Some people choose to work as an independent contractor (e.g. Gig worker).  The choice to be a self-employed worker or free-lancer has been an option for decades, especially in fields such as construction, entertainment, and commissioned sales.  Those arrangements are still viable. The self-employed format has also attracted people with skills in the information technology, transportation or other fields. The gig free-lancer count is now 16% of the US workforce.

Most gig workers savor the independence, perhaps because they’ve also experienced unpleasant taskmasters when they were conventionally employed.  Some free-lancers would prefer to work for a benevolent employer, but they have not been successful in the conventional job marketplace.  Many conventional employees are also on the lookout for a benign employer.

On average, gig workers earn $36,500 per year. Conventional employees average $62,700. Gig workers work fewer hours compared with regular employees.  Among gig workers, those with higher educational attainment experience a higher degree of satisfaction with their choice of work format, likely a function of their higher earnings and the higher degree of confidence that they can acquire a new contract or job when needed.  Gig workers in high tech fields seem to enjoy the work-style freedom and choice among interesting projects.  Mature workers are more satisfied with their experience in gig life than with their experience as an employee.  People who hold both a regular job and a self-employed contract for extra work are the most satisfied.  Furthermore, some gig workers are developing their own new business, writing a book or movie script, or honing their artistic talents.

Gig life does not satisfy all gig workers.  The dissatisfied are those with less education, who are younger, or who have skills that are low in demand.  The average gig income can explain a lot of their dissatisfaction.  Low income can make it difficult for gig workers to afford typical employee benefits such as health care, retirement contributions, social security contributions and paid-vacation.  They can obtain those benefits, but it is not cheap.

The financial pressures on most gig workers are real.  By law, Gig workers pay 12.4% of their income in Social Security contributions.  Employed workers pay just 6.2%, and the other 6.2% is paid by their employer.  Gig workers can buy into health plans with or without subsidies.  They can usually schedule unpaid vacation time.

Retirement plans like SIMPLE IRAs are easy for a gig worker to set up for themselves.  Saving for retirement requires discipline, paycheck by paycheck, even for employed workers. The IRS offers guidelines on setting up the plan.  Gig workers can treat themselves as employees and make contributions to their SIMPLE IRA retirement plan, in amounts up to $12,500 per year, or a SEP account for a greater share.  For those who are just starting and are approaching retirement, “catch up” allowances are permitted.

The SIMPLE IRA investor can choose a reputable custodian and pick the investment style that suits their needs and tolerance for the inevitable bumps everyone experiences as an investor.  For example, Vanguard offers a wide choice of IRA plans.  Over the 1926 to 2016 period, the plans at either end of the spectrum had an average annual yield of 10.2% for an “all stocks” plan versus 5.4% for an “all bonds” plan.  Stocks led investors on a wild ride with a loss in 25 of the last 91 years, but over time stock yields were impressive and paved over the ruts of bad years.

A yearly deposit of $5,000 earning 10.2% interest will accumulate to more than $500,000 in 24 years.  A yearly deposit of $5000 earning 5.4% interest would accumulate almost $250,000 in 24 years.  Saving for retirement takes cash and discipline, not necessarily an employer. (Please Note: The American Consumer Institute Center for Citizen Research (ACI) is agnostic on the choice of IRA custodian and investment plans, but ACI does recommend that people equip themselves with an organized retirement plan.)

Employee-like benefits can be had by devoting more of their pay to “benefits,” which is precisely the financial burden that employers take on when they hire an employee.  To remain gig worker status and yet afford employee-like benefits, the worker may need to develop more valuable skills, such as those associated with an applied science degree.  Skills development is an option that benefits everyone.

Some observers have suggested two radical ways to resolve the lack of benefits problem.  The first suggestion is to change antitrust laws so that gig-workers can band together to negotiate freelance contracts for pay and benefits with multiple employers.  It may sound like a “free money” option, but the inevitable reaction of employers will be to increase automation in gig-jobs where that is possible and discontinue some gig-contracts where the productivity is unfavorable at the new pay and benefit levels.

The second suggestion is to enact laws that define gig workers as employees, entitled to benefits similar (or identical) to those enjoyed by conventional employees.  This and unionization (of course) was the sentiment that the National Labor Relations Board embraced under the prior Administration.  It runs counter to the recent decision in California where a federal judge declared a delivery driver to be an independent contractor.  If that decision is overturned, redefining gig workers as employees will trigger an inevitable employer reaction. Employers will right size the newly expanded workforce, shedding employees and cost.  Some gig workers will gain, and some will become unemployed.

The most constructive option for everyone is for gig workers to develop skills that are in higher demand.