How Gig Workers Can Achieve Stability Amid Economic Instability
Do you ever wonder how it feels to not run to the office to clock in on time; to gain back that extra 30 minutes of sleep; to attend meetings and work while out-of-town; and to be the boss of your own time? Dream job, right?
The coming of the digital age spawned many lifestyle changes and possibilities for people like instant, voice and video messaging, crowd sourcing, automation, work flexibility, and many more.
The ability to be present whenever and wherever, paved the way for the gig economy to flourish and create a network for independent workers to find jobs and for businesses to crowdsource for their manpower needs.
What is Gig Economy?
Gig economy is a workforce solutions-providing market that opened opportunities for businesses to outsource their labor needs through short-term contracts.
A study by the Pew Research Center showed that at least 16% of Americans have earned income through any of the following means
- Driving for a ride-hailing app;
- Shopping for or delivering groceries or household items;
- Performing household tasks or running errands;
- Making deliveries from a restaurant or store for a delivery app;
- Using a personal vehicle to deliver packages to others via a mobile app or website; or
- Doing something related to the foregoing.
Who Are Gig Workers?
Gig workers, also known as freelancers, are independent contractors, contract firm workers, and on-call workers who take on multiple jobs and are usually paid by the hour or on a project or output basis.
Freelancers composed 36% of the U.S. workforce and contributed $1.3 trillion in the U.S economy in 2021.
But, how are gig workers faring now, given the current state of the economy?
State of the Economy
Stock market prices continue to trend downwards, slammed by a soaring inflation rate which hit 8.6% in May 2022, the highest since 1981. This makes 2022 an unsettling year for investors.
Like consumer goods and services, the stock market is no exception to the law on supply and demand. With less investors wanting to buy stocks for fear and uncertainty of the country’s economic health, stock market prices will continue to drop.
We are currently in “bear market” territory as companies in the S&P 500 index (i.e. a stock market index tracking 500 of the largest U.S. companies) reported a 21% drop in June.
A “bear market” develops when the decrease in stock market prices is at least 20% lower than the 52-week high.
Now, can this market downturn affect gig workers?
Market Downturn and Gig Economy
The gig economy was designed to succeed even during a market downturn and this was evident during the pandemic when companies turned to freelancers and outsourced some of their workload to cut on costs. In fact, even professionals are thinking of switching to freelancing amid the “Great Resignation Era.”
However, nothing is black and white especially in an industrially diverse labor market, and a pandemic-driven downturn as unique as the one we are facing, is bound to upset even the thriving gig economy. Well, at least for a few groups within it.
The truth is, we may be seeing growth in the gig economy but only because some industries and sectors within it are pulling the weight for the deteriorating gig market groups.
This rings true for ride-hailing and takeaway firms which are performing relatively low even compared to the stock market in general. As an example, Uber’s value dropped by about 32% -- from $125 billion in early 2021 to $39 billion today.
So what may happen for gig workers in this industry?
- More Work, Less Pay.
With investors putting pressure on technology industries, some companies like ride-hailing and takeaway firms are underpricing its services to achieve volume for high growth. Thus, delivery riders may need to take in more customers to earn more.
Furthermore, the firms’ cost-cutting measures may also affect the pay and benefits afforded to them.
The second and worse scenario would be unemployment due to the firm’s closure.
Because of economic instability, less investors are willing to fund losses so gig firms will have to make up for it by increasing prices at a time when there is an income-expense disparity because of inflation.
Now, consumers who once thought that your firms’ services are essential, will find out that there are more affordable alternatives out there, making the firms irrelevant in the long run.
What’s Next for Gig Workers?
Freelancers, whatever industry they may be in, must prepare for the worst during an economic crisis. Here are some tips on how you can achieve stability regardless of the economic climate:
1. Learn new skills.
The gig economy is a skill-based market. By diversifying your skills, you are opening yourself to new opportunities which you may turn to, in case the industry you’re currently in is not doing well.
2. Expand your network.
Most freelancers get work through word-of-mouth. Find ways to find new people within the gig economy and don’t be afraid to introduce yourself and keep in touch regularly. Remember, building relationships is not overnight work.
3. Save money.
You cannot control inflation or stock market prices, but you can control your finances. Save up with retirement in mind and set money aside for your emergency fund and rainy-day fund. It is also important to reduce your liabilities by paying your debts and avoiding credit card transactions.
4. Invest in health insurance
Gig work may seem like the ideal for many employees, but it can also come with a few disadvantages like the lack of employer-sponsored health insurance.
The pandemic taught us the importance of healthcare and reminded us, at the same time, that it is expensive.
Luckily, by virtue of the American Rescue Plan Act, gig workers are now eligible for reduced premiums on health insurance coverage. In fact, data shows that in 2021, freelancers paid 54% less on the ARP’s Marketplace health insurance.
The benefits afforded by the law are set to expire at the end of 2022, so reach out to us and we’ll help you get started!
5. Adopt cash flow tactics.
Have cash flow tactics in place that will help you track your expenses and income, identify areas for savings, and set base monthly operational expenses.
Attaining financial stability amid economic instability is easier said than done. It’s important to consult a financial advisor to walk you through the pros and cons of investment and provide you with alternatives that can help you achieve your goals. Talk to us today!
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your financial advisor, attorney, or tax advisor.For additional information and disclosures, please visit our website at mbewealth.com. MBE Wealth Management, LLC is a registered investment advisor.