How the Gig Economy Fails Senior Workers Facing Retirement

As an increasing share of older Americans are turning toward other kinds of emerging jobs in order to make ends meet in retirement, many older workers are turning to jobs that don’t carry any benefits. The result of this is that fewer older workers are in more “traditional” jobs that carry benefits, while many other older workers can actually undermine the strength of their retirements depending on how long they stay with a particular job without benefits.

This is according to a new research brief authored by Alicia H. Munnell, Geoffrey T. Sanzenbacher and Abigail N. Walters released by the Boston College Center for Retirement Research.

While there are multiple definitions concerning what constitutes “nontraditional work” – including jobs in the “gig economy,” those in short-term employment relationships or those who work as independent contractors or for temp agencies – identifying work patterns for those between the ages of 50 and 62 by using sequence analysis reveals that just over a quarter of American workers are directly benefiting from a nontraditional work environment in terms of bolstering retirement security.

“Only 26% have the ‘ideal’ sequence of late-career employment, a traditional job with benefits consistently from ages 50-62,” the brief reads. “Many retire early or have brief bouts of not working or nontraditional work and, worse, many have a weak attachment to the labor force or are in nontraditional jobs consistently.”

This working behavior exhibited by older Americans can have significant prospects for their financial security, even if only engaging in nontraditional work for a brief period of time.

“The regression results show that having only a brief period of nontraditional work decreases retirement income by 6%, but doing that work consistently decreases income by a full 26%,” the brief reads. “Indeed, the effect of consistent nontraditional work is similar to being only weakly attached to the labor force. This finding illustrates the importance of ensuring that all workers have access to affordable health benefits and convenient retirement savings vehicles.”

The brief’s basis study also finds that the majority of older workers who find themselves in nontraditional jobs are also generally frequent users of such jobs, resulting in visibly lower retirement incomes at the age of 62 when directly compared with those consistently in more traditional jobs.

The basis for the findings detailed in the brief are derived from following workers from ages

50-62 in the Health and Retirement Study (HRS) to, “identify how they use nontraditional jobs and the effect of these employment patterns on their retirement security.” The finding related to 26% of workers having the “ideal” sequence of late employment was visible in the HRS data as well as the Panel Study of Income Dynamics (PSID) carried out from 1998-2010 by researchers at the University of Michigan.

Read the brief at the Boston College Center for Retirement Research.

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