Uberising workforce makes long term saving a struggle

Jobs like being an uber driver allow people to have flexible work but may also result in volatile incomes making it harder for people to save for the long term. Photo/Akos Stiller/Bloomberg

Greater casualisation of the workforce is making it harder for people to save for the long term, says an American expert.

Ida Rademacher, executive director, of the Financial Security Program for The Aspen Institute, said research it had undertaken showed households were facing much greater income volatility than in the past.

While incomes might have varied on an annual basis in past decades research following the spending habits of 250 American households showed more people were facing monthly income volality - and the variation could be as much as 25 to 40 per cent.

"There is less wiggle room than we think for people," Rademacher said at a recent conference in Auckland on financial education.

Rademacher said many people could not think about their long term savings because they were too busy worrying about today.

"There are a lot of people standing in canoes."

Rademacher said two major global societal trends were driving the issue - the increasing casualisation of work and day to day living costs being propped up by debt as a result of stagnant incomes and falling wealth.

She said almost all new technology jobs were contingent - being contract work or non-permanent with changeable hours of work.

"If we don't know what hours we are working next week or even tomorrow it crowds out the ability to get a second job or find childcare."

At the same time wages for the majority of Americans had stagnated since the 1970s so people's buying power had gone down and their wealth had fallen.

And debt levels have spiralled.

In the US in 1983 the debt to income ratio was 67 per cent by 2007 it was 157 per cent.

Rademacher said much of that debt was not beng used to pay for luxury consumption just basic expenses.

If they had a financial shock tomorrow 46 per cent of American said they would not be able to come up with US$400.

The short term is looking rather dire.

Ida Rademacher

Rademacher said more needed to be done to shore up people's short term balance sheets and emergency savings to allow people to think about planning for the long term and she suggested they could be better connected by allowing people use their superannuation fund to initially put aside money that could be used in an emergency.

David Boyle, group manager investor education at New Zealand's Commission for Financial Capability, said it was an issue that it too had been looking at for some time.

Boyle said while he did not have any data to support it he believed the casualisation of the workforce was impacting the number of people putting money into KiwiSaver.

In the year to June 30, 580,000 adult KiwiSaver members did not put any money into their KiwiSaver accounts.

"Some of the reasons for that I'm pretty sure are because of the changing work and employment conditions.

"More New Zealanders are moving from PAYE to a contract role."

Boyle said that meant those people were "out of the net" and not being captured by the automatic KiwiSaver contributions which go through centralised collection system run through the Inland Revenue Department.

He said some may not know they were no longer contributing to KiwiSaver.

"That is something that needs to be looked at more."

He said those with fluctuating incomes should try to put aside money when times were good.

But that may be easier said that done.

Research released earlier this month by the OECD showed more than 30 per cent of New Zealand respondents said their income did not always cover their living costs - higher than the OECD average of 27 per cent.

While 11 per cent of the Kiwis surveyed said they borrowed to make ends meet compared to the OECD average of 14 per cent.