Independent work: choice, necessity, and the gig economy

Independent workers in the reluctant and financially strapped segments face 
an additional layer of challenges
Across advanced economies, labor markets are characterized by a growing wage gap, 
as the top earners pull away from everyone else.
99
 Digitization may have accelerated this 
divergence, as the workers with the most sophisticated digital skills command wages that 
are far above the average.
100
 Perhaps unsurprisingly, the independent workforce could be 
experiencing the same kind of disparities that exist in the rest of the labor market (see Box 4, 
“The income question: Are independent earners becoming a two-tiered workforce?”). 
Some 30 percent of independent earners in our survey reported turning to independent 
work out of economic necessity. These workers, along with the individuals in traditional jobs 
who say they would prefer to be independent, are struggling. They are likely to be from low-
income households, and a large share have a high school education or less. The financially 
strapped are disproportionately women. Our survey shows they are dissatisfied with their 
income level, income security, hours worked, and benefits, even if independent work is 
better than alternatives such as unemployment or poor-quality traditional jobs. 
Income variability can become a serious issue in this content. Traditional workers are not 
immune from this issue: a recent study found that 55 percent of all Americans experienced 
a 30 percent month-to-month change in total income.
101
 For some independent workers, 
the volume of work that is available and the going rate for it can vary due to factors beyond 
their control. While some independent professionals may be equipped to absorb these 
fluctuation, this risk looks very different for the reluctant and financially strapped segments. 
96
  For more on this issue, see Brad Hershbein et al., 
3 targeted approaches to expand employment 
opportunities
, The Hamilton Project at the Brookings Institution, March 2015.
97
  Maria Koumenta et al., 
Occupational regulation in the EU and UK: Prevalence and labour market impacts
, 
Department for Business, Education and Skills, Queen Mary University of London, July 2014.
98
  Augustin Landier, Daniel Szomoru, and David Thesmar, 
Working in the on-demand economy: An analysis of 
Uber driver-partners in France
, March 2016.
99
  See, for example, Elise Gould, 
Wage inequality continued its 35-year rise in 2015
, Economic Policy Institute, 
March 2016.
100
 
Digital America: A tale of the haves and have-mores
, McKinsey Global Institute, December 2015.
101
 
Paychecks, paydays, and the online platform economy: Big data on income volatility
, JPMorgan Chase 
Institute, February 2016.

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McKinsey Global Institute
4. Making independent work a win for all stakeholders
For these workers who live close to the edge, a drop in income caused by losing a client, 
non-payment, an injury or illness, or a family emergency can be dire. A recent report found, 
for example, that 47 percent of Americans could not cover a $400 emergency bill.
102
 At the 
same time, it is important to note that independent work—and particularly supplemental 
work—can help low-income households stabilize their finances as needed. Digital 
platforms that allow anyone to plug in and start working may help them fill the gaps when 
other sources of income dip. The same study that found income variability also found that 
individuals use independent work to help smooth variations in income. 
While these workers may scramble to cover the bills in the immediate terms, the longer-term 
issue of their retirement security is also looming. Low-income independent workers may 
have the ability to establish their own retirement accounts, but realistically, they are unable 
to save. A recent report found that roughly half of US households ages 55 and older have no 
retirement savings beyond Social Security.
103
 It is urgent to consider how to provide low-
income independent workers—and, for that matter, workers in precarious traditional jobs—
with a greater safety net and pathways to improve their skills. 
102
 
Report on the economic well-being of US households in 2014
, Board of Governors of the Federal Reserve 
System, May 2015.
103
 
Retirement security: Most households approaching retirement have low savings
, US Government 
Accountability Office, May 2015.

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McKinsey Global Institute
Independent work: Choice, necessity, and the gig economy