Agenda - Council Work Session - 07/28/2026

Home

Even larger than the problem of misclassification in construction is the practice of paying workers completely off the books. The Alliance for Construction Excellence reported in 2019 that there are fully four times as many construction workers being paid off the books as the number being misclassified as independent contractors (1.2 million to 300,000).24 The cash -only nature of under-the-table work leaves workers particularly vulnerable to wage theft, though misclassified workers and even legally employed workers can be subject to this as well. A 2009 study of three cities found over 70% of residential construction workers had experienced not being paid overtime or for work done off the clock.25 Ormiston et al. (2020) estimate that throughout the country in 2017 workers lost between $81 1 million and over $1 billion in overtime and premium pay due to payroll fraud.26 A study of construction workers in California found that workers paid under the table earn just 52 cents for every dollar earned by workers with employee status.27 The practices of misclassification and paying off the books are most likely to occur in industries where it is most profitable and most easily hidden, both true of the construction industry. Employers in construction can accrue tremendous savings by avoiding employment taxes and workers' compensation premiums, and the layers and layers of subcontracting characteristic of the industry make these practices easy to conceal.28 In most states, general and subcontractors are not liable for —and in fact benefit from —payroll fraud found further "down the chain" of subcontractors; these practices continue "with or without the knowledge, assistance or willful ignorance of the owners, developers, general contractors, or construction managers."29 Overall, between 12.4 and 20.5% of construction workers are either misclassified or paid under the table.3° More than one in five of the construction workers in the six Southern cities study did not have enough money for groceries or bills at some point in the previous year.31 The impact of low wages and lack of benefits in low -road construction goes beyond the direct effects on workers and their families. It also has costs to society at large. When workers do not earn enough money to meet their basic needs, they often turn to safety net programs to make up the difference. In this brief we will estimate the public cost to the states and the federal government from the use of safety net programs by construction workers and their families as a result of the low -road practices that are becoming more and more commonplace in the industry. Data and Definitions We examine construction workers' and their families' utilization of the five largest means -tested safety net programs for which data are available: Medicaid; Children's Health Insurance Program (CHIP); basic household income assistance under Temporary Aid for Needy Families (TANF); Earned Income Tax Credit (EITC); and Supplemental Nutrition Assistance Program (SNAP). Responsibility for funding the health programs is shared by the states and the federal government. We include only the cash assistance portion of TANF, and this program too receives funding from both the states and the federal government. While there are state -level EITC programs in over half of the states, in this analysis we include only the federal EITC. The federal government alone funds SNAP. We analyze only programs that function as income supplements, omitting job -training, housing cost assistance, educational, and other programs that indirectly assist low-income families. The Public Cost of Low -Wage Jobs in the US Construction Industry