Indian gig workers may finally be getting a fairer deal

Context: Uber’s recent announcement of new terms for drivers may prove revolutionary in the long history of labour relations, specifically wrt the Gig economy.

To work around the recurrent problem of drivers cancelling rides because they did not want to go to the destination or wanted a cash payment upfront rather than waiting for the company to reimburse them weekly, the cab hailing service is making that information available to drivers so that they can pick which rides to accept.

What are some recent issues faced by the Gig economy and the startup ecosystem?

First, poor working conditions and high fuel prices are making the retention of drivers and two-wheeler delivery personnel an uphill battle. Attrition at food delivery companies is estimated at around 40% every month.

Second, the US Federal Reserve’s accelerated rate hikes this year mean that funding might not come as easily as before. India’s low labour costs had made windfalls for startup founders even more dramatic. Unicorns were minted at rich-world valuations while the pay offered to ‘delivery partners’ stayed decidedly developing world. Last year, 40 new unicorns—companies with valuations of $1 billion or more—were created in India.

Is India’s startup growth slowing down, and why?

Yes.

As The Economic Times reported on 28 April, in March and April, “four unicorns were minted in India compared to 10 during the same period last year. So far this month, no new unicorn rounds have been announced, against eight new ones in April 2021.

Reasons:

The backdrop for this slowdown is a global bear market. At the start of the May, the S&P 500 and US government bonds have fallen simultaneously for five or more weeks consecutively.

What is the economic situation in India?

Large consumer goods companies are reducing the size of packages of biscuits and detergents or raising prices. As volume and margin growth slows, and interest rates rise, new investments will be postponed.

Core inflation, notably of medical services and education, has been there for some time now and has likely cut into middle class spending on goods.

The Centre’s continual hikes of taxes on petrol and diesel over the past couple of years may have been necessary to keep its fiscal deficit in check, but it has also acted as a consumption tax.

Markers of middle-class prosperity as sales of entry-level cars and two-wheelers are languishing.

India’s middle class has been shrinking for a few years. Last March, Pew estimated 32 million Indians had fallen out of the middle class during the pandemic, amid a global drop in the size of the middle class.

This year’s sharp rise in Indian inflation even before Russia’s invasion of Ukraine will have undermined the recovery in earning power for those working in restaurants and hotels, even as those industries continue to see a welcome rebound.

Way forward

India is set to face a 6%-plus inflation for the foreseeable future.

In the US, workers in labour-intensive industries are demanding and getting a better deal.

Thus, indexing petrol costs to payouts for gig economy drivers and delivery riders and giving them better working conditions marks a welcome socioeconomic shift, in India.

Source: This post is based on the article “Indian gig workers may finally be getting a fairer deal” published in Livemint on 26th May 22.