Should gig workers get unemployment insurance?

Those working in the gig economy are among the most precarious people in the workforce today. Not only are their hours extremely uncertain, but they also lack any of the social protections that come with salaried employment.

Research from Linnaeus University explores whether unemployment insurance would provide a degree of financial stability to people who often live on the knife edge.

At the heart of the dilemma is the question of whether those working in the gig economy are doing so out of choice or whether it's the only thing available to them. While a lot of gig work is more highly skilled than we commonly think, the reality is that many gig workers operate under the minimum wage.

Research has shown that over half of gig workers operate in technical poverty. The average hourly wage reported by respondents was £8.97, a figure that falls short by approximately 15% of the current UK minimum wage of £10.42, which was recently updated this month.

“The findings highlight that working in the UK gig economy often entails low pay, anxiety, and stress. As food, fuel, and housing costs keep rising, this group of workers are especially vulnerable and need to be more adequately remunerated and better protected,” the authors explain.

Blurring relations

The rise of gig workers has coincided with a blurring of the traditional roles of employer and employee. The Linnaeus research explains, for instance, that during a redundancy, the employer documents how long the individual has worked and that the layoff was involuntary, which entitles that person to unemployment support.

This relationship doesn't exist in the gig economy, where only the worker themselves can inform authorities about their loss of income, and even then, it's likely to be a partial reduction rather than a complete removal of earnings.

The paper highlights that while there is a general desire among the working population to have more autonomy and flexibility, the largest growth in non-standard work styles is among those with the lowest degree of labor force attachment. These people often have difficulty finding more traditional employment, and therefore, the gig economy offers the only alternative.

"More and more workers around the world are in non-standard employment relations," the researchers explain. "Yet, they risk being locked out from the protection offered by traditional social insurance programs, including unemployment insurance."

A new safety net

The authors counter the argument that those engaging in the gig economy are more open to risk and are likely to value a form of social safety net less than those in traditional employment. The lower level of resources that many in the gig economy possess exposes the risks they face each day, which can have a significant impact on their mental health.

Should gig workers rely more on unemployment insurance for spending money, and if they're less afraid of taking risks than regular workers, there's a case for giving them access to unemployment insurance. Even if it means they might stay unemployed for a longer time compared to regular workers.

But there's a downside to this kind of insurance. It costs money because of the payments made and the way it can make unemployment last longer. Using the usual insurance meant for regular workers on non-standard workers might make them more likely to take risks they shouldn't. Some might pretend to be unemployed when they just don't want to work, or they could use unemployment benefits to cover short gaps in their work.

Ongoing support

The research shows that most of the help from unemployment insurance goes to people who are unemployed for a short time. It doesn't explain much about why some people stay unemployed for a long time. One way to deal with this is to have a more consistent benefit plan instead of giving a lot of benefits at the beginning of unemployment.

Instead of making everyone get unemployment insurance, another option is to have it as a choice. Some non-standard workers might not see much use in having insurance, so they could decide to skip it. On the flip side, those who think it's important can choose to have it. This way, non-standard workers end up paying more of the cost for the insurance themselves.

Figuring out if people pick non-standard jobs on purpose or because they have no other choice is a big deal. Those who pick non-standard work because they like it will see unemployment insurance in a different way compared to those who do it because they have to.

"Individuals selecting into non-standard work based on opportunity and preferences will assign a different value to unemployment insurance than individuals on the fringes of the labor market doing non-standard work out of necessity," the researchers conclude.