Subject: Economics

Why in the News?

Startup founders publicly claimed to support gig workers’ rights but secretly resist laws that would actually protect them.

What is the nature of employment in urban labour chowks and mazdoor mandis?

• Daily Wage and Informal Work: Workers gather at labour chowks every morning, hoping to be hired for the day. Example: Construction workers in Delhi’s Kashmere Gate labour chowk wait for contractors to hire them for masonry or painting jobs.
• Highly Competitive and Unstable: Large numbers of workers compete for limited jobs, often accepting lower wages out of desperation. Example: In Mumbai’s Dadar labour market, carpenters and plumbers rush to secure work before others.
• Exploitative Hiring Practices: Employers and thekedars (middlemen) negotiate wages, often offering the lowest possible rates. Example: In Ahmedabad, daily wage workers in textile markets are hired at rates well below the minimum wage.
• Lack of Social Security and Benefits: No job security, health benefits, or pensions; workers are paid only for the day they work. Example: Brick kiln workers in Hyderabad have no accident coverage despite working in hazardous conditions.
• Piece-Rate and Task-Based Payment: Workers are often paid per unit of work completed rather than a fixed wage. Example: In Chennai’s wholesale vegetable markets, loaders are paid per sack carried rather than for the number of hours worked.

Who benefits the most from the presence of thekedars in the labour market?

• Employers Benefit from Lower Labour Costs: Thekedars help employers negotiate lower wages and better terms by creating a competitive environment among workers. This allows employers to maximize profits by minimizing labor costs. Example: In urban labour chowks, employers can select workers at the lowest possible wage due to the high competition among workers, which benefits the employer financially.
• Thekedars Themselves Profit from Commissions: Thekedars earn commissions or fees from both workers and employers for their services. This financial gain is a direct benefit to them. Example: In the construction industry, thekedars often receive a percentage of the workers’ wages as a commission for facilitating the hiring process.

How do digital platforms replicate the role of thekedars in modern gig work?

• Acting as Middlemen Without Responsibility: Just like thekedars, digital platforms connect workers to employers but do not recognize them as formal employees, avoiding obligations like job security or benefits. Example: Ride-hailing apps like Uber and Ola classify drivers as “partners” rather than employees, denying them benefits like PF or health insurance.
• Downward Wage Bidding: Workers must accept the lowest possible payment, as platforms set rates based on demand and supply, just like the daily wage auctions in mazdoor mandis. Example: Food delivery workers on Swiggy and Zomato have seen their per-delivery payments decrease over time as competition increases.
• Algorithm-Controlled Work Allocation: Platforms use algorithms to decide which worker gets a task, replacing the manual selection process of thekedars. Workers have no bargaining power over wages or work hours. Example: Freelancers on Upwork or Fiverr depend on algorithms that prioritize clients, making workers compete for lower pay.
• Lack of Collective Bargaining: Gig workers are isolated, just like daily wagers in urban labour markets, making unionization and collective bargaining difficult. Example: Amazon Flex workers have no union representation and must accept whatever delivery rates the company offers.
• Exploitative Rating Systems: Workers must maintain high ratings to get work, forcing them to accept low wages and poor conditions, similar to how thekedars exploit labour desperation. Example: “Insta Maids” service offers house help for ₹49 per hour, making workers compete for ratings instead of fair wages.

What are the challenges for gig workers in India? 

• Lack of Job Security and Social Benefits: Gig workers are classified as “independent contractors,” denying them benefits like health insurance, provident fund, and paid leave. Example: Delivery partners for Swiggy and Zomato receive no compensation if injured while working.
• Low and Unstable Earnings: Payment structures are unpredictable, with fluctuating wages and reduced per-task payouts over time, making financial planning difficult. Example: Uber and Ola drivers often struggle as their earnings depend on peak-hour incentives, which companies frequently revise.
• Exploitation Through Rating Systems: Workers must maintain high ratings to secure jobs, forcing them to accept unreasonable customer demands and work long hours. Example: Urban Company service providers risk lower earnings or job loss if they receive poor ratings from customers, regardless of actual service quality.

Way forward: 

• Strengthening Legal Protections & Social Security: Enforce minimum wages, accident insurance, and pension benefits for gig and informal workers. Example: Amend the Code on Social Security, 2020 to ensure mandatory employer contributions.
• Collective Bargaining & Fair Work Standards: Facilitate unionization and introduce fair algorithmic policies to prevent wage suppression. Example: Implement transparent rating and payment systems on digital platforms like Swiggy and Uber.

Mains PYQ:

Q Examine the role of ‘Gig Economy’ in the process of empowerment of women in India. (UPSC 2021)

Reason: The article explores “insta-commerce,” where gig workers, including women, sell via social media. While the PYQ focuses on empowerment, the article highlights challenges like job insecurity, unfair wages, and the lack of grievance redressal. This perspective offers a nuanced view of the gig economy’s impact, including its dual role in both enabling and potentially disempowering women.