Some 50,000 NYC building workers paid off the books

NEW YORK (Reuters) - One of every four construction workers in New York City is paid off the books, and their health-care costs and lost payroll and income taxes will cost taxpayers $557 million next year, a new report said on Wednesday.

The city still is in the midst of an extraordinary construction boom as demand for new offices and apartments skyrocketed in the past few years, largely due to Wall Street's strong recovery after September 11, 2001.

Though the financial industry now is experiencing severe strains driven by problems in the subprime mortgage market, the commercial and residential real estate sectors have not turned lower.

New York City has a total of 200,000 construction workers and about 50,000 are either misclassified as independent contractors or paid off the books, according to the report by the Fiscal Policy Institute, a New York think-tank.

"Official figures don't reflect (the) activity of a growing number of unscrupulous employers skirting the law," said James Parrott, chief economist for the Fiscal Policy Institute.

"And law-abiding employers are put at a real disadvantage, forced to bear many costs shifted to them from employers breaking the law," Parrott added.

In 2005, the fiscal impact of these underground workers totaled $489 million -- a cost set to rise by $68 million next year.

In his breakdown of the 2005 costs, Parrott estimated that companies that paid construction workers off the books cost taxpayers an extra $272 million in payroll taxes for Social Security and Medicare, and insurance premiums for workers compensation, unemployment and disability benefits.

Underground workers who had to pay for their own health care, taxpayers who fund public health plans, and companies that do not use underground workers that had to pay higher health insurance premiums, all lost $148 million, he calculated. Foregone income tax collections totaled $70 million.