October 28, 2022
A new report published by Commonwealth shows how income volatility impacts gig workers and tests three possible interventions to help address their financial precarity: $1000 in funds received through either (1) weekly stipends, (2) one-time emergency grants, or (3) emergency loans.
Commonwealth is a national nonprofit dedicated to building financial security and opportunity for financially vulnerable people through innovation partnerships. Steady is one of those partners, and handled cash distributions from March to June of 2022 for the gig workers participating in the Commonwealth study.
The report found that the benefits of gig work are often offset by unique financial challenges:
Low-to-Moderate Income (LMI) means an income is less than 80% of the local area median income.
Gig workers make up approximately 25 to 35% of the national workforce, and they over-index as low-to-moderate income earners, according to the Commonwealth report. For example, the Urban Institute found that of workers with incomes below 200 percent of the federal poverty level (FPL), nearly half (44.4 percent) reported nonstandard work arrangements in December 2020, and more than one in three (35.9 percent) reported that their main job was nonstandard. The Commonwealth report also noted that often, these low-to-moderate income earners make less than minimum wage, experience lost earnings from technical difficulties, use SNAP benefits, and are unable to cover utility payments in full. These types of barriers to financial security keep gig workers from building an emergency savings reserve.
LMI gig workers don’t have access to certain safety net benefits that are dependent on work type, like unemployment insurance, or employer-provided benefits, like health insurance. With heightened income volatility and a lack of these benefits and protections, LMI gig workers are more likely to face financial shocks. A 2022 study by the Economic Policy Institute found that more gig workers could not afford utility bills or medical care, as compared to W-2 workers.
For this experimental pilot, Steady recruited members on the SteadyApp who might be qualified to participate. Once screened and selected by Commonwealth, SteadyIQ distributed the funds to participants in a one-time emergency grant or weekly stipends. Once the experimental period ended, SteadyIQ conducted an impact analysis on the deposit accounts of participants, measuring the effect of both types of interventions on: total income over time, types of income sources (i.e. W-2 vs. 1099), income health (i.e. use and amount of payday loans, cash advances, earned wage access products), and spending trends (i.e. monthly credit card spend, spend to income ratios).
Commonwealth outlined three recommendations for benefits for gig workers that will reduce the impact of income volatility. These benefits, in combination with schedule stability and predictable wages, have the potential to help LMI earners manage their day-to-day finances and prepare for future financial shocks.
With SteadyIQ available to verify income and handle cash disbursements, these solutions are now feasible for employers, lenders, and governments. To learn more about how to utilize SteadyIQ’s income verification tools, please contact us.