Association for Public Policy Analysis & Management

Recent research suggests the share of workers in contingent work – broadly defined as contract, temporary, or on-call work – is on the rise. But no research has focused on the association between contingent work and retirement security, because no single U.S. data source combines information on contingent work and detailed retirement security information for the full population of workers. To get around this issue, this paper analyzes three data sources that together provide an assessment of the extent to which contingent workers are able to prepare for retirement: 1) the National Longitudinal Survey of Youth, which follows one group of workers from early career into their late 40s and early 50s; 2) a more age-representative sample from the Survey of Income and Program Participation; and 3) Health and Retirement Studyrespondents at ages 50-61.

The findings suggest that contingent workers are likely to have less financial security when they arrive in retirement than workers in traditional employment. These workers are generally less likely to have access to retirement savings plans and subsequently accumulate less wealth (including defined benefit wealth). Contingent workers’ Social Security wealth, however, is not substantially different than for traditional employees. Core contingent workers - including workers and temporary help agencies and contract firms, and on-call workers and day laborers - seem especially vulnerable. Lower-earning and less-educated workers, and those who have contingent positions in blue collar occupations – or are contingent in multiple occupations over time – seem to be especially hurt by contingent work. On the other hand, workers who spend more time in independent contractor arrangements are not much different than traditional employees.

These results suggest a challenge for current efforts to expand retirement coverage: how to increase retirement security among contingent workers, particularly those in on-call and temporary positions. Most policy efforts have focused on encouraging employers to fill gaps in retirement coverage, but any of the workers highlighted in this study would likely be exempt from regulations and policy outreach that focus on traditional employees. As a result, policymakers need to begin thinking of ways to expand coverage to workers outside of the traditional employer-employee relationship. In addition, streamlining earnings reporting and enforcing the proper classification of some workers as traditional employees will improve these workers’ earnings records, resulting in greater Social Security income in retirement.