries confirm that the self-employed often underreport their earnings (Hurst, Li and Pugsley, 2010 [26] ; Bucci, 2019 [27] ). In the United States, a 2018 survey found that 32% of self-employed admittedly underreport their income for tax purposes (Bruckner and Hungerford, 2019 [28] ). Moreover, the inclination towards informality might be magnified when working with or through the internet platforms, especially if the platforms are based abroad and do not report any transaction data to Source: OECD domestic authorities.…”

Section: Income Validation Bargaining Power and Income Variabilitymentioning

confidence: 99%

“…A few countries introduced specific regulation to limit pension coverage gaps for selfemployed workers with only few major clients. While in Germany, self-employed persons who work predominantly for one client 28 and do not have employees have been mandatorily insured in the pension system since 1999, in Italy and Portugal the contributions of independent contractors relying on single contracts are now topped up by their clients. In addition, in Portugal if a self-employed worker depends significantly on one single client -the so-called ordering customer -the latter has to pay social security contributions for the self-employed.…”

Section: Policy Changesmentioning

confidence: 99%

Life expectancy

2019

OECD Pensions at a Glance

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“…European Commission (2018), "2018 Ageing Report; Economic and budgetary projections for the 28 A number of OECD countries achieved near-universal coverage of the working-age population through mandatory or quasi-mandatory plans in 2018. In ten OECD countries, voluntary private pensions (occupational and personal) covered more than 40% of the working-age population.…”

Section: Further Readingmentioning

confidence: 99%

Gross pension replacement rates for different entry age

2019

OECD Pensions at a Glance

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The world of work is changing. Mega trends, such as digitalisation, globalisation, and demographic and climate change are transforming our economies and societies. Many new opportunities for growth and development are emerging, but also some clear challenges with increasing numbers of people with unstable working conditions, often in temporary or part-time jobs, and with low and intermittent earnings. New technologies make it easier and cheaper to offer and find work on-line, and platforms have seen an exponential growth in recent years, even if they still account for a small share of employment across the OECD. Overall, non-standard employment, including self-employment, accounts for more than one in three jobs in OECD countries. Non-standard workers are a very diverse group, but on average, they earn less on an hourly and especially yearly basis. For example, a median full-time self-employed person earns 16% less than a full-time employee, on average across the OECD.What does this mean for workers' social protection? Most social protection systems were built on the premise of stable, linear careers, often with only one employer, and thus are ill equipped to provide adequate income security for non-standard workers. Many of them, be it in self-employment, short-term, gig, platform or click work, risk falling through the cracks.These developments challenge all branches of social protection, but one stands out in particular due to its long-term impact: the provision of old-age security. For pensions, the future of work is now. Many countries have tightened the links between contributions and pension benefits and thus, to reach an adequate pension, contributions have to start early and continue for the whole career. Countries have long recognised this; they have therefore made membership in pension systems mandatory for most workers and are encouraging participation in voluntary occupational and personal pension plans.But as always, the devil is in the detail. Workers on fixed-term contracts should in theory be covered, as most countries align rules with those for standard workers. The problem is largely about the level of expected benefits given their patchier and generally lower contributions. However, in some countries, for some specific groups, reduced or no pension contributions are required for self-employed workers, temporary agency workers, young workers, seasonal workers, apprentices and/or trainees.Ensuring pension coverage for the self-employed is much more difficult. Without a formalised employment relationship, it is not clear on what basis pension contributions should be levied. For employees, contributions are often based on the gross wage, but this does not correspond to any category of a self-employed worker's earnings. Also, it is very difficult, if not impossible, to distinguish between labour and capital income. Still, most OECD countries require the self-employed to contribute to their mandatory pension systems. Why then is pension coverage still a challenge? Even if as affiliates of a pension ...

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Failure to Contribute: An Estimate of the Consequences of Non-and Underpayment of Self-Employment Taxes by Independent Contractors, and On-Demand Workers on Social Security

Cited by 4 publications

References 31 publications

Traditional and Nontraditional Earnings: Demographic, Financial, and Beneficiary Patterns

Traditional and Nontraditional Earnings: Demographic, Financial, and Beneficiary Patterns

Life expectancy

Gross pension replacement rates for different entry age

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