Independent work: choice, necessity, and the gig economy

Policy makers need to address income protection, social safety net gaps, 
administrative hurdles, and legal recourse
Many of the labor market policies currently in place—such as the minimum wage, benefits, 
family leave, workers' compensation for on-the-job injuries, and retirement schemes—
are not set up to accommodate independent work. A growing number of policy makers, 
academics, and other stakeholders are actively considering ways to fill those gaps, although 
there is more work to do. Here we outline some of the issues that warrant attention, although 
assessing the effectiveness or desirability of any specific policy changes is beyond the 
scope of this research. 
One clear starting point is simply obtaining better data on the independent workforce. 
Any changes in policy shifts have to be based on evidence, and what is available today 
is problematic. Governments need to conduct more regular surveys to gain a better 
understanding of the many types of flexible arrangements that now govern work, with up-
to-date categories and criteria. It will also be important to carefully monitor the effects of 
independent work on tax policy and revenue collection.
Beyond collecting better data, one of the largest looming questions is whether independent 
workers have an adequate social safety net. This is particularly the case in the United 
104
  Rudy Tellis Jr., 
Digital matching firms: A new definition in the “sharing economy” space
, US Department of 
Commerce Economics and Statistics Administration, ESA issue brief number 01-16, June 2016.

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McKinsey Global Institute
Independent work: Choice, necessity, and the gig economy
States, where health-care benefits and retirement plans have traditionally been provided by 
employers. The Affordable Care Act was an important development in broadening access 
to health insurance for independent workers (and for ensuring that workers in traditional 
jobs have a right to uninterrupted coverage). Similarly, retirement vehicles such as the SEP 
IRA, with higher limits for retirement saving than individual IRAs, are another step in the 
right direction. But in both of these cases, significant numbers of independent workers are 
not in a position to take advantage of these programs, or the programs themselves need 
adjustment. The cost of coverage under the Affordable Care Act, for instance, can be painful 
for those whose earnings place them just above the cutoff for premium subsidies. 
Modernizing the social safety net for traditional workers who now change jobs more often 
than in the past as well as for independent workers who do not have a single employer 
may be warranted.
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 In the United States, support is growing for constructing a more 
portable system of benefits—that is, benefits that are tied to workers themselves, not to a 
single employer. One option is to allow independent workers to form pools to create their 
own marketplaces and delivery systems for benefits.
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 This model is already working in 
industries ranging from Hollywood to construction: workers shift from project to project, 
with their unions delivering a range of benefits such as health insurance. Another proposal 
involves a so-called “hours bank.” But any proposal will have to tackle multiple angles, 
starting with who would pay for such benefits and how the benefits would be earned and 
tracked for workers who have multiple clients and employers.
In both the United States and Europe, there are also equally important but less discussed 
issues such as disability insurance, minimum wage protections, and unemployment 
insurance for periods when work dries up. Another issue to consider is how workers are 
classified and whether new designations need to be created to reflect new working models. 
Finally, policy makers should consider ways to strengthen the ability of independent workers 
to seek legal recourse and compensation against fraudulent buyers and sellers. Today they 
have limited options to take action against employers and clients for non-payment or injury. 
Low-cost, efficient small claims court processes are one option for addressing this issue.