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Home » Blogs » Think Tank » As The Gig Economy Grows, So Does Its Downside

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As The Gig Economy Grows, So Does Its Downside

September 11, 2017
Robert J. Bowman, SupplyChainBrain

An estimated one-quarter of Americans - some 40 million altogether - participate to some degree in the gig economy today. (The number includes part-time workers.) According to a new study, however, their health and general wellbeing could be at stake.

The 2017 research brief, “Part-Time Nation,” comes from The Guardian Life Insurance Co. of America. While noting the advantages of a flexible work schedule, it concludes that many part-time workers are financially vulnerable due to a lack of employee benefits. Specifically, 75 percent don’t have medical insurance, 68 percent aren’t building up savings for retirement, 86 percent aren’t getting disability coverage, and 87 percent don’t have life insurance. Says Guardian: “It may be time to sound the alarm for Part-Time Nation.”

Part-timers are hardly a new phenomenon, but these drawbacks didn’t seem to be a huge concern until relatively recently. One reason is an explosion of “gig” opportunities, made possible by companies such as Uber, Lyft and Airbnb, which rely entirely on contracted labor. Add in the soaring cost of healthcare, and the gig existence suddenly doesn’t seem so desirable anymore.

By definition, a part-time job rarely generates enough income on which to live. So gig workers are often forced to take more than one job. Between 2015 and 2016, the number of multiple job holders in the U.S. increased from 7.3 million to 7.8 million. Women were particularly affected by the trend.

Juggling part-time jobs can actually be “destructive” to a woman’s earning potential, says Rob Wilson, president of human-resource consultancy Employco USA. He cites a study from John Hopkins Institute for Health and Social Policy which found that women who held a variety of part-time jobs in their 20s saw no increase in earnings in their 30s. “Meaning that even as their experience and their families’ needs grow, they do not earn a dollar more,” says Wilson.

He cites additional research which found that contract workers are more likely to suffer from depression and require antidepressant medications. At the same time, their lack of access to employer-provided health insurance makes those drugs cost-prohibitive.

Employers, of course, stand to benefit greatly from a reliance on contract labor. They save on costly benefits such as Social Security, Medicare, retirement plans, and vacation and sick time. Fast-growing operations like Uber and Lyft base their entire business model on the “independent” workforce.

The modern-day version of crowd-sourced labor, as typified by Uber, was originally seen as a source of supplemental income for otherwise employed workers. Some thought they might turn to driving for Uber while seeking full-time positions. Increasingly, though, gig jobs have become a long-term means of support for workers who either prefer to remain independent, or can’t find full-time work.

A decade ago, following the most recent recession, H.R. experts were advising workers not to take positions below their skill and income levels, Wilson says. But that is no longer the case. Many workers remain in gig positions for extended periods of time, often putting in 60 or more hours of work per week to make a living.

The stress that comes with jobs of high unpredictability can have a serious effect on workers’ health, says Wilson. Moreover, the need to hold down multiple jobs can disrupt family life.

Then there’s the tax situation — which, to be fair, has long existed for the independent or self-employed worker. Gig workers are responsible for paying their own taxes, including Social Security, Medicare and federal withholding. “They could be looking at paying thousands out of pocket to cover these taxes,” says Wilson.

Independent work has long been a reality in the transportation business, especially in trucking, which in many areas is dominated by the owner-operator. In a number of cases, however, “independent” truckers are asserting that they are effectively employees of the trucking companies that rely on their services — without the benefits that would accrue if that position were made official. Some have sued in order to gain the designation of full-time worker, subject to all applicable benefits.

The same kind of pushback is beginning to emerge in newer areas of the gig economy. Uber drivers are claiming in a class action lawsuit they have been misclassified as independent contractors, and are entitled to reimbursement for expenses. Microsoft is among the big publicly traded companies to be sued by long-term temporary workers claiming that they were denied benefits. (After one year on the job, temps are either supposed to be made permanent, or returned to their employment agencies.)

Companies relying on contracted workers are likely to come under increasing pressure to formalize their employment relationships, as the implications of the gig economy become evident. In the meantime, entities such as Employco are looking to reduce the cost of health insurance for individual workers by way of their aggregated purchasing power. But millions of gig workers remain without essential benefits or access to affordable healthcare.

Don’t expect the gig marketplace to go away anytime soon. It continues to offer advantages to the independently minded worker. Wilson says it can be of particular value to older Americans who have trouble finding full-time employment. “The gig side does give them some flexibility,” he says. “It’s not all bad news for gig workers.”

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