Displaced workers are turning to the gig economy in the fallout of the COVID-19 pandemic, and will likely continue to do so.
According to some estimates, gig workers will make up more than half of the workforce by 2023, and that growth has likely been expedited by the pandemic. Though many joining now are likely striving to make up lost income, turning to gig economy work isn’t always a path to financial health — 58% of full-time gig workers say they’d struggle to cover an unexpected $400 expense.
Gig workers are essential workers, who are driving our economy. There is a path to financial health for them — and, it only requires a small adjustment to how they’re paid. Making gig workers’ pay automatically available at no cost each day or after each completed shift would benefit everyone, while providing a win-win scenario for the worker and platform alike. This is also an easy way for the payments industry to truly make a positive impact on the financial health of gig workers.
Here’s why on-demand platforms should make pay automatic (at no cost):
Gig economy workers face a “cash gap.” Gig workers aren’t provided with the pay structure they need to operate; most gig workers are paid weekly via slow bank transfers, while they continue to incur daily expenses. While some platforms offer instant payout options, they typically come with fees. This “cash gap” wherein gig workers are incurring steep operating expenses creates a need — they need their funds to be readily available at no cost so they can continue to work and generate more income. It also poses a challenge for some freelancers who aren’t paid at set intervals, and puts them at risk of incurring overdraft fees, taking out expensive payday loans or relying on high-interest credit cards.
Predatory lending is not the answer. Payday lending is not the solution — many payday lenders charge exorbitant fees, and often leave borrowers deeper in the debt cycle. Automatic pay, however, offers an alternative. Consider this, too: 85% of gig workers would work more if they could be paid faster.
Gig workers are essential workers. Many gig workers complete necessary tasks like restaurant, grocery and even pharmaceutical delivery; providing transport to other essential workers; and more. Giving gig workers their pay automatically will ensure a low gas tank, flat tire or other unexpected expense doesn’t derail them — or make it impossible to do their work. Many on-demand platforms are already solving these challenges. For instance, Uber Money, Lyft Direct and DoorDash’s DasherDirect offer automatic access to earned wages, along with debit accounts, rewards and more.
Gig workers are driving our economy. On-demand and freelance platforms should take note: While many Americans are not financially healthy, this does not have to be the case for millions of essential gig workers. But the wrong method of pay can keep them from performing essential tasks, while limiting their income potential (and financial health).
