Does the Gig Economy Provide a State of Financial Insecurity?

The gig economy tends to divide opinion quite roundly, with supporters saying it offers a tremendous level of flexibility and opportunity, whilst its detractors suggest it offers a race to the bottom coupled with intense uncertainty.

A recent report from financial company Prudential falls very much into this latter category. It suggests that the gig economy has had a destabilizing effect on personal financial security, in the United States at least.

It finds that not only are gig workers in the US earning around 58% of what those in full-time jobs earn, they miss out on the employer-sponsored benefits such as healthcare and pension policies.

Unintended Consequences

The gig workforce makes up 16% of the total American workforce, with this rising 6% in the last decade. Whilst it has undoubted benefits, not least in terms of flexibility for both employer and employee, the authors worry about the unintended consequences of a rise in gig work.

"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," Prudential says. "The money made by gig work may contribute to reducing the national income gap, but the decline in employer-sponsored savings and insurance plans is doing little to address the wealth gap. Without benefit protections, many gig workers are left financially vulnerable."

The report identifies three main types of gig worker:

1. Those who only perform gig work.
2. Those who did gig work on top of either a full or part-time job.
3. Those with full-time jobs.

It also revealed that gig working is not exclusively urban, with gig workers across cities, towns and rural areas. The most common forms of gig-only work were in construction, personal care, and sales, with the most common 'gig-plus' workers operating in computing and IT.

The lack of 'extras' has been something that has been discussed around the world, as most developed economies use employment for a range of social programs, whether pensions, benefits, or healthcare. Even education and training is often provided by one's employer, and the gig economy tends to place the emphasis for all of these things onto the individual.

"While working independently has its rewards, the uncertainty of gig income makes it difficult for people to prepare for emergencies or save and invest toward achieving important financial goals," Prudential said.