Most gig and hourly workers are walking a financial tightrope. They will not be able to afford even a short-term hit to their earnings.
By 13D Research and cross-posted from Medium.com.
In WILTW October 10, 2019, we warned that the health of the U.S. consumer is far more precarious than most recognize. The situation was escalating even before the COVID-19 outbreak. In 4Q19, prime and subprime auto delinquencies that are 90 or more days past due surged by 15.5% to a record $66 billion. Meanwhile, the credit card delinquency rate at small banks — the roughly 4,500 banks that largely cater to lower-income households — hit 7.05%, the highest ever in data going back to 1980. As of the end of last year, total consumer debt had surpassed $14 trillion for the first time ever, according to the Federal Reserve Bank of New York.
Now, COVID-19 is set to expose America’s greatest economic vulnerability: inequality. From restaurant workers, caterers, and Uber drivers to office and hotel cleaning staff to event venue staff to people supplementing earnings with AirBnB revenue, income is cratering across the country for hourly and gig workers. And most have little to no financial cushion — the top 20% of households now account for nearly all savings in America:
In the decade since the Global Financial Crisis, the nature of work in America has transformed. Thirty-six percent of U.S. workers are now involved in the gig economy. Forty percent of U.S. workers generate 40% of their income with independent work. Forty-two percent of millennials freelance. Overall, freelancers contributed $1.28 trillion to the American economy in 2018.
From Microsoft and Disney to NBA player Kevin Love, companies and wealthy individuals have made headline-grabbing gestures of financial compassion for hourly and gig workers. It will prove far too little. Most gig and hourly workers are walking a financial tightrope. They will not be able to afford even a short-term hit to their earnings. It will mean a further spike in auto loan and credit-card delinquencies. It will mean a spike in healthcare-driven bankruptcies. It will mean unpaid rent. And it will mean consumer spending will plummet…