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Work in the gig economy could be costing you over $90k
Despite the growing popularity of the gig economy, workers in this space could face long-term financial disadvantages, a new research paper has found.
Work in the gig economy could be costing you over $90k
Despite the growing popularity of the gig economy, workers in this space could face long-term financial disadvantages, a new research paper has found.
Research released by the Actuaries Institute showed that a nine-fold increase in popularity has seen the gig economy blow out to $6.3 billion, but a lack of superannuation and other basic entitlements is leaving these workers further behind.
The paper highlighted that by being deemed independent contractors, gig economy workers are missing out on receiving entitlements such as minimum wage, employer-paid superannuation, sick leave, annual paid leave, paid parental leave, long service leave and worker’s compensation insurance.
So, while the rapid rise of the gig economy has brought opportunities for workers, it has raised some important policy issues, particularly with regard to long-term financial security.
“Most gig workers have only minimal superannuation contributions and lower insurance coverage, increasing the prospect of greater reliance on public safety nets, including the age pension,” Actuaries Institute chief executive Elayne Grace has said.
Long-term impact on retirement
While gig workers have the flexibility of picking up shifts when they deem right, this flexibility could be at the detriment of their retirement, the research suggested.
Actuaries Institute has found that less than 1.5 per cent of gig economy workers make personal superannuation contributions, and where they do, the payments are minimal compared with the employer-paid contributions of minimum wage workers.
A simulation of superannuation outcomes showed that workers who spend five to 10 years of their productive labour years participating in the gig economy may be between $48,000 or $92,000 worse off in superannuation savings at retirement relative to a minimum wage employee.
“The ongoing concern is if the prevalence of gig economy work continues to rise under existing labour force regulations, there will be an increase in the proportion of persons with little to no superannuation savings on retirement,” the paper said.
“This would put further strain on the government-funded age pension scheme.”
The paper also found that workers who participate in the gig economy have an overrepresentation of vulnerable groups, including younger workers, students and those who were formally unemployed.
“As the gig economy continues to grow, it is increasingly important for government and digital platform owners to better understand the benefits and risks faced by gig workers,” it said.
Benefits to workers
Despite the gig economy still having some longer-term issues for working Australians, the Actuaries Institute drew attention to several benefits.
These include greater flexibility and autonomy to choose when and where to work, relatively low barriers to entry and the ability to improve consistency of income – by ramping up gig economy work when primary sources of income might temporarily fall.
Around 25 percent of workers experienced short-term economic benefits, six months after starting work. The paper noted, however, that 77 percent of those workers were from population segments with the lowest levels of discretionary expenditure.
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