From UPSC perspective, the following things are important :
Prelims level : Not much.
Mains level : Paper 3- How to govern India's gig economy?
The gig economy plays to employment patterns in India, where most of the workforce is engaged in “informal” jobs in the “unorganized” sector.
Employment pattern in India
- Non-contractual employment: A recent study of employment patterns over a 13-year period ended 2017 for the Prime Minister’s Economic Advisory Council finds that non-contractual employment grew by 68 million over the period.
- And “has been a hero of employment generation growing by about 5% annually“.
- There were 145 million people in non-contractual employment in 2017-18.
- Professionals constituted the most rapidly growing occupations, with older, better educated and skilled witnessing higher growth.
- Unorganised sector growing at much higher rate than organised sector: The study also found that unorganized sector employment grew by 65 million between 2004 and 2017, compared to only 27 million new jobs in the organized sector.
- What does the asymmetric rate suggests? It suggests that businesses are finding it more convenient to sustain themselves when they are below the radar of the government.
- Potential for growth of gig economy: As technology and business models take the gig economy across the country and implant it more deeply into the Indian economy, we can expect to see a lot more people find employment through online marketplaces and technology platforms.
Regulation of labour laws and expanding the tax base
- Social Security Code: In December, the government introduced legislation in Parliament that seeks to consolidate a number of labour laws into a Social Security Code.
- Who will be covered in the code? The new statute encompasses self-employed professionals, freelancers and platform workers, such as those employed by taxi aggregators and food delivery companies.
- Widening the tax base: The tax person is not far behind.
- Recent reports suggest that revenue officials are leaning on platforms and aggregators to get gig workers registered with the goods and services tax (GST) network.
- Need to reflect on how to govern the gig workforce? While it is just as well that the government is attempting to rationalize labour regulations and expand the country’s tax base, it is important to step back and reflect on how the gig workforce ought to be governed.
The new approach to classification of jobs: Income and volatility
- Classification on the basis of two fundamental characteristics: If we discard the mental model that has long classified jobs as formal and informal, and look at work afresh, we observe that jobs vary along with two fundamental characteristics:
- The level of income they generate and-
- The volatility of this income.
- Example: A security guard at a company might earn a few thousand rupees a month, but with the assurance of a regular monthly paycheque.
- More informative way: Instead of the old binary formulation of informal versus formal jobs, it is more informative to see jobs being distributed on a spectrum depending on how much they pay and how volatile the income flows they provide are.
- Wherever a job lies in this spectrum, the objective of public policy ought to be to ensure a “trimurti”.
- Frist-Providing dignified working conditions: Promoting dignified working conditions include-
- Ensuring fairness.
- Protection against exploitation and-
- Arrangements for retirement.
- Need to ensure the obligation from employers: This means that even as labour laws are rationalized to eliminate outdated and hard-coded regulations, it is necessary to ensure that all employers retain an obligation to promote the dignity of all their employees.
- Second-Need to lower the barriers: Real wages grow not because the government imposes minimum wages, but when productivity rises.
- Productivity growth occurs when barriers to trade, investment and travel are lowered.
- A closed economy cannot be a successful gig economy.
- Finally-A re-imagined social security system: A re-imagined social security system for the 21st century must tap government, corporate and social contributions for insurance and retirement accounts.
- Such a multi-contribution system is possible today and the proposed Social Security Code is an opportunity to put in place such a future-proof framework.
How to handle the dispute arising out of the gig economy
- Start online dispute resolution system: The gig economy is perhaps the best place for India to start its first online automated dispute resolution system.
- You can’t govern the 21st-century economy with 18th-century technology.
While ensuring the application of the labour code to the gig economy and bringing them in the tax net the government also ensure the conducive environment for the gig economy to flourish and contribute significantly in the growth of the country.