It has become a hot economic and social topic in the past few years. A recent EY survey shows that 40% of large US employers plan to use more gig workers by 2020. About a quarter expect more than 30% of their staff to be gig workers by then.
EY has even launched a platform for experienced contractors, GigNow, which is available to workers in five countries.
The rise of gig work is another example of how disruption presents both challenges and opportunities to wealth managers.
As a start, there are three key factors for investment firms to consider:
- The impact on employment models
The labor market will see increasing emphasis on flexibility, temporary contracts and individual entrepreneurship (e.g., workers as “free agents”).
- The impact on companies
This includes how relationships between employers and gig workers evolve, and how benefits provided (or not) could affect companies’ costs, margins and ultimately their valuations.
- The impact on workers as investors
Having different (or possibly no) corporate support (e.g., retirement savings plan, health insurance) will have a significant effect on those choosing the gig work model.
It’s that third area — the impact of gig work on “workers as investors” — that I want to focus on.
A new way of working
The nature of gig work means that no two workers, and no two “gigs,” are exactly alike. But it seems clear that taking a more entrepreneurial approach to employment will have an effect on every gig worker’s income streams, savings (and spending) habits, health care needs and retirement planning.
Without access to employer-sponsored retirement benefits, the self-employed have a much greater personal responsibility for funding their retirement compared to employed workers. A global study by Aegon found that 44% percent of independent contractors aren’t saving anything for retirement and 22% only do so occasionally.
However, a recent study from T. Rowe Price found that 78 percent of US gig workers consider themselves more involved in their personal finances as a result of participating in the gig economy. Thirty-nine percent of gig workers report checking their accounts more regularly, 32 percent are more on top of their bills, and 23 percent are more “hands on” with their individual investment accounts, since joining the gig economy.
In other words, gig work represents an entirely new client segment for firms to consider, which presents both challenges and opportunities.
Firms’ ability to support the gig economy may depend on their ability to understand how this constantly changing way of working affects the lifestyle and investment needs of individual investors. And that understanding needs to be along the same lines as that developed by online retailers, who are now often able to predict what and when customers will buy.