Improving Social Security Coverage and Retirement Benefits for Independent Contractors

Independent contractors (ICs) of all kinds experience many of the same risks as workers in standard employment relationships, but face them without the same rights, benefits, and social insurance protections afforded to traditional employees. Social Security, being a reliable source of retirement income even for those with limited employment-based retirement options, fills a crucial role in preparing ICs for retirement. Yet several factors coalesce to create a policy challenge to ensuring adequate Social Security income for these workers. Reasons for ICs’ lower Social Security coverage and benefits include lower earnings, episodic work, and poor tax compliance. This paper provides a background of the policy mechanism for covering ICs through Social Security, explores the reasons why the system leaves gaps in coverage for ICs, and offers six categories of policy options to improve Social Security coverage and retirement benefits for these workers.

An Academy brief based on this paper is also available. The brief, “Social Security and Independent Contractors: Challenges and Opportunities,” provides a more concise discussion of the issues analyzed in this paper, and features illustrative charts.