The Gig Economy's Impact on Workers' Compensation Insurance: A Deep Dive

The Evolution of Gig Work

The gig economy, or independent contract work, has been around for centuries. Before the Industrial Revolution, and for some years after, most workers were self-employed or worked in small businesses. Recently, 'gig work' has received a lot of buzz due to the rise of technology companies such as Uber, Lyft, and TaskRabbit that electronically mediate contract work.

Impact on Workers' Compensation Insurance

The National Council on Compensation Insurance (NCCI) closely examined the gig economy and nontraditional work arrangements in its 2019 Q2 Economic Briefing. Since workers in nontraditional arrangements rarely receive the same benefits as wage and salary workers, this issue has obvious relevance for workers' compensation. Some of the key takeaways from the Briefing include mixed evidence about the rise in alternative work, with about 30 percent of adults in the U.S. engaged in some type of informal or alternative work.

Future Trends and Recommendations

The risk of workers' compensation leakage is likely to rise during and after the next recession. When firms shed payroll in a future downturn and workers have difficulty finding traditional jobs, then the labor supply for nontraditional work will increase. At the same time, cost-cutting firms will have incentive to experiment. If firms and at least some workers favor new arrangements, then payroll lost in a recession is likely to shift to nontraditional work during recovery. To navigate these changes, workers should consider purchasing their own workers' compensation insurance, and companies should explore flexible insurance solutions that cater to the gig economy.