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

2025-02-07

2025-02-28

propensity to choose traditional employment; Willingness to pay for traditional employment instead of independent contract work; willingness to pay for schedule flexibility.

See full analysis plan.

Beliefs about net pay relative to gross pay; beliefs about W-2 v 1099 jobs; reported expenses; pay and working conditions

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).

We have two main outcomes: the willingness to pay (WTP) to be a traditional employee rather than a self-employed freelancer, and WTP for flexible schedules. WTP will be estimated from a discrete-choice experiment conducted in one of two experimental environments.

We will have respondents choose between 5 sequential pairs of jobs. Key to our design is that in each comparison, one job is always a freelance independent contractor job and the other is a traditional employment job. Each job is additionally characterized by a pay amount (discussed further below), and control over schedule—these are varied in each set of options in order to estimate one’s willingness to pay for each job feature separately from a willingness to pay for a W-2 job per se (holding other attributes constant). To fix comparisons, we state that neither job offers health insurance or retirement benefits. Pay levels are anchored to average pay levels of drivers. The schedule choices are modeled after the current schedule environment being faced by drivers, as well as a hypothetical schedule modeled after other low wage jobs. In particular, the wording presented is as follows:

Schedule flexibility:
• Work whenever I want, as much as I want
• Schedule set by company in advance. You can work your desired number hours up to 40 hours per week guaranteed. You will only be assigned late nights or weekend hours if you choose.
• You can choose to drive as many hours as you want only so long as the company determines there are enough trips. You may be unable to log on if there aren't enough trips.

Our RCT randomly assigns respondents into one of two experimental conditions that vary what information is provided about the nature of independent contract arrangements.

A. In a control group, jobs options are described as either 1099 independent contractor jobs or as W-2 employment jobs. 2 job opportunities are first presented in terms of gross pay, before presenting three options in terms of net pay. To avoid anchoring, we ask questions about expenses only after data collection in the discrete choice experiment has concluded.

B. In a treatment condition, we ask the same questions about expenses but do so before beginning the pairwise comparisons. We then explicitly highlight key differences in how the law treats employees and contractors (i.e. social insurance, tax responsibility, and legal protections). After conducting a knowledge check, we then direct respondents to make the same 5 job comparisons, except presenting the three net pay options first.

Randomization done within Qualtrics.

Individual.

No

~2000 individuals

~2000 individuals

1/3 in control, 2/3 in treatment arm