New Article: Taxing Nannies

New Article: Ariel Jurow Kleiman, Shayak Sarkar, & Emily A. Satterthwaite, Taxing Nannies, SSRN, Jan. 2024. Abstract below:

Nannies in the U.S. work long hours for low wages and risk retaliation if they complain. Informal, or “off the books,” work exacerbates their precarity, keeping it secret from state and federal tax agencies, as well as employment and labor agencies. Yet we have little understanding of how nannies navigate the tax reporting that renders them formal or informal.

This Article investigates nannies’ preferences for or against formal employment and tax reporting, the reasons behind such preferences, and how such preferences inform nannies’ relationships with their employers and legal institutions more broadly. The Article employs a multi-method research approach that includes an original and innovative survey of nannies and an analysis of nannies’ tax-related posts on the online forum Reddit. To supplement this research, the Article also discusses interviews with fifteen subject-matter experts regarding industry norms, common challenges nannies face, and policy reforms.

This multi-method approach reveals four key takeaways. First, surveyed nannies express a strong preference for and experience with formal employment. Second, however, a subset of nannies—often undocumented and working more informally—is missing from surveys and the literature. Extrapolating survey results to these most vulnerable populations may be unwise, but our expert interviews fill in these gaps. Third, the formal/informal dichotomy so prominent in the discourse is inaccurate. Rather, nanny pay arrangements exist across a spectrum, with some compensation both on and off the books to accommodate hirers’ and nannies’ complicated interests. As a consequence, the Article’s fourth takeaway is that simple calls for increased enforcement may not accomplish intended goals, given the heterogeneity of nannies’ tax lives. Instead, other legal institutions must first be reformed to better support vulnerable nannies and align incentives for formality across key systems such as tax, immigration, and public benefits.