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Why Faster Access To Earned Wages Is Critical For The Gig Workforce

Forbes Technology Council

Marco Margiotta is the CEO and Founding Partner of Payfare.

Throughout the pandemic, workers flocked to the gig economy looking to make up for lost income or deficiencies in their full-time income and to take advantage of the influx in available jobs. While accelerated over the last year, this trend shows no signs of slowing down, as recent Monster data showed that 92% are now considering gig work. For many, Covid-19 and the shift to remote work has led to a desire for flexibility over when, how and where they work.

We also know these workers are deeply concerned with financial matters, like meeting day-to-day expenses or building their emergency funds. Unfortunately, however, a shift to gig economy work alone is rarely a path to financial flexibility or freedom; many face income volatility and major cash gaps, as disposable income is needed to successfully run their gig businesses. In fact, research from the Federal Reserve showed 58% of gig workers would struggle to cover an unanticipated $400 expense. Not only does this segment of the workforce face inconsistencies in demand for their work — particularly in the delivery and transportation industries — but they also incur a high cost for the nature of their work, including vehicle fuel, maintenance and insurance expenses.

As gig platforms look to retain their growing workforce, addressing these payment needs and empowering a financially healthy gig workforce can help them stand out. Here's why this must become table stakes to support our nation's economic recovery:

• The gig economy is growing rapidly. Now is the time to focus on financial inclusion for these workers. In just two short years, gig workers are expected to make up half the workforce, and this year, more than 67 million Americans are forecast to complete some type of gig work. Many gig workers struggle to get their earnings at a pace that enables them to keep up with expenses. Transfers to traditional bank accounts are slow and can leave them waiting for days. Those who opt to receive their earnings more quickly often do so via a third-party payment processor that charges fees. However, unexpected, urgent expenses like low gas tanks or flat tires can still come up, and those in the delivery and transportation industries cannot work and earn more money until they're addressed. These challenges might lead some to turn to predatory payday lending, but this cannot be the only solution, as it's expensive and leaves them deeper in debt.

• Income volatility is an innate challenge for gig workers. Gig workers face many inconsistencies in demand for their work. For instance, during the pandemic, demands for home delivery skyrocketed while consumer interest in ridesharing waned. These inconsistencies can lead to income volatility, or substantial swings in income from month to month, and a Think Forward Initiative report shows workers who experience this volatility endure more financial stress, more difficulty making ends meet and lower savings. In fact, estimates from PYMNTS and Mastercard indicate approximately 16 million gig workers live paycheck to paycheck.

• Gig workers are entrepreneurs, and they deserve to be treated as such. We often think of gig economy workers as only those facilitating on-demand services like rideshare and delivery drivers, but there is a large — and important — role of the gig economy in entrepreneurship that can't be overlooked. Every day, independent entrepreneurs are creating consulting businesses via Upwork, building their vacation rental portfolios on Airbnb or even ridesharing on Uber or Lyft to make ends meet while building the new business of their dreams. Entrepreneurs like these need to be empowered with financial health that gives them flexibility and control over their earnings.

While many Americans are not financially healthy, this does not have to be the case for millions of gig workers. Gig platforms looking to move the needle on the financial health of gig workers should note that, in a world where 85% of gig workers would work more if they were paid faster, there are relatively simple technological solutions that can create a win-win (and help your platform stand out). We'll look to further explore these options in an upcoming article.


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