INDIA AND ITS GIG ECONOMY.. The Emerging Duality of India’s Workforce – Empowerment or Exploitation? (June 2024)

Introduction: Arguably, one of the most difficult relationships in the corporate sector in India is in the sphere of work ethics involving workmen who are constantly called upon to deliver up to the required standard of efficiency and the management who is tasked with the duty of ever greater performance all the time. In the past, having got used to being mollycoddled by the managements, workmen could get away with lower productivity and questionable work practices.  With increasing competition in the market and decisive government interventions, though the scene has changed, the behavior pattern of a typical workman hasn’t yet.  The workmen nurse an abiding grievance against managements for having been subjected to unfair demands for more output but with increasingly poorer pay packets.  In the process, the employer feels stifled, and the employee feels frustrated.  Eventually this leads to the inevitable separation of the employees, many a time with a golden handshake under one pretext or other.  This has also encouraged the managements recruiting employees without firm appointment orders and through third party manpower suppliers.  With the labour laws being what they are, recruitment through these sources has become the most preferred mode to avoid statutory overhang.  Today if the government organisations have limited quota of sanctioned vacancies, the private sector would rather have their employees through third party contracts.  Largely this is the labour recruitment scene in the corporate sector which in turn leads to the eventual separation of the employees who, perhaps genuinely feel that they can earn better if only they could find niche business opportunities where their services could be traded just like any other.  The desire to do so also becomes overwhelming in those cases where the workmen yearn for a sense of autonomy while working coupled with a better work-life balance. Enter the world of gig work where the workman gets the freedom to work for whomsoever he wants, and the employer also feels happy about this arrangement as the latter is not saddled with long term liabilities concerning his employees. If this kind of work arrangement was a necessity during the pandemic days for obvious reasons, the convenience associated with this arrangement appealed to both the management and the employee. An evolving industrial environment as explained above hastened the process of engaging people for services on call.  As a result in this gig market, such arrangements today are getting increasingly favoured and formalised. As can be expected however, industry and the government have started to realise the pitfalls of engaging workmen from this market though such concerns are more ethical in nature than economics. With these developments, India in one sense, is on a cusp.  The time has therefore come for the players to lay down their ground rules, keeping in mind good corporate governance standards.

The Gig World:  Among the employees India has largely seen two types of employee categories – those who work in the organised sector of industry and those in the unorganised sector. Of late, especially after the pandemic, a third category has also emerged – the gig worker.  For the uninitiated, a gig worker is one who takes up temporary jobs typically in the service sector as an independent contractor or a freelancer.  Gig workers have freedoms that most full-time workers can only dream of – setting their own working hours, working from home and most importantly being their own bosses!  A gig economy is a labour market that relies heavily on temporary and part-time positions filled by independent contractors and freelancers rather than full-time permanent employees engaged on long time basis by various industries. Gig workers enjoy flexibility in work and independence in executing them but with little or no job security.  Many employers look at this source of labour engagement to save money by not paying benefits such as health coverage and paid vacation time. However, there are also cases where these gig workers get to enjoy certain employee benefits through outsourced benefits programmes through external agencies.  One of the reasons for the emergence of a gig economy in India is the adoption of these practices that have already been tried out in other parts of the world, especially in the West. There are plenty of names that crop up when we discuss this subject, viz., Uber, Airbnb, Zomato, Swiggy, Urban Company, etc.  The list is getting longer with every passing day.  Typically, these jobs are project-based ones for temporary durations, often referred to as “gigs”.  Individuals find work through online platforms or directly with clients rather than being employed by a single company for an extended period.  They are typically independent contractors or freelancers and not employees.  Besides executing the work that they are called upon to do, they are also responsible for payment of their own taxes, benefits and also for work equipment.  For those employees who cherish autonomy at work and work-life balance, this is the ultimate go-to arrangement.  This is the kind of flexibility that most workers yearn for but seldom get.  While opting for such work arrangements the gig workers often face income instability, lack of job security and very limited access to benefits like health insurance and paid leave as already mentioned above. Examples of gig work are those jobs that individuals discover and access through online platforms that list availability of such work opportunities. These jobs are often one-time or short-term contract jobs. These include driving for a ride-sharing service, painting someone’s house, freelance work, coaching, fitness training, and tutoring. The job is exchanged for cash and little else like retirement benefits and health insurance.

The Emerging Gig Landscape: India's economic landscape is experiencing a huge transformation with the rise of the gig economy. This new model, characterised by short-term, project-based work facilitated by online platforms, offers flexibility and a hitherto unknown opportunity for both workers and businesses. However, its rapid growth presents unique challenges that necessitate a thoughtful approach from the point of view of government regulations.  One of the key advantages of the gig economy is its potential for large job creation. Estimates suggest that it could contribute significantly to India's GDP and generate millions of jobs, particularly for the youth and those seeking flexible work arrangements. This is crucial for a nation striving to bridge the employment gap. Additionally, the gig economy also empowers individuals with skills and fosters entrepreneurship.  However, the lack of traditional employer-employee relationships in the gig economy raises huge concerns. Gig workers often face precarious work conditions, lacking job security, minimum wage guarantees, and access to social security benefits like health insurance and pensions. This vulnerability can be detrimental to a gig worker in the event of injury, illness, or economic downturns.  The Indian government has started to navigate this complex terrain. Some initiatives, like the e-SHRAM portal for registering gig workers, are positive steps towards creating a national database and potentially extending social security benefits. The proposed Labour Codes that could be implemented by the government after the general elections recognize the problems by trying gig workers’ right to survive under the sun.  However, a more comprehensive regulatory framework is called for.  One approach is to establish minimum wage standards and ensure fair treatment by platform companies. Regulations could also focus on portable benefits schemes allowing gig workers to accumulate social security benefits across different platforms. Additionally, fostering skilling initiatives and promoting digital literacy can bridge the digital divide and empower more individuals to participate in the gig economy effectively.  Finding the right balance between fostering innovation and protecting workers' rights is critical here. Overly stringent regulations could stifle the growth of the gig economy itself. However, a complete lack of regulations could exacerbate the existing inequalities and leave gig workers exposed to rampant exploitation.  The path forward lies in collaboration. The government, platform companies, and worker unions can work together to develop a regulatory framework that fosters a thriving gig economy while ensuring fair treatment and social security for its participants. This will require ongoing research to understand the evolving nature of the gig economy and tailor regulations accordingly.  In one sense, the gig economy presents both opportunities and challenges for India. By implementing thoughtful regulations that prioritise both economic growth and worker welfare, India can harness the full potential of this new economic model while fostering a more inclusive and secure future for its workforce.  Employers have a wider range of applicants to choose from within the gig economy because they don’t have to hire someone based only on their proximity. Technology has developed to the point that it can either take the place of the jobs people previously had or allow people to work just as efficiently from home as they could in person. Economic reasons also factor into the development of a gig economy. Employers who cannot afford to hire full-time employees to do all the work that needs to be done will often hire part-time or temporary employees to take care of busier times or specific projects. On the employee’s side of the equation, people often find that they need to move or take multiple positions to afford the lifestyle they want. It’s also common to change careers many times during a lifetime, so the gig economy can be viewed as a reflection of this occurring on a large scale. The gig economy experienced significant increases in 2020 as gig workers delivered necessities to homebound consumers during the pandemic. Also, those whose jobs were eliminated turned to part-time and contract work for income post the pandemic.

Benefits, Challenges and Future Prospects of a Gig Economy: 

A.      Benefits of Gig Economy:                                                                                                                                             

1.      Flexibility and Independence: Gig workers enjoy greater flexibility and autonomy over their work schedules and choice of assignments. This flexibility allows individuals to balance personal and professional commitments more effectively, catering to diverse lifestyles and preferences.         

2.      Freedom and Autonomy: The gig economy opens up a plethora of job opportunities across various sectors such as information technology, creative industries, logistics, and service sectors. This diversity helps in reducing unemployment and underemployment, providing a means of livelihood for a broad spectrum of the population.

3.      Skill Utilisation and Development: Gig work often enables individuals to leverage their unique skills and talents that might not be utilised in traditional employment. Moreover, the need to remain competitive in the gig market encourages continuous learning and skill development, fostering a more skilled and adaptable workforce.

4.      Economic Contributions: By promoting entrepreneurship and self-employment, the gig economy can stimulate overall economic growth. It encourages innovation and the creation of new business models and services, contributing to economic dynamism all around.  

B. Challenges before the Gig Economy:                                                                                                                          

1.      Lack of Job Security and Benefits: Gig workers often face lack of job security and employment benefits such as health insurance, retirement plans, and paid leave. This can lead to financial instability and insecurity, especially during economic downturns or personal emergencies and income uncertainties. 

2.      Unlike salaried employees, gig workers will not have a consistent and predictable income. This variability can make their financial planning challenging and can result in periods of financial strain.

3.      Project-based nature of gig work means income is often unstable.  Workers may struggle to find work on a consistent basis, leading to financial instability and difficulty in planning for the future.                                                                                                                                                                         

4.      Unclear Legal Framework: The gig economy operates in a regulatory grey area in many countries, including India. The absence of clear regulations can lead to exploitation and unfair practices by employers and gig workers may also lack legal recourse in case of disputes.         

5.       Current labor laws don't adequately address the unique aspects of the gig economy. This ambiguity creates confusion regarding worker classification, rights, and dispute resolution mechanisms.                                                                                                                                                                          

6.      Social Security and Welfare: The current social security systems in India are primarily designed for traditional employment models. Gig workers often fall outside the ambit of these protections, leading to inadequate social security coverage and welfare support.        

C. Future Prospects of the Gig Economy:   

1.      Policy and Regulatory Framework: For the gig economy to thrive sustainably, there is a need for a robust policy and regulatory framework that protects the rights of gig workers while encouraging their urge for autonomy. Policies that ensure fair wages, job security, and social benefits will be crucial.  

2.      A large portion of the gig economy operates in the informal sector, making it difficult to track worker numbers, collect taxes, and offer government support programmes. Gig workers are largely excluded from traditional labor laws that results in no guaranteed minimum wage, paid leaves, health insurance or pensions for them. This creates financial insecurity and leaves them vulnerable during emergencies or slow periods.

3.      Technological Advancements: Advancements in technology will continue to drive the gig economy. Platforms that connect gig workers with employers will become more sophisticated, improving job matching, payment security, and dispute resolution mechanisms.  Limited access to technology and digital literacy can also exclude segments of the population, particularly in rural areas, from participating in the gig economy.                                                                                              

4.      Education and Training: Investing in education and training programs tailored to the needs of the gig economy will be essential. This includes digital literacy, financial planning, and sector-specific skills development, ensuring that workers are well-equipped to succeed in a gig-driven market.                                                                                                                                                                                     

5.      Corporate and Social Responsibility: Businesses participating in the gig economy must adopt responsible practices that ensure fair treatment and opportunities for gig workers. This includes transparent payment systems, clear contractual terms, and mechanisms for worker feedback and support.                                                                                                                                                                           

6.      Community and Networking: Building communities and networks among gig workers can provide support, share knowledge, and advocate for their rights. Platforms facilitating such communities can enhance the collective bargaining power and well-being of gig workers.

The New Gig Paradigm: The gig economy in India now presents a transformative shift in the employment paradigm offering flexibility and diverse opportunities while posing significant challenges in terms of job security and social protection as outlined above. The future of the gig economy will depend on the establishment of supportive policies, technological innovations, and a commitment to fair and inclusive practices. By addressing these challenges proactively, India can harness the full potential of the new economic model to drive economic growth and improve livelihoods of a large number of people.  Despite its benefits, there are still some downside to the gig economy. Competition has increased and the gig economy trend can make it harder for full-time employees to develop their careers, since temporary employees are often cheaper to hire and more flexible. Workers who prefer a stable, secure, and traditional career path are being crowded out in some industries.  The flexibility of working gigs can disrupt the work-life balance, sleep patterns, and activities of daily life. Flexibility often means that workers have to make themselves available anytime gigs come up regardless of their other needs. As such, they must always be on the hunt for the next gig. Unemployment insurance usually doesn’t cover gig workers who can’t find employment. Gig economy workers are more like entrepreneurs than traditional workers. While this may signal greater freedom of choice, it also means that the security of a steady job with regular pay, benefits—including a retirement account—and a daily routine are rapidly becoming a thing of the past.  Long-term relationships between workers, employers, clients, and vendors can erode. This can eliminate the benefits that flow from building long-term trust, customary practice, and familiarity with clients and employers. The gig economy may also discourage investment in relationship-specific assets that would otherwise be profitable to pursue, since no party has the incentive to invest significantly in a relationship that only lasts until the next gig comes along.

The Gig and the Macro Economy: Having assessed the benefits and challenges of the entry of a large number of gig workers in the economy the authority’s job is well cut out.  The government would be called upon to lay down ground rules for the smooth transition to the gig economy and later also to regulate it. This will in turn call for some key macroeconomic interventions like:

1. Social Security and Benefits Portability:  Create systems where gig workers can contribute towards social security benefits (health insurance, pensions, etc.) across different platforms. This provides portability across industries and attracts skilled workers.    Consider providing government subsidies to partially cover social security contributions for gig workers, especially those below a certain income threshold. This incentivises participation and reduces the financial burden of the gig workers.   

2. Skill Development and Training:  Government-industry partnerships will be required to foster collaboration between the government and gig platforms to develop targeted skill development programs relevant to the gig economy. This equips workers with in-demand skills and improves their employability.  Provide affordable digital literacy programs, particularly in rural areas, to bridge the digital divide and allow more people to access gig work opportunities.

 3. Regulatory Framework:  The first step in this direction is to establish clear guidelines for classifying gig workers, differentiating them from traditional employees. This will ensure fair treatment while avoiding stifling innovation and the gig workers much sought after autonomy. Setting up minimum wage standards based on skill levels and work types to prevent exploitation of gig workers and to ensure a basic level of income security for them would be required.  It will be necessary to create efficient and accessible dispute resolution mechanisms for gig workers to address grievances with platform companies.                                                                                    

4. Taxation and Formalisation:  It would be necessary to design a simplified tax filing system for gig workers, reducing the administrative burden and encouraging formalisation within the sector.  It may be necessary to extend tax benefits and incentives for platform companies that provide minimum wages, social security contributions, and training opportunities for their workers. This will go a long way towards promoting ethical practices.                                                                           

  5. Data Collection and Analysis:  Invest in collecting comprehensive data on the size, composition, and earnings of the gig workforce. This data is crucial for designing effective policies and programmes on a future date. Support research initiatives to understand the evolving nature of the gig economy in the Indian context. This allows for dynamic policy adjustments based on real-time data.

Future of Gig Economy: A set of Labour Codes is expected to be implemented immediately after the general elections. The Codes do contain certain salutary provisions to encourage and protect the gig workers.  Considering the concerns expressed elsewhere in this piece, adequate measures are required to be taken on the lines suggested here.  Economic prosperity of the country cannot be ensured through exploitation of any of the factors of production, especially labour.  In our anxiety to work around the unfair and inefficient contract labour system we should not end up with a system that would do more damage than good to all concerned.  By implementing the above macroeconomic measures, India can expect to foster a vibrant gig economy that is not just about economic growth but also about creating a secure and productive environment for our workforce.  In the process of generating work opportunities while addressing the concerns of the employers, the gig workers should not fall between two stools.

Thank you.

Venkat R Venkitachalam