Why Do People Choose Freelance Work Arrangements? Evidence from NYC Taxi and App-Based Drivers

The so-called “gig” economy has exploded in recent years due to new work mediated by rideshare and delivery platforms. Gig workers are self-employed independent contractors, which has important ramifications for workers. Unlike employees, independent contractors are not protected by labor law and are not eligible for social insurance programs administered through employers such as workers compensation and unemployment insurance. Further, contractors are often responsible for covering their own expenses, fees, and some taxes usually paid by employers, so that the true take-home earnings from independent contract work may be lower than appears initially. On the other hand, it is often the case that independent contract jobs offer greater flexibility and control over one’s work that is desirable to many participants. A key question for policy debates is whether freelance contractors generally have a good grasp of the tradeoffs involved in contract work and voluntarily choose such arrangements because they value the amenities, or if such arrangements might instead exploit workers’ lack of awareness of the tradeoffs involved to reduce compensation without workers’ awareness. We study tradeoffs between contract type and flexibility using a survey experiment design that nests a discrete choice experiment within a randomized information intervention that allows us to disentangle the role of beliefs and salience about the tradeoffs involved in contract work from underlying (and potentially heterogeneous) preferences over amenities like flexibility, as well as their direct tastes for inherent features of employment (such as legal protections and tax withholding).