Mina Addo on the Impacts of Non-Standard Work on Retirement Security

Judith Siers-Poisson [00:00:05] Hello, and thanks for joining us for the Poverty Research and Policy podcast from the Institute for Research on Poverty at the University of Wisconsin–Madison. I’m Judith Siers-Poisson. For this episode, we’re going to be talking with Dr. Mina Addo. She’s an IRP National Poverty Fellow in residence at the Office of Planning Research and Evaluation in the U.S. Department of Health and Human Services. She completed her Ph.D. in social welfare at the University of Pennsylvania School of Social Policy and Practice and is a qualitative researcher with experience with mixed methods studies. We’re going to be discussing her paper titled “The Retirement Implications of Non-Standard Work,” which was funded through a 2022 Junior Scholars and Training Research Award from the Center for Financial Security’ Retirement and Disability Research Center. Mina, thanks for joining us today.

Mina Addo [00:00:55] Thank you for having me.

Siers-Poisson [00:00:57] So what types of work fall under that heading of non-standard work?

Addo [00:01:02] Great question. Non-standard work is a broad term and it includes things like freelancing, independent contracting, and gig work, and also includes temp work or on-call type positions. And if you think about the term non standard, it’s in contrast to the standard employee relationship where people typically work with the same employer for some longer period of time. And in contrast, non-standard work tends to be short term. People are paid by the project or the gig. It typically doesn’t offer benefits the same way that a traditional or a standard job would. And in some ways, it can be more precarious for those reasons. I would also note that compared to standard work, there typically isn’t promotion potential. So, people who are rideshare drivers or rideshare drivers, there are no senior rideshare drivers. It’s generally just something that people continue to do.

Siers-Poisson [00:02:07] Mina, what have the trends been over time in non-standard work? It certainly seems like there are more people and more opportunities to do it. But is that true? Has it been growing?

Addo [00:02:19] So yes, it has been growing, but in certain types of non-standard work. So, the first thing I would say is non-standard work isn’t necessarily new. People have been independent contracting, freelancing, doing sort of side-hustle type jobs for a long time. But what is new is the development of the technology and apps that facilitate this type of work. And so, you know, looking at the literature, a lot of the recent growth has really occurred in that space. So, people starting to drive for rideshare services, doing handyperson, handyman type services. More along those lines. It’s really the technology piece that has facilitated non-standard work. That’s really where you see most of the growth.

Siers-Poisson [00:03:09] So let’s talk about that non-standard work in today’s context. Do we have a sense of how many people are doing non-standard work? And I know you’ve looked at people who are doing just non-standard work, but also non-standard work along with more traditional work.

Addo [00:03:25] Yes, absolutely. So, this is not a straightforward answer. And just as you touched on, the numbers really depend on how you are defining non-standard work and who’s included. So, I’ve seen numbers ranging from 5% of workers to 40% of workers. And the variation comes in when you think about who’s counted. So, some studies that don’t include people who are, say, side hustling, like you mentioned, so people who have a full-time position but maybe are doing non-standard work on the side. Studies that only capture a primary job are not capturing that segment of the non-standard work population. Another reason for the variation is just data availability. So, thinking again about technology and apps. There’s a lot of research on app-based gig work because that data is available. And so some of the studies do count people who are doing gig work as secondary to primary work. And so that’s where you see some of the larger numbers. So again, it really depends on who is included in the measure and how work is being captured. Is it just one job or could it be one job plus a supplement? That’s really what’s accounting for those differences in estimates.

Siers-Poisson [00:04:46] In your paper, you talk about a wide variety of types of non-standard work. So, everything from, like you said, you know, maybe the Uber or Lyft driver or people cleaning houses or doing hand person kind of work, but then all the way up to people who might be an IT professional and they’re doing consulting on the side. A lot falls under that umbrella. But what do we know, especially about the demographic characteristics of people who are doing … I would call it maybe the more precarious kind of non-standard work.

Addo [00:05:18] Absolutely. Great questions. So, in terms of who is doing more non-standard work and particularly the more precarious forms, we know that it’s people with less education. It tends to be workers who are people of color, and particularly Hispanic workers, and people who are in lower-income households as well. There is also some literature that shows that older workers, people aged 62 and above, sort of transition out of the traditional workforce by doing non-standard work. So, we can also see that there is a larger share of older workers who are also engaging in non-standard work.

Siers-Poisson [00:06:02] I know that it can be hard for older workers, say, if their job gets eliminated or they have a change in life situation, it can often be hard for them to get hired into a more standard job. So, it seems like that age group could be doing it because they want to kind of gradually ease into retirement, or they just can’t get back into the standard workforce.

Addo [00:06:27] Yeah, I think that’s a really good point, Judith. That’s beyond the scope of my study, but I’ve certainly seen literature that does talk about that, that when people are finding it difficult to find sort of traditional jobs, non-standard work is a place that they can go and it’s an opportunity to earn some money. And I would say we saw that particularly during the pandemic. So, people whose jobs were eliminated or perhaps they were furloughed, you know, the business closed, anything like that. People did turn to non-standard work so that they were able to meet their financial obligations. And often in the case, if people had applied for benefits and were waiting for benefits but had immediate needs, non-standard work is something that you can enter into pretty quickly. You know, if you decide you want to start rideshare driving, it’s a short process to begin to do that as opposed to the time it may take to find another job.

Siers-Poisson [00:07:28] So, Mina, this research is specifically about how non-standard work affects retirement security. So, I’d like to pause to talk about retirement in the United States. So how would you most people commonly finance their retirement?

Addo [00:07:43] Some people describe retirement as a three-legged stool. So, there are Social Security benefits, there are retirement plans like employer sponsored retirement plans, things like 401Ks, 403Bs and other forms of employer-sponsored plans, and then private savings and assets. So that could be investment accounts that people have, home ownership can be an asset people could draw down from or people have individual IRAs. And so it’s typically a combination of those benefits that people rely on in retirement after they’ve left the workforce, or as I touched on before, as maybe they’re transitioning out of a traditional job.

Siers-Poisson [00:08:30] So how does being employed in a non-standard work situation affect—if it does—the amount of, say, Social Security that you might be eligible for when you reach that that minimum age?

Addo [00:08:44] That’s a great question. So, there are a few things that affect Social Security benefits. I won’t go into the long history. But basically, we qualify for Social Security benefits based on earnings’ history and our duration of work. So you earn credits. And in order to draw down Social Security benefits, you have to have a certain number of credits—I believe it’s 40 credits—and you can accrue credits quarterly for each year that you are working. And so it’s both the duration of benefits and the amount of benefits that you receive are dependent on your earnings. Now, when you are a non-standard worker, you are responsible for filing taxes with the IRS in a different way than traditional employees are. So, if you’re a traditional employee, your employer reports your earnings to the Social Security Administration. And there’s also a tax, a Social Security and Medicare tax, and that’s shared between the employer and the employee, but among non-standard workers, first, you’re responsible for the reporting, but you’re also responsible for the full amount of the tax. There is a deduction for some of that. And again, I don’t want to go too far into the details, but the risk for Social Security benefits are that if non-standard workers are not accurately reporting, they’re not getting those credits for the work that they’ve done and therefore they may not receive the benefits that they are entitled to upon reaching retirement.

Siers-Poisson [00:10:28] And also one of those other legs of that stool was retirement benefits that are provided by the employer. And I don’t think I’m going out on a limb here to guess that these non-standard workers don’t have access to that.

Addo [00:10:44] So that’s correct. And thank you for reminding me of that part of the question. So employer-sponsored benefits, we have in this country an employer-sponsored system of benefits—not just retirement, but unemployment insurance, paid leave, all of those types of things. And so when you are in a standard job or it’s a traditional job, what I find in my study is that you are more likely to have access to an employer-sponsored retirement plan. And workers who are in these traditional jobs are more likely to have that asset, to actually have a plan compared to workers in non-standard jobs who are less likely to have access. Now, one caveat I would give is that in my study I looked at cross-sectional data, so I just looked at one period of time. And so if you are somebody who, you’re a non-standard worker now, but maybe you had a standard or a traditional job in the past, you may have an employer-sponsored plan from that previous job that you still have access to. In some cases, you may be able to still make contributions to that plan. So, while there is a difference between non-standard workers and traditional employees in terms of having plans, it’s not necessarily the case that all non-standard workers do not have access to retirement plans.

Siers-Poisson [00:12:11] Going back a little further in our conversation, you said that people who were more likely to be engaged in non-standard work included people of color and looking at the wealth gap between White Americans and Americans of color, there’s a huge difference. And so this three-legged stool for non-standard workers is feeling more and more unstable as we go through all of these different elements.

Addo [00:12:40] Yeah, you’re absolutely right. So, again, thinking about private assets and savings, workers who are people of color, workers who are younger, both of those categories, folks typically have fewer assets. And I would also add to that group women—women also tend to have fewer assets than men. And so, there are gender wealth gaps as well. So, I think in terms of, you know, looking at race, gender and age, it’s the case that as workers are earning less money, they have less money available to save. And over time, that compounds. Right. And so, you can see that over time the disparities grow larger and those who are vulnerable and have fewer assets, we can see that retirement is of a particular concern to them.

Siers-Poisson [00:13:41] So clearly there are a lot of challenges for non-standard workers to build up any kind of retirement security. What do you see that meaning for an individual who maybe has had traditional work here and there but maybe for large portions have been relying on non-standard work or maybe even haven’t been in the workforce for parts of that?

Addo [00:14:05] Yeah. So, I’ll answer that in two parts. So, the first part I would say is, you know, again, in my study, I can see that having access to an employer-sponsored plan is a clear difference between non-standard workers and employees. And so, you know, one implication is that if our goal is to help workers be better prepared for retirement, there is a need for options for people who do not have access to employer sponsored plans. And there are some options. So, there are some state-based plans. For example, the Oregon Saves model that’s available to workers whose employers don’t offer plans or to self-employed workers. There’s also a federal policy change. The SECURE Act 2.0, which provides a savings incentive for individuals who are moderate- or low-income, who save money for retirement. And this is again, this is a new policy change to sort of incentivize savings. So, in a sense, these federal and state-based plans do provide options for workers who don’t have access to plans. The thing I would say is, you know, we touched on disparities earlier. And so, thinking about making sure that everybody is in a position to retire or to have the assets they need to sustain themselves in retirement. Not everybody is coming from the same place. Not everybody is starting from the same place. And so that really speaks to the need for targeted approaches such that people who are more vulnerable because they have fewer resources preparing for retirement so that there is a way to make sure that they can accrue the resources that they need.

Siers-Poisson [00:16:02] Clearly, having those kinds of options are really important for individuals. I wonder if you could talk a little bit about why it’s important for us at a society level to make sure that people do have the ability to retire comfortably and safely instead of being in this precarious position well into the later stages of their lives.

Addo [00:16:24] Yes, absolutely. You know, I don’t think it’s a stretch to say I think we all want seniors to be able to live out their lives in dignity. And this is getting beyond the scope of my research, but I’ve seen recent news articles talking about the rising number of seniors who are finding themselves needing homeless services. And I don’t think that’s a goal that any of us aspires to. I think we would all like to believe that our parents, our elders and our community and ourselves will be able to maintain a quality of life upon retirement. Or I would add, to even have the ability to retire. I think seniors working late into life because of necessity is also something that, you know, I don’t know that that’s desirable for everybody. And so that’s thinking about implications for society. You know, there are some workers who may be more likely to rely on Social Security benefits because they lack other assets. So, we have to think about that program and what that might mean. I touched on this earlier, but again, concerns about equity. So, thinking about who is more likely to be economically insecure in retirement and thinking about making sure that those people are protected and are not vulnerable to downward mobility and poverty.

Siers-Poisson [00:17:55] You know, you talked about some federal and state level initiatives that can help kind of bridge that gap for non-standard workers. And you also mentioned the importance of making sure that Social Security responds. Are there other policy implications or opportunities that you see that could really help stem some of the concerns for people in this situation?

Addo [00:18:20] So I think there have been discussions about modifying Social Security in terms of things like increasing the retirement age for seniors, the age at which seniors could draw full retirement benefits. There have also been proposals looking at increasing the amount of income that is taxed towards building the Social Security reserves. I think both of those are certainly worthy of consideration. But I also think about what’s happening now in people’s lives and or in relation to their ability to afford the cost of living. So, in my study, it’s very clear that income is a primary factor in determining the odds that somebody is going to be able to retire. It’s more impactful than education level. It’s more impactful than age, which is sort of a proxy for how long somebody has been in the workforce. And so ultimately, people being in a position where the work that they’re doing now is enough that they can meet their obligations, but also have that extra amount of money that they can save for the future is, I think, another part of the problem here. And so really taking a look at our wages, keeping pace with the cost of living, do people have the ability to manage sort of inevitable shocks? You know, that’s another thing that happens when people have private savings, that they experience a shock and then they make a withdrawal from a retirement plan, which has long-term implications for their ability to retire. And again, I would just say, you know, perhaps you’re in a better position if you have that asset, you actually have a plan that you can draw from. But thinking about non-standard workers who may not have access to those plans, they’re even more vulnerable in that situation.

Siers-Poisson [00:20:18] Mina, I’m curious, what prompted you to work on this particular topic? Why is it of interest to you?

Addo [00:20:25] Thank you, Judith. So broadly, my research interests are in economic vulnerability and wanting to understand the lived experience of vulnerability. I’m first and foremost interested in public policy and ways to improve people’s lives, and so understanding the economic conditions that are shaping their lives is very important to that. In my dissertation, I studied income volatility and some of the things that I found were that non-standard work was driving volatility, either because non-standard work was a primary job or because people had a traditional job and then were doing non-standard work on the side. And another key concern that people raised with me in my dissertation interviews was a concern about retirement. And this was people across the income spectrum, but they all worried about having enough resources in retirement. And this was particularly true among non-standard workers. And so I had the opportunity to apply for some funding through CFS and the Retirement and Disability Research Consortium, which is funded by Social Security Administration. And they are clearly interested in retirement, and they’re also interested in non-standard work. So it was an opportunity for me to delve a little bit deeper into this non-standard work population and also to learn about retirement. And I do want to just give a short disclaimer, which is to say that the opinions and conclusions that I discuss with respect to my research do not represent the opinions or policy of Social Security Administration or any other federal agency, and accuracy or any errors are my fault and not the fault of SSA or the federal government.

Siers-Poisson [00:22:20] And as we wrap up, what further research would you like to do or see done on this particular issue?

Addo [00:22:28] Great question. So, I would say a few things. For this particular study, I mentioned that I used a cross-sectional data source. So looking just at one point in time. I would like to build on this study by looking at a data source that would allow me to look at some longitudinal trends. So how do people’s savings patterns change over time? For example, you know, as people get sort of closer to retirement and perhaps it becomes more real, do we see any changes in savings, things like that. I’m also interested in looking at actually the value of retirement assets. So in my study, I could see whether people had a specific asset. So do you have a 401K? Do you have a pension? Are you a homeowner? Do you have investments? But I couldn’t actually observe the value of those assets. So I think it would be interesting to also look at differences according to the value of various assets. I actually looked at three categories of workers; so, the traditional employees only, the non-standard workers only, and then people who are doing a combination of both. And due to the data source and sort of sample size, there was a limited amount of analysis I could do really looking at that non-standard work plus employee category. But I’d really like to understand that group better. And particularly, I would like to understand what’s the role of non-standard work in sort of the household finances. So, is this something that people need to do? Do people need to have this extra source of income in order to meet sort of basic expenses? Do people use non-standard work for another purpose? And specifically, you know, are people making decisions about their work based on ideas about retirement? So again, I’d just really like to dig more into the non-standard work plus employee category to understand them better, and that would likely require some qualitative work to really talk to people and get a sense of their lived experience.

Siers-Poisson [00:24:41] Well, Mina, thank you so much for talking with us today. It’s really interesting and important work that you’re doing.

Addo [00:24:46] Thank you so much for having me. This has been fun.

Siers-Poisson [00:24:50] Thanks so much to Dr. Mina Addo, an IRP National Poverty Fellow in residence at the Office of Planning Research and Evaluation in the U.S. Department of Health and Human Services. She joined us to discuss her research on the impact of the rise of non-standard work on retirement security. You can find a link to her paper in the show notes for this episode. The production of this podcast was supported in part by funding from the U.S. Department of Health and Human Services Office of the Assistant Secretary for Planning and Evaluation. But its contents don’t necessarily represent the opinions or policies of that office. Any other agency of the federal government or the Institute for Research on Poverty. Music for the episode is by Poi Dog Pondering. Thanks for listening.