WORKING PAPER SERIES WORKING PAPER LABOR CENTER The Social and Economic Costs of Illegal Misclassification, Wage Theft and Tax Fraud in Residential Construction in Massachusetts Tom Juravich Professor, Labor Studies and Sociology University of Massachusetts Amherst
[email protected] Russell Ormiston Associate Professor, Department of Economics, Allegheny College President, Institute for Construction Economic Research
[email protected] Dale Belman Professor, School of Human Resources and Labor Relations, Michigan State University Institute for Construction Economic Research
[email protected] June 28, 2021 The Social and Economic Costs of Illegal Misclassification, Wage Theft and Tax Fraud in Residential Construction in Massachusetts Tom Juravich Russell Ormiston Dale Belman Executive Summary This study examines labor and employment practices in the residential construction in- dustry in Massachusetts. Our research is based on more than 60 in-depth interviews with documented and undocumented workers, union and non-union contractors, union and public officials, and community activists involved in residential construction. The results of these interviews are complemented by a comprehensive quantitative analysis of data from the Massachusetts Department of Revenue, Department of Unemployment Assistance and Department of Industrial Accidents that provides statistical projections of the extent and economic costs of worker misclassification in Massachusetts construction. Based on our extensive interviews, we have identified a new and fully institution- alized business model operating in residential construction across the Common- wealth. Practices such as the illegal misclassification of workers as independent contractors, wage theft and tax fraud, and paying workers in cash that were once at the margins of the construction industry, are now at the center of medium and large residential construction in Massachusetts.