Gig Employment and Retirement Savings: Examining the Effect of State-Based Income Reporting Requirement

• In Event: Saving for Retirement

Abstract

The rise of platform-based gig work is a significant development over the past decade. According to recent estimates, nearly 40 percent of adults receive some form of income through gig work (GAO, 2022) and gig income is a growing share of overall household income. However, unlike traditional employees who typically receive fringe benefits, gig workers are ineligible to receive workplace benefits such as health insurance and retirement savings offered through the employer. This paper examines how gig workers save for retirement and investigates whether state-based gig income reporting policies influence retirement savings behaviors. Using data from the Survey of Household Economics and Decision making (SHED, 2015-2023), we estimate staggered Difference-in-Difference (CSDiD) models to test the hypothesis that workers in states with reporting requirements may increase savings in tax-advantaged retirement accounts, not tied to the employer, such as in Individual Retirement Accounts (IRAs) with the goal of reducing taxable income and benefitting from tax-advantaged retirement savings options.

Preliminary findings show that IRA ownership increased among gig workers in states that imposed gig income reporting requirements. Interestingly, these effects are more prevalent among workers that already had Employer-Sponsored Retirement accounts (ESRPs), suggesting that those familiar with retirement saving through the workplace are more likely to respond to reporting mandates by increasing savings in alternate tax-advantaged account. We also find that gig workers that save for financial emergencies are more likely to own an IRA indicative of savings behavior motivated by reducing tax liability as opposed to ease of liquidity associated with IRAs. Taken together, our findings suggest that an unintended but positive consequence of state gig-income reporting requirements may be increased retirement savings as workers with savings preferences appear to respond to these policies by utilizing tax-deferred retirement savings.

Authors

• Manita Rao, AARP

• Ngoc Dao, Kean University