How Do Workers Think About the Costs and Benefits of Freelance Work? New Evidence From a Survey Experiment

We examine how workers perceive the trade-offs of freelancing using a novel survey design that explores the nature of workers’ perceptions of their own jobs and the implications of work arrangements for their take-home pay. We find that, across several alternative classifications of freelance work, workers in such arrangements make less per hour than traditional employees, but report having greater control of when, where, and how they work. We find that on average, self-employed workers spend an additional 5 to 8 percentage points of gross pay covering unreimbursed expenses relative to traditional employees. However, when asked about expectations of net pay in freelance and traditional employment jobs with the same gross pay, respondents who received no quantitative information expected net pay to be higher in freelance arrangements than in employment arrangements, on average. This pattern reversed among respondents who were randomly assigned to receive customized estimates of their expected total expense and tax burdens in each arrangement, who estimated that freelance arrangements would generate lower net lower earnings than employment arrangements (consistent with the estimates we provided to them). This suggests that workers may not be fully aware of the tax and expense burdens freelance workers are responsible for. Interestingly, we find similar results both for workers who are currently employees in their main job and those who are currently self-employed, suggesting that the low salience of the tax and expense burdens associated with freelance work are not merely driven by those with no self-employment experience.