From the Minnesota Reformer, Max Nesterak discussess a recent report whose analysis says that approximately 316,000 workers in Minnesota may be misclassified. Max writes:
Approximately 316,000 private-sector workers in Minnesota — or 9.4% of workers — may be misclassified as independent contractors and robbed of critical employment protections like overtime pay, unemployment insurance and workers’ compensation insurance, according to a new analysis by the left-leaning think tank North Star Policy Action.
Based on that analysis, the group estimates workers lost between $2.9 billion and $6.2 billion in 2019 because of payroll fraud, while state government lost between $506 million and $1.3 billion in tax revenue.
“This is an important form of fraud that’s taking place in the state that probably deserves more attention than it currently gets,” North Star Policy Action researcher Aaron Rosenthal told the Attorney General’s task force on misclassification on Friday. “10,073 cars were stolen in Minnesota in 2017 compared to 316,000 people who experienced wage theft.”
Misclassification is poorly policed, according to a recent report by the state Office of the Legislative Auditor, but the extent to which employers commit payroll fraud is hard to measure.
Federal and state agencies use different criteria to determine if workers are independent contractors. Government agencies also don’t widely collect data on those factors, like how much control workers have over their time and the permanence of the worker-employer relationship.
Rosenthal said the estimate is surely an undercount. North Star Policy Action compared Census Bureau data on the number of workers who paid self-employment taxes with data from the Bureau of Economic Analysis data on wage and salary employees. That shows the number of workers who have been classified as self-employed by BEA but didn’t file self-employment taxes. But it misses workers who were paid off the books, as well as those who paid self-employment taxes but may be misclassified, like certain gig workers.
The Office of the Legislative Auditor reviewed records from the Department of Employment and Economic Development’s 2018 random audit of the unemployment insurance program and found 4% of workers were misclassified, although they cautioned the results could not be generalized across the whole economy. The office recommended that state agencies calculate misclassification on an on-going basis.
Read the full story at Nearly 1 in 10 Minnesota workers may be misclassified — and other labor news • Minnesota Reformer