Addressing the precarity of non-standard workers through direct cash interventions
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:
- Supplemental income
- Complicated taxes
- Low and unpredictable wages
- Difficulty accessing benefits
Low-to-Moderate Income (LMI) means an income is less than 80% of the local area median income.
- A low income earner is defined as an individual with an annualized family income of less than 50% of the HUD area median income, and a moderate income earner is defined as someone with an annualized family income between 50% and 80% of the HUD area median income (Source: Community Reinvestment Act).
Gig Work and LMI
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.
Why are LMI gig workers at higher risk?
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.
How Did Steady help?
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).
Three options to support gig workers
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.
- Weekly stipend: 100% of participants reported that receiving stipend funds made them feel less stressed about their finances and that the ability to access funds again in the future would make them feel more confident in their ability to pay for emergencies.
- Grant: 92% of respondents said that a future grant would make them feel more confident in their ability to pay for emergencies.
- Loan: 75% of loan recipients were still pending loan repayment at the close of the program. Early evidence suggests programs where repayment is not required may be more effective in prolonging impact, and further research is needed on how to best deliver emergency loans and who the tool benefits.
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.