Gig Workers Compromising Financial Security for Flexibility
While estimates of the size and growth of “gig employment” vary, there are several indications that gig work is here to stay, even though such work may have a destabilizing effect on personal financial security, a new survey shows.
Noting that it conducted the survey to better understand the profiles and mindsets of gig workers, Prudential Financial’s survey, “Gig Worker On-Demand Economy
,” emphasizes that the gig-work model has many positive aspects, including the opportunity for workers to have flexible schedules and be their own boss. In addition, for older workers, gig work can help serve as a bridge to their desired retirement age or to supplement income in retirement.
Gig work, however, also presents challenges and is fundamentally changing the employer-employee relationship, the report notes. The resulting consequences for workers include an unpredictable work stream, a lack of access to benefits, and lower average pay compared to full-time employees, making the “foundational elements of financial wellness more difficult to achieve.”
For example, the majority of respondents who work solely as temporary or contract workers do not have access to employer-sponsored retirement or insurance plans. Only 16% of gig-only and 25% of gig-plus workers have access to an employer-sponsored retirement plan, compared to 52% for their full-time counterparts, according to the research. In addition, the survey found that gig workers on average make only 58% as much as those who hold traditional full-time jobs ($36,500 versus $62,700).
“While the gig model is cost-efficient for employers, reduces their benefits costs and gives workers flexibility, these workers may in turn suffer from income volatility and lack of access to a benefits safety net,” said Andy Sullivan, president of Group Insurance, Prudential. “Without benefit protections, many gig workers are left financially vulnerable.”
The study notes that gig work is not an exclusively urban trend; rather, it is spread equally among cities, suburbs and rural areas, thus increasing available income opportunities in some areas where there had been few.
Gig workers are also more likely to be in the service and manual labor sector, the report notes. The most common job categories for gig-only workers are construction, installation and repair, personal care, and sales, while the most common work categories for gig-plus workers (those who have both a gig and full- or part-time job) are computer/information technology, sales, and personal care.
With several metrics indicating that gig work is here to stay, the report outlines potential actions for stakeholders to consider:
- Policymakers should encourage exploration of both public and private sector solutions to deliver benefit solutions to gig workers to improve their level of financial wellness.
- Employers that use the gig model may consider offering holistic financial wellness programs and benefits to traditional employees and gig workers alike.
- In the absence of employer-sponsored benefits, gig workers should consider using insurance exchanges, setting up IRAs, and using budgeting tools, as well as seeking advice to help them navigate options.
- Advisors should use their expertise to help gig workers navigate the financial choices they need to make to achieve financial wellness, including managing day-to-day finances and protecting against major financial risks.
The online survey was conducted by Harris Poll on behalf of Prudential from Jan. 5 to Feb. 18, 2017, among a representative U.S. sample of 1,491 workers. Gig work was defined as providing a service or labor, and did not include renting out assets.