Few in Temporary or Alternative Jobs Have Access to Employer-Provided Retirement Plans

Contingent workers—those who provide services on a short-term or temporary basis—are much less likely than traditional workers to have a retirement plan at work, according to data released recently by the federal Bureau of Labor Statistics (BLS).

According to the bureau, 23.4 percent of contingent workers were eligible for—or had access to—employer-sponsored pension or retirement plans in 2017. This is about half the rate for more permanent or traditional workers, among whom 47.6 percent were eligible for an employer-sponsored plan. The BLS defines contingent workers as those “who do not have an implicit or explicit contract for ongoing employment.” Those who do not expect to continue in their jobs for personal reasons—for example, because they plan to return to school or retire—are not counted.

BLS and the Census Bureau last fielded the Contingent Worker Supplement to the Current Population Survey in 2005. Analysts and policymakers had been anticipating updated data.

The results show slight declines in various kinds of contingent work since the 2005 survey. BLS reported that 1.3 to 3.8 percent of working Americans did contingent work, depending on the definition, while 10.1 percent were in what the bureau calls alternative work arrangements as their main job in 2017.

Labor experts agree that contingent work is characterized by a lack of job security, but consensus often ends there. Varying definitions address the temporary nature of the work, the “alternative,” or nontraditional, aspects of the employer-employee arrangement, or both. Therefore, BLS measures three types of contingent work and separately counts those in alternative work arrangements, such as on-call workers and independent contractors.

Trends in contingent and alternative work

All three measures of contingent work dropped slightly since 2005. Using BLS’ broadest definition, 3.8 percent of working Americans were employed in contingent arrangements as their main job in 2017, down from 4.1 percent in 2005. The share of the workforce in alternative employment arrangements declined from 10.7 percent to 10.1 percent in 2017. BLS measured the number of workers in contingent work at 5.7 million in 2017, while the number in alternative employment arrangements stood at 15.5 million.

Other measurements, however, such as IRS tax data, suggest that nontraditional, temporary work arrangements are growing. The Treasury Department, using 2014 tax data, found that the self-employed represented about 12 percent of all tax filers with earnings, up about one-third from 2001. But the agencies assess the numbers differently. The BLS household survey asks workers only about their primary employment, which does not capture the many workers who use contingent work to supplement their income.

Limited retirement savings opportunities

Fewer than a quarter—23.4 percent—of contingent workers were eligible for employer-sponsored pension or retirement plans in 2017, compared with nearly half— 47.6 percent—of traditional workers who reported they had access to a workplace plans.

Eligibility varies, however, with the type of work arrangement. For example, 48.1 percent of workers whose jobs were with contract companies were eligible for an employer-provided plan, compared with only 12.7 percent of temporary help agency workers and 35.4 percent of on-call workers. BLS does not collect retirement coverage data for independent contractors.

Contingent workers were also less likely than noncontingent workers to participate in employer-sponsored retirement plans. About 18.4 percent of contingent workers said they did so, compared with 43.4 percent of noncontingent workers . While the survey does not address reasons for these differences, self-employed and “gig” workers usually don’t have access to convenient payroll deduction mechanisms for retirement savings. Another factor could be that contingent workers find it more difficult to put money aside for retirement from what are typically lower and sometimes more volatile incomes.

The 2017 Contingent Worker Supplement reports that, among full-time workers, contingent workers’ median weekly earnings were just about three-quarters—77.3 percent—of those for noncontingent workers. The difference could be due to the demographic characteristics of these two groups and the types of jobs each tends to hold.

Contingent workers also often work fewer hours than do other workers, according to research by economists such as Lawrence Katz and Alan Krueger, and the Government Accountability Office.

The new data on retirement plans are consistent with other research. Federal tax data reported by Treasury’s Office of Tax Analysis show that about 41.9 percent of wage or salaried workers contributed to an employer plan or individual retirement account (IRA) in 2012, compared with 7.8 percent of primarily self-employed sole proprietors and 18.8 percent of gig workers who find jobs through apps or online platforms.

Addressing an unmet need

Because contingent and alternative workers are not traditional employees, their lower rates of retirement plan eligibility and participation are not surprising. Some labor analysts, however, raise concerns that workers without these savings could face impoverished retirements or could even be unable to retire.

Despite the slight declines in contingent and alternative arrangements reported by BLS, these types of work also could shift costs primarily borne by employees and employers today to federal and state governments—if in retirement these workers must turn to means-tested government programs such as Medicaid and Supplemental Security Income.

The trends point to a need to explore new ways to provide secure, widely available retirement plans for workers. Financial technology companies are already working on approaches that would give contingent and alternative workers access to low-cost and viable retirement savings plans or systems.

Many states are setting up or considering “auto-IRAs” for private-sector workers who do not have access to a plan on the job, and they are using strategies to spur participation, such as automatic enrollment of new workers.

As these state auto-IRA programs grow, policymakers may decide to allow the self-employed, and other contingent and alternative workers, to participate. To date, however, there is no broad agreement on an approach that would reach people across different jobs and sectors. Further work is needed to consider the development of viable retirement savings options for contingent workers, bringing together stakeholders from businesses, the workforce, the financial and technology sectors, government, and researchers.

Alison Shelton is a senior research officer with The Pew Charitable Trusts’ retirement savings project.