How Coronavirus Highlights the Insurance Gap for Gig Workers

Tuesday, March 17, 2020

By Hannah Gdalman, Stevenson Fellow, Financial Health Network

In light of the coronavirus outbreak, the Financial Health Network recently asked its employees, like a growing number of white-collar workers, to work from home and avoid all non-essential travel. Even though our offices have closed, we’re able to work remotely, take our meetings virtually, and proceed with business as usual. This is a privilege that few have, however. In fact, only 29% of U.S. workers have the option to work remotely, bringing to the fore important conversations about work-related risk of exposure, economic vulnerability, and other disparities between U.S. workers across industries such as healthcare, hospitality, education, the gig economy, and more.

The coronavirus outbreak also raises some important questions surrounding the financial preparedness of workers in America when faced with an unexpected emergency. Of the 71% of U.S. workers that don’t have the option to work from home, many are gig workers. Gig workers comprise a growing portion of the American workforce, with 1 in 10 U.S. workers relying on gig work as their primary source of income.

In the absence of paid sick leave or short-term disability insurance, gig workers are often faced with difficult decisions, like whether to stay home and lose wages, or risk getting sick or infecting others by going to work. In the event that external factors (read: coronavirus shutdowns) cause demand to drop off and work hours to decrease, gig workers may not qualify for unemployment benefits.

What’s more, without adequate health insurance, many gig workers are unprepared to deal with the financial shock of a major injury or illness. Three out of four people who work for contract and temporary agencies as their main job, as well as 10.6 million people who work primarily as independent contractors, don’t have access to health insurance through their employer. Independent contractors are also significantly more likely to report they have no health insurance at all. According to data from our U.S. Financial Health Pulse 2019 Trends Report, only 43% of respondents who relied on independent or freelance work within the past month as their main source of income reported being confident that their insurance would cover them in the event of an emergency ( including health insurance, vehicle insurance, home or rental insurance, life insurance, and disability insurance). This is the reality for millions of gig workers in the U.S. today. Without the proper safeguards in place, an unexpected emergency can lead to lost wages, reduced savings, and debt.

In response to many of these concerns, California made headlines in early January of this year when legislators passed Assembly Bill 5, a bill that would require companies like Uber to treat contract workers as full employees, entitling them to guaranteed minimum wage and benefits, including insurance. Assembly Bill 5 has sparked heated debate as thought leaders argue whether California’s approach is the right one. Some would prefer to see a shift away from the employer-provided model altogether, arguing that employer-sponsored benefits like health insurance were born during a time when costs were lower and options fewer than they are today. But both traditional employers and gig platforms can — and do — play an important role here, and some are demanding that we start thinking differently about benefits.

Etsy is one example of a gig platform that has shown leadership on this issue, advocating for policy changes that would help gig workers build economic security through a reimagined benefits system. Last year, the company became an inaugural partner in the Blackrock Emergency Savings Initiative and is currently working to identify a suitable savings solution for its sellers. Government can play a role in bridging the gap, as well: portable benefits, which are connected to the individual rather than the employer, are one possible alternative. If offered universally, portable benefits stand to create more equity between traditional full-time workers and gig workers. State-sponsored benefits, such as emerging state-facilitated retirement savings plans, also have the potential to serve millions of workers who don’t have access to these benefits from their employers. The insurance industry can also join the charge by offering innovative new solutions and platforms designed to give gig workers access to flexible, customizable, and holistic insurance benefits. As the gig economy continues to grow, we must think about how stakeholders across multiple sectors can bridge the insurance gap, providing tools and strategies that help workers plan for unexpected emergencies and improve their financial outcomes.

Planning for unexpected financial shocks by having appropriate insurance and adequate savings is one of the Financial Health Network’s key indicators of financial health. While the fears and unknowns surrounding the spread of coronavirus underscore the financial vulnerability of gig workers in particular, this pandemic will impact the entire economy. Over the weeks and months ahead, the Financial Health Network will be diving into our financial health data and highlighting the impact of the virus on many other underserved sectors and populations who are most vulnerable to its negative effects.

This blog post is part of a series of thought leadership pieces that will explore the impact of coronavirus and other financial shocks on different segments of the economy and population.

By Financial Health Network on March 17, 2020.

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