Rise of the 'gig' economy

Ashok Gehlot, the Congress chief minister of Rajasthan, is a man battling many odds. With assembly election looming large, he has to defend the state from political incursions by the rival Bharatiya Janata Party, led by Prime Minister Narendra Modi. He has to keep a wary eye on attempts by Sachin Pilot, his young rival in the party, to replace him. He has to also defend his record in office in the face of some recent signs of anti-incumbency.

Gehlot, however, hopes to overcome his troubles by pioneering a number of pro-people measures, backed by rights-based legislations ranging from the Right to Health Bill in 2022 to Rajasthan Minimum Guaranteed Income Bill, 2023 (upholding the right to work). He hopes that these interventions will help the Congress party in the upcoming Rajasthan polls.

Presenting the state budget in February, the Rajasthan government had announced many schemes and freebies, including the announcement to give smartphones to 13.5 million women in the state, 100 units of free electricity, free healthcare, free gas cylinders to the poor and scooters to 30,000 meritorious girl students.

How these freebies will impact the state fisc in the long run is already a matter of debate. “The CM has been showering freebies left, right and centre to secure another term,” said an Alwar-based businessman to Business India. “While he is giving free power to the poor, our factories are running under capacity due to power cuts.”

However, there is no denying the path-breaking elements in some of Gehlot’s agenda. The Rajasthan Platform-Based Gig Workers (Registration and Welfare) Act, 2023 (or RGW Act), in addition to a promised allocation of Rs200 crore to the Gig Workers Security & Welfare Fund, are two measures that have drawn praise.

This first-of-its-kind ground-breaking piece of legislation aims to establish a welfare board and a dedicated social security fund for platform-based gig workers in the state. The bill is a result of persistent campaign mounted by civil society pressure groups like MKSS (Mazdoor Kisan Shakti Sangathan), best known for its demand for the Right to Information Act (which grew out of the demand for minimum wages for workers) and workers’ unions like IFAT (Indian Federation of App-based Transport Workers). But can Gehlot set an example for other states and the Union government to follow?

The term ‘gig’ is borrowed from the music world in the West, where performers book ‘gigs’ that are single or short-term engagements at various venues. Gehlot may or may not know the origins of the term, but his move has surely enthused the state government of Karnataka, now also run by the Congress, to announce a seed fund of Rs3,000 crore for comprehensive accidental and life insurance coverage under a Gig Workers Welfare Board, as was promised in their recent election manifesto.

Such schemes are not unfamiliar – platform workers in the transport sector in Thailand and Malaysia, for instance, benefit from health and accident insurance as well as social security that is financed by a deduction of 2 per cent for every ride. In the US, the National Labour Relations Board recently issued a ruling that makes it easier for Uber and Lyft drivers, construction workers, home health aides and even strippers to organise and join unions. So far, the existing labour law in the US extended the right to unionise only to workers with employee status, excluding independent contractors. The new ruling broadens the factors considered in the federal government’s test for determining a worker’s status as an independent contractor or an employee.

In India, the Modi government passed the Code on Social Security (one of the four labour codes), which also allowed for some social security for gig workers with much ado, but the scheme only remains on paper without proper implementation.

In the limelight

Suddenly, gig workers who were ignored by successive governments at the Centre and in the states are in the limelight. They are also being seen as a political vote bank, give their sheer numbers. Apart from the Congress regimes of Rajasthan and Karnataka, BJP leaders are also jumping into the fray. So, when around 50 stores of food delivery company Zomato’s grocery unit BlinkIt (formerly Grofers) recently shut down in Delhi-NCR, as delivery workers stopped work as part of their demand for better wages, the BJP took up their cause.

The workers were also protesting against a new structure introduced by Zomato for riders that compensates them based on their effort. “BlinkIt management must implement old payment immediately,” said Kapil Mishra, a Delhi BJP leader. “Reduction from Rs25 per delivery to Rs10-15 is tantamount to cheating the employees”.

Recently, emboldened gig workers and their representative unions from across the country organised a protest at Delhi’s Jantar Mantar and formed a joint platform, called the National Co-ordination Committee on Gig Workers, to drive a united struggle. India’s traditional labour laws do not cover the growing fleet of gig workers who don’t have the benefits, which employees of companies get, like provident fund, minimum wage, pe-aid leave, health insurance and most of all job security. 

Growing, and how

India’s gig economy has been growing. The pandemic prompted multiple companies to adopt flexible work cultures like work from home (WFH) etc, with gig workers finding new opportunities in nearly every industry. If industry statistics are to be believed, India has over 15 million freelancers working on technology projects. According to ASSOCHAM, India’s gig economy is growing at a CAGR of 17 per cent. Nearly 60 per cent of tech industry organisations are now investing in gig workers and 97 per cent of these companies want to keep gig workers at their current level or hire more gig workers.

According to a recent Boston Consulting Group report, the gig economy has the potential to service up to 90 million jobs in India’s non-farm economy alone, transact over $250 billion in volume of work, and contribute an incremental 1.25 per cent to the GDP over the long term. Our gig economy workforce is also one of the largest contributors to the global gig workforce. This clearly shows the exploding importance of platform/ gig workers in the larger political economy of India as well as its electoral politics.

Prime Minister Narendra Modi must be aware that frustrated gig workers could coalesce into a new voting bloc and also influence the public mood, if more of them take to the streets to demand better treatment. “In one call, we can mobilise thousands of drivers and delivery boys to come out to the streets,” warns Shaik Salauddin, president, Telangana Gig & Platform Workers Union. “If millions of people are ignored the way it is happening, then surely. it will reflect in the polls.”

Gig employment

Employment in this segment is growing. The Niti Aayog expects 200 per cent growth in gig employment by 2030. The gig economy acts like a net for millions of unemployed youth (and elderly) to join this low-cost, low-investment labour market, in the hope of subsistence and ‘flexi-work’ offered by platforms like Ola, Uber, Swiggy, Zomato, Urban Company, Porter, Dunzo, BlinkIt and so on. These platforms call themselves ‘tech aggregators’/‘mediators’/‘facilitators’ and not employers and mis-classify these workers as ‘partners’ or ‘mini-entrepreneurs’ and not employees to evade all possible responsibility and accountability. 

Primarily, it is high unemployment and jobless growth that is compelling more and more workers to join this intensely informal employment sector that they later seek an escape from. Young people are turning to platform-based gig work because of three reasons – stagnation of real wages and the rising cost of urban living; the missing comprehensive social security in our country; and lack of dignified, decent, and secure work in urban areas. These intersecting vulnerabilities have forced (mostly young) people to work longer hours and perform multiple gigs, to survive, as they seek better, more regular employment.

White collar too

Interestingly, the demand for gig workers in white-collar jobs has risen recently. According to a report conducted by the CIEL group, a talent solutions provider, 55 per cent of the organisation has hired gig workers for their work. Notably, in some cases, the proportion of gig workers has reached as high as 20 per cent of their total workforce, suggesting a huge share of gig workers within these organisations.

“We are witnessing a paradigm shift in the world of work, with gig employment becoming increasingly popular among employers due to its advantages including cost-effectiveness, scalability and access to specialised skills,” says Aditya Narayan Mishra, MD & CEO, CIEL.

Not just organisations hiring gig workers, even individuals prefer to pursue gig work. The CIEL, which surveyed more than 400 organisations pan-India across sectors and 1,200+ white collar gig workers, mentioned that 38 per cent of gig workers choose such jobs due to ‘flexibility’ in working on different projects. “The allure of diverse assignments allows gig workers to continuously expand their skill set, gain valuable experience across various industries, and pursue their passion for diverse work opportunities,” says a CIEL report.

Growth drivers

There are other growth drivers effecting the gig economy as well. Over the last decade, the widespread use smartphones and the availability of high-speed internet has made it easier for workers and businesses to connect through though online platforms, facilitating the rise of the gig economy. The economic liberalisation policies followed by successive governments have facilitated this.

At top levels, the gig economy is particularly attractive for educated workers who are looking for flexible work arrangements that allow them to balance their personal and professional lives – but this is a minuscule minority. Then there is the demographic factor and unemployment. Besides, the rapid growth of e-commerce has led to a significant increase in demand for delivery and logistics services, which has in turn led to the growth of the gig economy in these sectors.

While the gig economy is growing rapidly in India, like the unorganised sector, it has become a major source of employment for a significant portion of the population. This indirectly helps the Modi government and acts as a safety valve, as jobs in the organised sector are hard to come by and Prime Minister Narendra Modi’s promise to create 20 million jobs a year remains elusive.

Addressing the challenges facing the unorganised sector will be crucial for ensuring the well-being and livelihoods of these workers. The government’s efforts to improve the situation in the unorganised sector, such as the National Policy for Informal Sector Workers and plans for a national floor level minimum wage are a step in the right direction but clearly more needs to be done in improving the lives of workers, if we are to compete with China.

Challenges ahead

The challenges confronting the gig workforce in India basically emanate from two areas which need to be urgently addressed:

Adequate protection: Although gig workers get minimum wages, they need certain legal protection, policies, and opportunities like other employees protected under labour laws. This can safeguard the rights of gig workers and help curb labour disputes. 

Health benefits and leaves: Gig economy platforms can provide health insurance benefits to their workers to ensure their well-being and safety. These include coverage for medical costs, hospitalisation, preventive care services such as regular health check-ups and vaccinations, as well as paid leaves for workers.

Of course, there are other factors in the gig economy, which can be addressed at a later stage, like the mode of employment arrangements, payment arrangements, costs, fairs, incentives, penalties and entry into and exit from this labour market, which are not wholly determined by the worker. The workers are often expected to obey and comply with rules and conditions often seen in formal job markets – such as wearing uniforms, carrying documents, and so on, and also adhering to the terms and targets set by these companies.

However, the fruits of formal employment do not accrue to them, such as decent work, fixed working hours and social security benefits. In fact, in cases of accidents or even violence at work as reported by some of these workers, instead of offering compensation or support, many of these companies have reportedly gone ahead and deleted the databases of the aggrieved workers.

Historic Act

It is in this context that the RGW Act 2023 is being hailed as a historic legislation with offerings like registration of all gig workers (and issuing unique IDs to each), registration of aggregators and primary employers; proposed monetary cess (less than 2 per cent and more than 1 per cent) levied on each platform-based transaction/duty to be contributed to the social security fund for the workers; provision of social security benefits to these workers (including accident and health insurance, maternity, gratuity, pension, EPF, ESIC, scholarships in consonance with existing schemes as prescribed); grievance redressal mechanism for the workers, regular consultations with trade unions working with platform workers, provisions for heavy penalties (up to Rs50 lakh) on non-complying aggregators and employers, among others. Moreover, the proposed welfare board is to comprise state officials, representatives of workers, aggregators and civil society, with at least one-third of the nominated members to be women.

Some of the issues being raised by unions around the Act are that no portion of the contributions to the fund should be deducted from the workers’ earnings, as they are already heavily distressed; and also, the formation of the board and rules should be done before the model code of conduct, so that elections and the results do not stall or delay the implementation process.

Other issues, such as the need for provisions on basic minimum earnings, as also capping of commission rates and deductions by companies, capping of maximum working hours, stopping illegal and arbitrary deactivation of workers’ IDs, data transparency, provisions for fuel and other inflation-adjusted fares and allowances in the RGW Act and Motor Vehicles Aggregator Rules 2023 etc, should be considered.

Dignified identity

Akriti Bhatia, founder, PAIGAM (People’s Association in Grassroots Action and Movements), feels that such legislation, if implemented well, will be the first step in giving a dignified identity and recognition to a ‘gig worker’, who can claim her/ his rights from the state, can hold the platform accountable, will have a representation in decision-making, and is not merely reduced to an ‘Ola driver’ or a ‘Swiggy delivery boy’.

Nitin Pai, co-founder, Takshashila Institution, a public policy research organisation, adds that the Rajasthan Act is clearly well-intentioned and creates an enabling statutory framework for gig worker welfare, but unless implemented on the basis of sound economic reasoning, can end up in failure or worse. The Act does well to focus on creating an inclusive governance structure and raising finances to support welfare objectives.

However, Pai feels that it is silent on the actual social security system architecture, the nuts and bolts of how the programme will work, and leaves the proposal’s design and implementation to the bureaucracy.

Single fund 

It is not that the legislation has not been criticised. The single biggest weakness is that it centralises welfare contributions into a single fund, administered by a government-appointed welfare board. Instead of empowering the individual worker, the Act empowers government officials and other members, who will comprise the board. This is a bad formula: unscrupulous officials will mis-spend it, while scrupulous ones will under-spend in the fear of mis-spending. How else does one explain that 44 per cent (Rs38,000 crore) of a similar fund for the welfare of building and construction workers sitting unused in governmental coffers? As experts point out, a centralised fund for gig worker welfare is a 19th century solution for a 21st century problem.

Social sector experts feel that a far better way would have been to channel money directly into individual gig worker welfare accounts. There is already a technology and financial infrastructure – in the form of Aadhaar and UPI – to make targeted welfare payments. Rajasthan should use this instead of duplicating efforts of creating new unique IDs and payment channels.

The welfare board should create individual accounts for the monthly transfer of funds into them. In addition to investing the capital under its management for long-term returns, this fund should be used to purchase group insurance -- life, term, health and accident – for its members. Also, it could help mitigate the effects of gig income volatility by enabling discounted micro-overdraft loans, using the Open Credit Enablement Network that has already been rolled out.

More criticism

There has also been criticism of the idea of extracting a 2 per cent cess from aggregators to finance the social security infrastructure. Social security is society’s obligation and cannot be transferred to private firms. It should rightfully be financed by the state’s exchequer, from the taxes that individuals and corporations already pay. It is desirable to get aggregators, employers and consumers to contribute too, but this must be through moral obligations, not tax liabilities. The government could offer matching grants to encourage voluntary contributions. 

Unfortunately, a climate of distrust between the BJP-run Union government and non-BJP state governments frustrates genuine co-operative federalism, when it is most required. The gig economy is national and works across state boundaries. A person delivering a parcel in Jaipur might be a seasonal migrant from Odisha, using an app owned by a Karnataka-based aggregator, picking up goods shipped by a Delhi-based seller, riding a vehicle rented from a Telangana-based company.

Rajasthan wants all aggregators to submit all transactions to its welfare board. Other states might follow suit. A gargantuan amount of data would wastefully, expensively and insecurely flow around government databases. 

As the gig economy multiplies, India needs a national, multi-contributor social security system that takes advantage of the pervasive digital public infrastructure that already exists. It is possible to create a system where pradhanmantri (PM) and mukhyamantri (CM) yojanas can add up to benefit the gig worker. Rajasthan’s move, it is felt, should not be seen as a Congress monopoly. It should galvanise the Union and state governments to put a new social security system in place now.

IS ‘GIG’ THE FUTURE? 

• According to a NITI Aayog 2022 report on the gig economy, the gig workforce has the potential to increase to 2.35 crore by 2030.

• In 2023, gig or contractual hiring is expected to increase to 9 per cent, on an average, of the total workforce hiring, as compared to 8 per cent recorded in 2022. The key sectors contributing to gig-workforce hiring will be automotive, engineering & manufacturing, GIC, and IT.

• If we consider the number of gig force workers in terms of expertise reported by NITI Aayog, 31 per cent of the workers are in low-skilled work and 47 per cent in medium-skilled work, while 22 per cent are in high-skilled work.

• Start-ups play a huge role in the unprecedented rise of gig economy workers, such as food delivery personnel and cab drivers, who are essential to the ecosystem’s operations.

• Participation in the gig economy is higher in developing countries (5-12 per cent) like India, compared to developed economies (1-4 per cent), affirms research by Boston Consulting Group. Most of the gig workers are employed in lower-income jobs such as deliveries, ridesharing, and wellness and care. 

PROS AND CONS

FOR

• The gig economy has many benefits for both the employee and employer. An employer has access to a wide range of talent that he can hire. If the talent proves to be less than acceptable, there is no contract to keep the employee on or issues of letting them go. When it becomes difficult to attract full-time workers, employers can hire from the gig economy.

• In addition, hiring gig workers can be more affordable as companies don’t have to pay for health insurance or other benefits. For employees, the gig economy’s benefits include having the option to do multiple jobs, work from anywhere depending on the specific job, freedom, and flexibility in their daily routine.

• It makes the people from tech-savvy and Internet-friendly thus aiding digital literacy. People who don’t use technological services such as the Internet may be left behind by the benefits of the gig economy. Cities tend to have the most highly developed services and are the most entrenched in the gig economy.

AGAINST

• While not all employers are inclined to hire contracted employees, the gig economy trend can make it harder for full-time employees to develop in their careers since temporary employees are often cheaper to hire and more flexible in their availability. Workers who prefer a traditional career path and the stability and security that come with it are being crowded out in some industries.

• Some workers find the flexibility of working gigs actually disrupting the work-life, sleep patterns and activities of daily life. Flexibility in a gig economy often means that workers have to make themselves available any time gigs come up, regardless of their other needs, and must always be on the hunt for the next gig. 

• The security of a steady job with regular pay, benefits – including provident fund – and a daily routine that has characterised work for generations becomes a thing of the past.