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Gig economy has destabilizing effect on personal finance, report says

August 30, 2017

The gig economy has positive and negative aspects, but it does appear to have a destabilizing effect on personal financial security, according to a new report by Prudential Financial Inc. based on a survey of 1,491 workers in the US.

A majority of survey respondents working solely as temporary or contract workers did not have access to employer-sponsored retirement or insurance plans. It also found those who work only in the gig economy earned on average $36,500 per year versus $62,700 for full-time employees.

“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. “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.”

  • Only 7% of people who work in the gig economy only, “gig-only workers,” had long-term disability insurance. It was 21% among workers who did gig work plus had a traditional full-time or part-time job, “gig-plus workers.”
  • Only 20% of gig-only workers and 37% of gig-plus workers have life insurance.
  • In addition, 16% of gig-only workers and 25% of gig-plus workers have assets in an employer-sponsored retirement plan, compared to 52% of those with traditional full-time jobs.

The Prudential report defined gig workers as those who work for themselves and provide a service or labor under terms such as freelancer, independent contractor, on-demand or temporary worker. It excluded those who rent assets, such as those using the Airbnb platform, or selling goods, such as on the Etsy platform.

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