Gig economy: Good for companies, bad for workers

Gig economy is the latest toast of the industry, especially in the post-pandemic job crisis scenario in India. All its benefits, like flexibility in work, efficiency, additional income to impoverished population (particularly the jobless, women and students), improvement in productivity by “reducing idle and unproductive time”, a “new business model” for “the growing demand for on-demand staffing” etc. are being counted and listed.

On December 3, 2021, Dhanendra Kumar, former chairman of Competition Commission of India wrote: “As India moves towards its stated goal of becoming a $5 trillion economy by 2025, the gig economy will be a major building block in inclusively achieving the above goalpost, bridging the income and unemployment gap.”

In March 2021, Boston Consultancy Group (BCG) published a study “Unlocking the Potential of the Gig Economy in India” which said the Indian gig economy “has the potential to serve up to 90 million jobs in the non-farm sectors of India (around 30%) with the potential to add up to 1.25% to India's GDP through efficiency and productivity gains alone”.

Before the pandemic hit, industry association ASSOCHAM had released a background note in January 2020, which stated that “gig economy is firmly on its way to becoming a key part of India Inc’s strategy” since it was cost effective for companies to accommodate temporary workforce etc. and asked the government to “act as a facilitator” for its growth.

It has also been argued that India has had the world’s largest gig economy in any case, with more than 50% of its workers self-employed, and that the workforce is getting formalised with tech-enabled gig work platforms (like Ola, Uber, Zomato, Swiggy, Urban Company etc.) which is a “wonderful gift” to the Indian labour market.

Growing gig economy

ASSOCHAM estimated that India had 15 million gig workers before the pandemic hit. The numbers would have swelled as the two pandemic waves of 2020 and 2021 caused massive loss of jobs and businesses.

BCG provided three key statistics: (a) globally, over 200 million people are considered part of the gig workforce (b) participation in the gig economy is higher in developing economies (between 5-12%) than developed economies (1-4%) and (c) most gig jobs are in lower-income job-types such as deliveries, ride-sharing, micro-tasks, care and wellness.

Start-ups, including some of the celebrated unicorns like Ola, Uber, Zomato and Swiggy, have emerged as a major driver of the gig economy in India. They hire contractual freelancers in both skilled and unskilled jobs to reduce cost. Start-ups are also one of the largest suppliers of gig workers operating in over 100 cities. Such is the growth and demand for gig workers that Google launched its app, Kormo Jobs, in 2020 to supply to other firms in India.

Multinational corporations (MNCs) have taken to “flexi-hiring” (gig workers) to reduce operational expenses, both before and after the pandemic, contributing significantly to the gig economy in India. According to government agency India Brand Equity Foundation (IBEF), although 75% of these companies have less than 10% gig workers, the number is expected to rise significantly, particularly in the FMCG-Pharma, technology/BPO, services, manufacturing and banking, financial services and insurance (BFSI) sectors. The edTech sector is already riding on the gig revolution and employs more than 90,000 people. Companies are increasingly looking for gig workers in HR operations, customer support, marketing and sales, software development, IT support etc., it said.

With the growth of Amazon, Flipkart, Uber, Ola, Zomato, Swiggy, Urban Company, Big Basket, Grofers and many others in retail, technology, food and beverages, home services etc. India has emerged as one of the largest employers of gig workers in the world.

The IBEF also points out that many home-grown freelancing platforms such as Upwork, Truelancer and Guru provide access to high-skilled gig workers. The number of such platforms has increased from 80 in 2009 to 330 in 2021 and their clientele comprising of not just start-ups but also Fortune 500 companies. Such workers are not restricted to urban areas because of the pandemic-induced remote work patterns.

Why gig workers are not happy?

Those who celebrate gig work for high efficiency, high productivity and for bridging the income and employment gaps in India often ignore the wretched working conditions of gig workers, particularly at the lower end of the skill chain – abysmally low wages/income, no social security, no job security and poor working environment. That is why India is witnessing multiple protests from gig workers all over the country. A few examples will explain why.

In March 2021, Amazon India’s delivery boys and girls, ironically called “delivery partners”, declared a 24-hour strike in Hyderabad, Bengaluru, Pune and Delhi-NCR region to protest against the new policy as per which they would be paid ₹10 for delivery of small packages and ₹15 for deliveries through tempos – down from ₹35 until then. The protesting gig workers said this would bring their monthly income down to ₹10,000. Besides, if they don’t deliver on time, they work overtime.

In December 2021, dozens of women (gig workers) providing beauty services through gig company Urban Company went on a protest in Gurgaon against the new policies proposing a subscription scheme that requires them to make upfront payment and take up a minimum number of jobs each month, addition of new categories of gig workers and a discount scheme for customers. The protesting gig workers said these would hurt their earnings and reduce their flexibility. The company promptly sued the workers in the court for the protest, declaring it illegal and unlawful – a first of its kind lawsuit in India.

While it has been claimed that gig economy enables workers to earn extra money by taking on a ‘gig’ during leisure hours amid his/her primary job, a study by the People's Union for Democratic Rights (PUDR), carried out during September-November 2021 in Delhi-NCR region, showed that for most of the gig workers interviewed said this was their primary job. It also showed on average, Uber/Ola drivers take home a monthly income of ₹25,000 to ₹30,000, whereas the same is around ₹14,000 to ₹15000 for Swiggy/Zomato workers. During the 2020 pandemic lockdown, almost 90% of gig workers lost their income and by August 2020 as many as 90% were earning less than 60% of their pre-pandemic income on average.

This study also pointed out that the incentives offered by Ola and Uber to their gig drivers earlier were reduced significantly in 2017 and by Swiggy and Zomato to their riders in 2019.

In Hyderabad, where app-based transport started earlier than Delhi-NCR, Shaik Salauddin, national general secretary of the Indian Federation of App Based Transport Workers (IFAT), says monthly earnings of Ola/Uber drivers have fallen from an average of ₹30,000-40,000 in pre-pandemic period to ₹18,000-22,000 now. This has happened due to various reasons: fall in rides, withdrawal and/or expansion of ride-based and other incentives and bonuses, 25% commission on earnings paid by the drivers to Ola/Uber etc.

In line with Amazon’s delivery boys and girls, the earnings of others doing gig work for other platform, app-based companies have also gone down substantially about which there are anecdotal evidence, if not proper studies.

Advantage for companies, disadvantage for workers

Often it is forgotten that gig workers are temporary freelancers, who are informal/unorganised workers with no legal protection, job and social security and rights. The IFAT, the federation of app-based transport workers, has filed a PIL in the Supreme Court in December 2021 demanding social security for gig drivers, reminding the court that the new labour codes (laws) passed amidst the pandemic lockdown of 2020 promised this but haven’t delivered as these are yet to come into force (rules haven’t been notified yet).

Vague, opaque new laws

That the new labour codes are vague about social protections for unorganised workers is another matter.

The new Code on Social Security of 2020 replaced all existing laws on the subject. Gig workers find a place as unorganised sector workers in this code but the actual security cover remains vague. Section 109 of the code says the central and state governments “shall frame and notify, from time to time, suitable welfare schemes for unorganised workers”. The code doesn’t provide concrete plans, timeline and definitive funding architecture for any social security scheme – as against very specific provisions provided in the earlier laws that have been replaced with the code.

There is an element of inevitability to the growth of gig economy and gig workers in India going by the growing loss of jobs and businesses and the surge in MNCs and start-ups, including unicorns, driving their businesses on gig workers in a wide range of sectors that need both skilled and unskilled work. These companies work in organised/formal sector but run their businesses with a large presence of unorganised/informal gig workers.

Millions of Indians have lost jobs and businesses to the pre-pandemic slowdown and the pandemic shutdowns and are forced to take up low-paying gig work. But think of the consequences for the economy: abysmally low income, lack of social security and job protection for a growing multitude of gig workers will significantly reduce consumption demand in the economy, which will then slow down production of goods and services, make capital investment redundant and prevent growth.

The solutions are obvious: create more better-paying, secure jobs and better wages and social protections for gig and other unorganised workers who constitute the bulk of Indian workforce.