Understanding the “Gig Economy”
It’s not a fad or a passing fancy. With a quarter of America’s workforce now considered to be freelancers, the “gig economy” is systematically re-defining the modern labor market. By media definition, this is the label applied to contract and contingent workers, as well as temporary workers plugged into short-term assignments, and it’s become a dominant characteristic of today’s service industry. And while it’s an attractive way to approach working–with flexibility, variety, limited entry barriers, and a quick way out of unemployment–there are questions about the longer-term affects on career development and eventual retirement financing, as well as the fact that benefits are typically limited or non-existent in gig assignments and the burden of traditional payroll overheads falls on the worker.
Lauren Markham, herself a freelancer, takes an in-depth look at the life of a gig employee, highlighting both the upsides and the downsides of temporary work. Check her article, posted on theatlantic.com, here…
With respect to that last factor–payroll overheads–the full impact of Social Security taxes falls on the gig worker rather than being shared between employee and employer. As a result, the full 15.3% is the responsibility of the gig worker. Given this reality, any upward movement in Social Security tax rates needs to take the potential impact on a large–and growing–segment of the American economy into account. The future of the gig economy may dictate that future reshaping of our Social Security system take this employment trend into serious account.