The surge in demand for gig workers, particularly in the shared services and logistics segments, in the aftermath of the Covid-19 pandemic led to mushrooming of job discovery platforms.
What is the gig economy?
- In a gig economy, temporary, flexible jobs are commonplace and companies tend toward hiring independent contractors and freelancers instead of full-time employees.
- A gig economy undermines the traditional economy of full-time workers who rarely change positions and instead focus on a lifetime career. e.g Employee models of Uber, Ola, Swiggy etc
- In this economy, tech-enabled platforms connect the consumer to the gig worker to hire services on a short-term basis. Gig workers include self-employed, freelancers, independent contributors and part-time workers.
- This project-based gig economy allows the service adopter to cut overhead costs, and the gig worker to get paid for a specific task performed instead of receiving a fixed salary.
- The gig economy can benefit workers, businesses, and consumers by making work more adaptable to the needs of the moment and demand for flexible lifestyles.
- At the same time, the gig economy can have downsides due to the erosion of traditional economic relationships between workers, businesses, and clients.
- Sectors such as media, real estate, legal, hospitality, technology-help, management, medicine, allied and education are already operating in gig culture.
Is Gig economy a new concept?
- The ‘Gig concept’ is very common in advanced countries like the US, Europe, who hire part time workers.
- With freelancing evolving into the Gig Economy, the concept is attracting a lot of people in India as well.
- Gig economy is remunerative and gives a wide range of choices but it also leads to casualization of the labor.
Trends in Gig Economy
- The digital gig economy generated a gross volume of approximately $204 bn from worldwide customers in 2018. Transportation-based services contributed to over 50% of this value.
- The size of the gig economy is projected to grow by a 17% CAGR and generate a gross volume of ~$455 bn by 2023.
- Digital platforms have emerged as enablers for employment creation with the power to easily discover job seekers and job providers in the absence of middlemen.
- Due to the rapid developments in technology, the transaction cost for outsourcing non-core activities is reducing and facilitating an increase in the number of tasks which can be performed by each worker.
- Thus, firms are shrinking in size and we are witnessing a rise in start-ups which are outsourcing many activities to expert service providers on a contractual basis.
- While the gig economy is popular amongst the blue-collar workers in India, there is now huge potential for the white-collar workers as well, due to increasing demand in industries – project-specific consultants, logo/content design, web design etc.
- The gig economy is expanding from less skilled services to more skilled jobs.
Gig Economy in India
- The COVID-19 pandemic-induced remote working has blurred the age-old skepticism over the efficiency and dependability of contractual or part-time employees, with companies increasingly looking to hire gig workers.
- As per a report by ASSOCHAM, India’s gig sector is expected to increase to US$455 billion at a CAGR of 17% by 2024 and has the potential to expand at least 2x the pre-pandemic estimates.
- India has emerged as the 5th largest country for flexi-staffing after US, China, Brazil and Japan.
- Haryana, Madhya Pradesh, Andhra Pradesh, Gujarat and Telangana have most opportunities in terms of growth for the flexi-workers.
- In another estimate, India is likely to have 350 million gig jobs by 2025, presenting a huge opportunity for job seekers to capitalize and adapt to the changing work dynamics.
- At present, India has a pool of ~15 million freelance workers staffed in projects across IT, HR and designing. In addition, India’s workforce is growing by ~4 million people annually.
- And as most of them are young millennials, they are showing an increasing preference for gig contracts. This trend is expected to significantly impact gig economy in the near future.
Key Drivers for Gig Economy
(1) Unconventional work approach by millennials
- Hectic lifestyles of employees in private sectors have created a negative perception of full-time employment among millennials.
- Factors such as growth opportunities, flexibility, better work-life balance and option to not acquire a college degree are encouraging millennials to opt for freelancing opportunities as opposed to corporate work culture.
(2) Emergence of a start-up culture
- The start-up ecosystem in India has been developing rapidly. For start-ups, hiring full-time employees leads to high fixed costs and therefore, contractual freelancers are hired for non-core activities.
- Start-ups are also looking at hiring skilled technology freelancers (on a per project basis) in areas such as engineering, product, data science and ML to bolster their tech platforms.
(3) MNCs are hiring contractual employees
- MNCs are adopting flexi-hiring options, especially for niche projects, to reduce operational expenses after the pandemic. This trend is significantly contributing to the gig culture in India.
(4) Rise in freelancing platforms
- Rise in freelancing platforms has also aided in the development of the gig economy. Many home-grown platforms such as Upwork, Truelancer and Guru provide access to high-skilled freelancers.
- The number of freelancing platforms has significantly increased—from 80 in 2009 to 330 in 2021. These platforms boast of a clientele comprising not only start-ups, but also Fortune 500 companies.
(5) Business Models
- Gig employees work on various compensation models such as fixed-fee (decided during contract initiation), time & effort, actual unit of work delivered and quality of outcome.
- The fixed-fee model is the most prevalent; however, time & effort model comes a close second.
(6) Impact of Covid-19
- According to the survey, India stands to lose ~135 million jobs because of the pandemic and this is likely to push the full-time workforce towards the gig economy.
- Moreover, many laid-off employees are focusing on developing skills to avail freelance job opportunities and become a part of this burgeoning economy.
Why is Gig Economy preferred by workers?
- One can work on freelancing as well as work full-time somewhere else. Hence it is profitable to the worker as he can hit two targets together and multitask.
- It is very beneficial for women who work on this concept when they cannot continue their work or take a break from career due to marriage or child birth.
- Retired people can stay active after retirement as this will keep them engaged away from loneliness and depression and can earn as well on their own rather than depending on their children or pensions.
- It offers flexibility and diversity to the workers. It offers flexibility when workers can work according to their convenience and schedule rather than routine like in full-time jobs.
- The travel costs and energy to travel to the workplace is reduced.
Why is Gig Economy preferred by Employers?
- The efficiency, efficacy and productivity of workers in gig economy are much more than that of a stable full-time job.
- More Economical for employers – When employment givers can’t afford to hire full-time workers, they hire people for specific projects and pay them.
- Start-up companies and entrepreneurs – who do not have big financial space – can grow only if they can leverage the services of contract employees or freelancers.
- In a gig economy, businesses save resources in terms of benefits, office space and training. (Reference – Whatis)
- Competition and efficiency among workers improved.
Challenges faced in Gig economy
- There are no labour welfare emoluments like pension, gratuity, etc. for the workers.
- Gig workers may face unfair termination. They may also attain minimum wages and less paid leave.
- Workers do not have the bargaining power to negotiate a fair deal with their employers.
- Unionization of workers will be difficult.
- Confidentiality of documents etc of the workplace is not guaranteed
- The gig economy is not accessible for people in many rural areas where internet connectivity and electricity is unavailable.
- The social welfare objectives can be neglected if business and profitable avenues of freelancing are prioritized.
What are the major impacts of the gig economy?
- Gig economy companies had introduced innovative systems and methods to the labour market. These methods are offering workers flexibility and the freedom to choose how and when they work.
- But this chaotic and amoebic environment has helped create an environment of exploitation where workers get minimal protection and low wages.
- A government study in the UK recently established that a quarter of the people working in the country’s gig economy are being paid below the national minimum wage.
- As most of the gig economy companies act as an aggregator and digital companies, their interaction with the labourers and customers is minimal.
Gig Economy and the women empowerment
- The women are considerably placed in a victimised position in the workplace. The flexibility that the gig economy offers women help to come out of the shackles of the male domination.
- The financial independence is often considered as the first step towards the women empowerment. The labour of the women will be valued and paid worth for.
- Rise and participation of the women in the job market would help in improving the indicators where women participation is considered the least and they will occupy roles as the decision makers.
- But women due to lack of certain options are forced to perform the dual responsibility of work and home.
- Dual exploitation faced as they are sandwiched between the familial and professional responsibilities where they have to forego their professional lives.
Code on Social Security 2019
- To aid gig workers, the govt passed the ‘Code on Social Security’, which will provide workers with life and disability cover, accidental insurance, health & maternity benefits old age protection and others.
- Under this code, the central and state governments will primarily fund social security measures, with a nominal contribution (1-2% of their annual turnover) by the aggregator.
- Also, the contribution made by the aggregator/platform will not exceed 5% of the amount payable to gig and platform workers.
- In addition, the code proposed to establish a ‘National Social Security Board’, which will supervise and formulate schemes for the well-being of gig and platform workers.
- The gig economy has been on the rise and is expected to beat the pre-pandemic estimates due the expected influx of gig workers transitioning from full-time employment.
- While the government has taken the initial steps to ensure social security of gig workers, the ‘Code on Social Security’ needs to be fine-tuned.
- Further, all platform workers should be offered mandatory coverage under the Bharat Pradhan Mantri Jan Arogya Yojana, Pradhan Mantri Suraksha Bima Yojana and Pradhan Mantri Jeevan Jyoti Bima Yojana.
- This can be facilitated through the employer companies and will ensure employee protection; thus, guaranteeing a sustainable gig economy.
- There should be revamped of employee policy assessments and evaluations. An effective evaluation process is required to ensure consistent and quality work, where customized assessment procedures need to be developed.
- India should learn from developed countries like the US and basic training and courses on freelancing, etc. should be provided to people.
- Career Avenues, choices, counselling should be available to students and workers on gig economy.
- Companies will also need a human resource department that can manage a diverse workforce and imbue the company’s culture into gig workers.