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IAS Foundation 2023-24, Batch Starts: 27th July

All is not well with Gig Economy

  • Category
    Economy
  • Published
    17th May, 2022

Overview

  • Analysis
  • What is Gig Economy?
  • Scope and prevalence of the gig economy
  • Features of the gig economy
  • Advantages of Gig Economy
  • Disadvantages of Gig economy
  • Gig Economy and Women
  • How to improve the condition of Gig Workers?
  • Conclusion

Context

As the gig economy is expanding, there are rising concern regarding the status of gig workers under labour laws, lack of social security, ambiguity of rights, and vulnerability to fluctuation in demand.

Background

  • As the pandemic disrupted the normal functioning of business leading to loss of jobs and income, the spread of the gig economy to provide some support is a welcome move.
  • With the boom in the gig market, concerns related to merge income labour rights and status of employment is becoming a debatable issue.

Analysis

What is Gig Economy?

  • A gig economy is a free market system in which temporary positions are common and organizations hire independent workers for short-term commitments.
  • Non-traditional or gig work consists of income-earning activities outside of traditional, long-term employer-employee relationships.

Scope and prevalence of the gig economy:

  • India constitutes about 40% of freelance jobsoffered globally.
  • According to a report on the future of jobs in India by FICCI, EY, and NASSCOM, with a 24% share, India is leading in terms of online labour market globally.
  • Gig hubs in India:Prevalence of gig economy is more in metro cities; with Delhi NCR at 43 percent emerging as the biggest hub, followed by Mumbai at 19 percent and Bangalore at 18 percent.
  • Use of gig work platforms has grownby more than 30% in emerging economies.
  • Only 20% of freelancers would prefer full-time employment.
  • 40% of companies expect that gig workers will become an increasing part of their workforce.

Social Security Code, 2020

  • The SS Code, for the first time, defines ‘gig workers’ and ‘platform workers’. 
  •  In this code, gig workers are classified as unorganised sector workers, although the security coverage is unclear.
  • The central and state governments are required under section 109 of the law to "design and notify, from time to time, suitable assistance plans for unorganised workers".
  • The national and state governments will predominantly fund social security measures, with the aggregator contributing a modest amount (1-2% of their yearly turnover).

Features of the gig economy

  • Based on temporary hiring:In a gig economy, temporary, flexible jobs are commonplace and companies tend toward hiring independent contractors and freelancers instead of full-time employees.
  • Technology dependent: Technology facilitates work from home and Internet offers workers connectivity with employers and customers.
  • Confined more to urban areas: Gig economy is highly technologically dependent and as cities tend to have the most highly developed services, they are the most entrenched in the gig economy.
  • Attracts young workers:Gig economy attracts millennials because it offers them alternative work arrangements. It provides them with what they value:
    • flexible working hours
    • ability to work from home
    • a variety of experiences
    • a sense of excitement to be working on different projects with varied companies
  • Wide range:The gig economy is prevalent in wide-ranging sectors/segments; Finance, agriculture and forestry, transportation, education, healthcare and construction.
  • Change of traditional roles: Workers are taking upon themselvesa much larger share of the market risk of economic ups and downs, changing trends, and fickle consumer preferences, which were traditionally borne by capitalist business owners who employed wage and salaried workers.

Advantages of the gig economy

  • Cater to immediate demand:Gig economy can benefit workers, businesses, and consumers by making work more adaptable to the needs of the moment and the demand for flexible lifestyles.
  • Cheaper and more efficient:Most times, employers cannot afford to hire full-time employees. In a gig economy, large numbers of people work part-time or in temporary positions.
  • Wider choice for employers:Technology and connectivity through the internet don’t require the freelancer to come into the office for work. Hence, employers have a wider range of applicants to choose from as they don't have to hire someone based on their proximity.
  • Offers specific expertise:Professional services firms are hiring gig workers to add deep domain expertise to client-impact teams. Majority of professional services contact workers have years of domain-specific knowledge, like consultants.
  • Wider choice for employees:People often find they need to move around or take multiple positions to afford the lifestyle they want. These days, people also tend to change careers many times throughout their lives; the gig economy is a reflection of this rising trend.
  • Youth economic productivity:The gig economy offers the perfect platform for the engagement of youth in productive employment activities. It is also estimated that the gig economy offers relatively high gender parity in the workforce, as compared to traditional employment.

Disadvantages of the gig economy

  • Erosion of traditional economic relationships
  • Discourage Investment in Human Resources
  • Crowding out traditional workers
  • Disrupted work-life balance for gig workers
  • No employment-related rights

Gig Economy and Women

  • Advantages
    • Balancing Home and Work
    • Safe Work Environment for Women
    • Addressing Migration issue
    • On-Demand Work
    • Earning Extra Income
  • Disadvantages
    • Gender segregation of work
    • Wage Disparities
    • Dual burden: On-demand work schedules do not allow women to reap the benefits of peak hours due to additional domestic and childcare responsibilities 
    • Digital Divide: The unequal access to digital technologies acts as a hindrance to women’s entry in highly technology dependent gig economy.

How to improve the condition of Gig Workers?

  • Empowering Gig Workers: Forming an umbrella union of the gig workers will provide them with collective bargaining power and information symmetry to hold a better footing against the platforms.
  • Expanding Coverage of schemes: There is an urgent need to clearly define the social security benefits of gig workers.
  • Reducing Dependency on aggregate platforms: Dedicated loan scheme for gig workers can empower them to become independent entrepreneurs and end their dependency on the platform aggregator companies.

Conclusion

The success of the gig economy will be dependent on how policymakers, futurists, industry, and governments come together to develop an enabling framework and labour laws that allow it to thrive and sustain. Also, companies will have to re-evaluate their current practices to accommodate gig workers.

Practice Question

Q1. Gig economy is becoming the new normal. Discuss the key drivers of the gig economy.

Q2. What are the advantages and challenges of the gig economy over traditional economy? Also, suggest measures needed to ensure welfare of gig workers.

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