Is gig work threatening workers’ financial futures?
The employment model’s lack of benefits will affect personal security for millions of Americans working as independent contractors, new research finds.
THE GIG ECONOMY, THE EMPLOYMENT model where workers act as independent contractors rather than employees, is expected to have a destabilizing effect on personal financial security, according to a new report from Prudential Financial.
Gig economy workers do not receive employee benefits, leading to a major gap in coverage for short- and long-term disability, life insurance and employer-sponsored retirement plans, according to the research.
For example, only 16% of gig economy-only workers — those without access to employer-sponsored benefits — have access to a retirement savings account, compared to 52% of fulltime employees.
“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,” says Andy Sullivan, president of group insurance at Prudential. “Without benefit protections, many gig workers are left financially vulnerable. 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.”
Seven in 10 millennial gig-only workers, have no access to benefits, compared to 44% of gig-only workers over the age of 55, according to Prudential’s research, which polled nearly 1,500 workers.
The implications of an entire generation without retirement savings can be detrimental, says Snezana Zlatar, senior vice president of full service solutions, product and financial wellness, at Prudential Retirement. “Without a sizable savings for healthcare and other basic services past retirement age, the number of Medicare enrollees could skyrocket.
“That should be one of the main incentives to encourage the public sector and private sector to seek solutions,” she says. “It’s not just about the wellness effect for individuals. It’s about reducing future reliance on government programs.”