Gig Economy 101
Written by Shagun Tyagi
Gig Economy is a baffling name. We can blame the word gig for that. The original meaning of the word ‘gig’ means a live performance by a musician or a comedian. How can an economy be called ‘gig’ then? What is a gig? Before taking a shot at defining the whole economy as a gig economy with millions of jobs, people, and technology intertwined in it, let us first define a gig formally (ironically) on an individual level. A gig can be, in its simplest form, a one-time job performed by a person on a casual basis. The ‘one-time’ aspect of this definition can be changed but the idea here is that this employment is casual i.e. temporary.
All hail to platforms! Technology has changed the way businesses hire labor and the ways people seek jobs. There are revolutions sparked off by technology in every area of human activity, especially economic. A prerequisite in understanding the gig economy is knowing the know-how of the platform economy. Any type of digital platform that uses the internet to connect dispersed networks of individuals to facilitate digital interactions between people is called a platform economy. The intermediaries in our traditional business models have been people. Platform economy changes that. We have a ‘platform’, an app/website enabled by the Internet, connecting suppliers of goods/services to consumers. The value creation here is in connecting people wherein the platform is a means to an end. Enabling economic transactions via the Internet by linking people can be the next revolution for the global economy.
Defining Gig Economy People change with changing times and so do their tendencies. Platform economy has changed the way people see and do their work as a labor unit. Gig economies thrive on the idea and infrastructure of the platform economies. The gig economy has three core elements to it- independent worker who gets the gig (from delivering delicious food to providing rental services), technology-enabled intervention by an intermediary (Zomato & Airbnb) , and you, the consumer (the hungry you and the backpacking traveller you respectively). Gig workers are temporary for businesses and are governed under contracts with the platforms.
Classic Example of Uber When you request an Uber to go back home, you request for a transport service on your Uber app. Uber connects you to the nearest available driver who has entered into a contract as a ‘gig worker’. The revenue gets shared as per the arrangements in the contracts. These drivers are not employees of Uber. Uber is not obliged to provide for their basic social security or minimum wage or sick leaves.
Who gets the consumer if many Uber drivers are in the same area is a question to ponder over. The idea that somebody’s income depends on an algorithm is scary. An economy functioning on algorithms that are unknown to people who get affected by them is an economy of uncertainty and vulnerability. To conclude here, gig workers are bound by their company’s structure and how their platform functions. Uber drivers cannot decide their rates, who they pick up and do not put up their ads in newspapers.
Why care about the Gig Economy? We need to acknowledge the gig economy because it is here. Let us crunch some numbers. In monetary terms, the size of the world’s gig economy exceeds $200 billion in gross volume, an amount that’s expected to more than double to approximately $455 billion by 2023. The majority (more than 75%) of those currently generating income through alternative work arrangements do so by choice. Policymakers should take into account the changing trends in labour market. Gig workers are too much in number to be ignored. The gig economy, according to my opinion, has the potential to drive a country’s growth strategy as it thrives on on-demand commerce. Gig workers supply the services (according to their skill set) on demand to firms who save the costs involved in employing a permanent worker. It imparts dynamism to a system where demand and supply of specific skill sets interact. Firms tend to view the concentration of specific skill set in a location as a deterrent to hire people. Remote collaborations can solve this problem. As Gen Z and millennials enter the workforce, flexibility of schedule and the sheer power to choose work that appeals to them is getting much more priority now. In fact, 43% list having a flexible schedule as the most important reason to work independently. All this shows that numbers on gig economy is going to scale manifold in years to come as businesses revolutionize their value chains. Labor Laws and the Road Ahead Sadly, Indian laws have no explicit provision regarding gig work. It is due to the fact that the current labor laws do not take into account the nature of work gig work is. Indian labour and employment laws recognize three main categories of employees: government employees, employees in government-controlled corporate bodies known as Public Sector Undertakings (PSUs), and private sector employees who may be managerial staff or workmen. Needless to say, gig workers do not have the ‘employee’ status in our country. What’s the big deal about it? The fact that gig workers are not given employee status as per the Indian laws, deprives them of many rights. They are not allowed to form trade unions to further their interests, no safety net from exploitative contacts and no provision for insurance and pension. The categories mentioned in the last paragraph are ensured certain working conditions, such as minimum wages under The Minimum Wages Act, 1948, a set number of hours of work, compensation for termination, etc. Gig workers are not. This is where the problem lies. So, are we doing anything about this? A draft bill (The Code on Social Security, 2019), introduced in the Lok Sabha on December 11, 2019, intends to simplify, amalgamate and rationalize nine laws related to social security. The law has introduced the concept of gig and platform workers and aims to formulate social sector schemes for the workers. Though the bill has its intentions at the right place, experts argue that the bill is not doing a good job defining the relationship between employee and employer. Crucial categories such as “workers”; “wages”; “principal-agent” in a contractual situation; and “organised-unorganised” sectors have not been clearly defined. Clearly, we have a long way to go.
COVID-19 has been the last nail in the coffin. Gig workers have been ravaged by the pandemic due to the contraction of demand for various non-essential services. The workers have been left on their own in the absence of a provision of an unemployment allowance. Problems like these arise because of the one-sided and unfair contracts gig workers sign. Big companies often try to circumvent the laws by using ambiguous terms like partners and not employees/drivers/contractors and making false promises of assured incomes to lower-middle class gig workers.
Way Forward If we care about economic growth in today’s times, we should care about the gig health of our economy too. Gig health will improve our business processes, creates jobs, leads to value addition in economy with personal fulfilment for a gig worker. Firms dismantling labour rights in a gig economy is a common sight. Labor laws should be amended to give scope to give gig workers basic statutory labour rights such as provident fund, sick leave, insurance, etc. Gig workers find it hard to comply with tax regulations as they are required to manage their tax obligations on their own, keeping in mind deductions and availing perks of self-employment. Governments should make the tax compliance system less complex for gig workers and set up an interface which is user friendly and less on jargon. Needless to say, The ripples of the disruption of the gig economy are not going to stop anytime soon. We need to take notice of the new emerging working class and harness their will to adapt to fuel our growth.
1. Buffer. “State of Remote Work 2018 Report,” March 23, 2018. https://stories.buffer.com/state-of-remote-work-2018-389425de2cd4.
2. “The Global Gig Economy: Capitalizing on a ~$500B Opportunity.” Accessed August 28, 2020. https://newsroom.mastercard.com/wp-content/uploads/2019/05/Gig-Economy-White-Paper-May-2019.pdf.
3. “The Rise of the Platform Economy - Deloitte United States.” Accessed August 28, 2020.https://www2.deloitte.com/content/dam/Deloitte/nl/Documents/humancapital/deloitte-nl-hc-reshaping-work-conference.pdf.