The gig economy has become a significant segment of the US employment landscape, and its growth is forecast to continue. In 2023, 64 million Americans or 38% of the workforce freelanced, contributing $1.27 trillion to the US economy in annual earnings.¹ By 2027, this number is projected to grow to 86.5 million, or 50.9% of the total workforce.²

The temporary and flexible nature of jobs within the gig economy however means that many of these workers are missing out on benefits enjoyed by full-time employees. For example, only 40% of gig economy workers have access to health insurance compared to 82% of full-time employees. For dental insurance, the numbers are 25% and 66% respectively and for short-term disability insurance, they are 5% and 42% respectively.³

In addressing this challenge by developing more insurance and benefits solutions tailored to the specific needs of gig workers, it is important for employee benefits providers and the insurance industry to understand what is driving the expansion of the gig economy and the diverse needs of those within it.

At AXIS, we define a gig worker as someone who is not a W2 employee. This encompasses a wide range of roles and job descriptions, such as independent drivers working for digital ride or delivery services, sole proprietors, seasonal workers, contractors, real estate agents or freelancers using digital selling and freelance sites and apps.

What’s Fueling the Rise of this Work Style?

In its American Opportunity Survey,⁴ McKinsey attributed the increase in the number of “independent workers” to three main factors.

Firstly, technology. Working remotely is now easier. The increased use of, and improvements in, remote-collaboration tools such as videoconferencing services makes it as simple to work with a freelancer as it is to work with a colleague in another location. In addition, the advancements in technology have fueled exponential growth in digital platforms such as those for ridesharing and food delivery.

Secondly, many people turned to freelancing in the wake of the pandemic, either out of necessity because they were laid off, or by preference because they wanted more independence and flexibility, or more work-life balance without the daily commute. Furthermore, inflation may have driven lower-income workers to take on more “side gigs”.

Thirdly, some employers prefer the ability to employ independent workers on a temporary basis to taking on full-time employees. The advantages for companies include being able to take someone on for a specific project only and enabling small or start-up companies that may not be able to afford full-time staff to still expand.

Work Categories and Income

With the expansion and range of these jobs, it is useful to understand the types of gig work that are most prevalent, and the income associated with them. According to TransUnion’s latest US Gig Economy Report, the top three types of gig work are driving for a ride-sharing service (23%), freelancing for a digital or online service (19%), and driving for a restaurant delivery service (19%).⁵

Given the wide range of industries and types of work undertaken by gig workers, unsurprisingly, wages vary widely. While the average hourly rate for freelance work is $48, the highest paid freelance professions in 2024 were public relations managers and media buyers, who earned $50-$100 per hour, followed by business consultants at $28-$98 per hour.⁶

Overall, the average annual income for a gig economy worker is $69,000, compared to $80,116⁷ for full-time employees.

Demographics

Gig workers’ demographics are as diverse as the jobs that they do. In terms of generations, gig work tends to be most common among Millennials, with 78% currently earning income from one or more gig platforms. This is followed by Gen Z and Gen X at 67% and 65% respectively. Just over one third (36%) of Baby Boomers said they earned an income via one or more platforms, and 40% of this generation plans to engage in gig work in the future.⁸

In terms of ethnicity, 31% of Hispanic adults earn money through gig work, followed by African Americans at 27% and white adults at 21%. And, while men are more likely than women to be employed in the gig economy, 47% of men are more likely to rely on gig work as their primary income compared to 40% of women.⁹

Benefits Needs Within the Gig Economy

The lack of benefits protection raises some significant risks for gig economy workers, especially those in manual labor or transportation jobs. In addition to physical health risks, gig economy workers are also at risk from mental health issues, especially anxiety. This is particularly prevalent amongst those for whom gig work is their primary income source who may face uncertainty over the amount they can earn from week to week—80% of those for whom gig work is their primary income source would find it challenging to pay an unexpected expense of $1,000.¹⁰

One of the main barriers preventing gig workers from enrolling in healthcare coverage is “perceived affordability”. A recent study found a “massive education gap around affordability among non-benefited worker populations, where nearly six in 10 uninsured workers think coverage is unaffordable and unattainable”.¹¹

Part of the solution for meeting the benefits needs of the gig economy is education, improved accessibility, and flexibility.

A New Approach

Traditional employer-provided benefits models are not designed for individuals who may be freelance, work for various organizations, or have inconsistent work hours. For gig workers, plan membership can change from week to week or month to month. Their hours worked and income are variable, and unlike companies or employee groups, there is no centralized system to help keep track of these changes.

Providing benefits solutions to the gig economy therefore requires a different approach that can be tailored to the needs and budget of each worker.

One solution is for gig workers to consider taking advantage of potential benefits offered by associations they are members of.

Enrollment into a plan also needs to be easy and the product offerings flexible. A real estate agent, a plumber, and an Uber driver, for example, may all have very different needs. One may put more value on dental or vision, than accident medical. Another may value critical illness over hospital indemnity.

What is crucial however, is for the gig worker to be able to start at an affordable price point and build their own benefits plan from there.

Flexibility is the Future

The gig economy is here to stay, and it is growing significantly. This provides insurers and brokers with the opportunity to adapt and innovate by creating flexible, tailored and accessible benefits products to meet the varied and individual needs of this increasingly significant segment of our workforce.

Embracing this shift and recognizing that flexibility is key can enable insurers and brokers to elevate their approach to supporting gig workers, ensuring this growing segment of the workforce has access to much-needed benefits to protect them and help them to thrive. This not only helps gig workers but strengthens the overall economy by supporting a more resilient and healthier workforce. As the gig economy continues to evolve, so too must the solutions we provide, paving the way for a future where flexibility and security go hand in hand.