NEW ORLEANS (WVUE) - Estimating how much money is being lost by misclassification is not easy. Here's how we did it.
Our investigation found much of the misclassification in the construction industry comes from the semi-skilled workforce: carpenters, painters, laborers, brick masons, etc.
We went to the Department of Labor website and downloaded their data on those semi-skilled construction jobs. We totaled the amount of jobs and total salaries (estimated by the DOL) for one year.
Our investigation found that 50-60 percent of that workforce appears to be misclassified. The Carpenters Union has found similar evidence.
So we totaled the salaries for the workforce, and took around 55 percent of those salaries as being misreported. We then calculated how much employees (federal, state, Social Security and Medicare) and employers (Social Security, Medicare, unemployment comp) fail to pay by that misclassification. We calculated about a 56 percent misreporting rate of that group (from IRS data) and came up with about $250 million for a total loss to state and federal revenue. That's money that could be owed to the state and federal government.
We also looked at total construction costs in the state and calculated how much of the misclassification we found on a typical project. Doing the math that way, the cost to taxpayers remained about the same - a quarter-billion dollar sum.
This is just one industry in one part of the workforce. It could be a conservative number because we are not even calculating other industries where misclassification is also prevalent, such as the hospitality and personal care sectors.