Gig Economy in India and the Issues faced by Gig Workers – Explained, pointwise

Introduction

The rapidly burgeoning gig workforce is ushering in a new economic revolution globally. India is at the frontier of this revolution with its demographic dividend of half-a-billion labour force and the world’s youngest population, rapid urbanisation, widespread adoption of smartphones and associated technology. The gig economy is poised to undergo rapid expansion in the coming decade. While the gig economy sector has several upsides with respect to growth and livelihood opportunities, there are some serious concerns that need regulation. NITI Aayog has released a report with comprehensive perspective and recommendations on the gig-platform economy in India. The recommendations can help address the concerns of gig workers in India.

What is Gig Economy and Gig Worker?

Gig Economy is the evolving economic model wherein the firms hire workers on a part-time flexible basis rather than as full time employees. The Code on Social Security, 2020 defines gig workers as those engaged in livelihoods outside traditional employer-employee relationship.

The workers work as freelancers or independent contractors. They generally have flexible and adaptable working hours based on individual preferences.

The jobs in gig economy typically require interacting with the users through online platforms e.g., the drivers engaged with cab hailing platforms (Uber, Ola etc.), delivery workers engaged with restaurant aggregators (Zomato, Swiggy etc.), or tutors delivering lectures over online platforms. The workers engaged in such jobs are called Gig Workers.

Gig Workers can be broadly classified into two categories — platform and non-platform-based workers. (a) Platform workers are those whose work is based on online software apps or digital platforms. (b) Non-platform gig workers are generally casual wage workers and own-account workers in the conventional sectors, working part-time or full time.

The Gig workers can also be classified on the basis of skills. These are high-skilled, medium-skilled and low-skilled workers. According to the NITI Aayog Report, at present, about 47% of the gig work is in medium-skilled jobs, about 22% in high-skilled jobs, and about 31% in low-skilled jobs. Trends show that the concentration of workers in medium skills is gradually declining and that in low skills and high skills is increasing.

According to a recent survey by a private firm, Quick Commerce, Healthtech, Fintech, and e-Commerce are the top sectors in the Indian gig economy. Within the gig workforce, work-from-home jobs account for 33% of the roles and 67% were on-field roles.

What is the size of Gig Economy in India?

According to NITI Aayog Report, India’s gig workforce currently stands at 77 lakh (2020-21). It is expected to rise to 2.35 crore by 2029-30. By 2029-30, gig workers will form 4.1% of India’s total workforce, rising from 1.5% in 2020-21. Currently 27 lakh gig workers (35% of gig workers) are engaged in retail trade and sale, while 13 lakh (17%) are engaged in transportation sector. There are 6 lakh workers (8%) in manufacturing and another 6 lakh (8%) in finance and insurance.

However, a report by the Boston Consulting Group expects India’s gig economy to rise to 90 million jobs (9 crore) in the next 8-10 years. Another industry report indicates that by 2024, more than 75% of the services industry will be staffed by gig workers. A report by Ernst and Young observed that Indian Freelancers hold a 24% share of the global online gig economy.

According to a report by ASSOCHAM (Associated Chambers of Commerce and Industry of India), the gig sector has the potential to grow to US$ 455 billion by 2024.

What are the advantages of Gig Economy?

Benefits to Gig Workers: Gig workers have the flexibility to work according to their convenience and availability. There are less restrictions related to fixed work-hours, attendance etc. Workers have some flexibility in choosing their work hours. Some workers take gig jobs on a part-time basis to supplement their income from regular jobs.

Cost Efficiencies for Companies: The companies are able to save costs on hiring full time employees. They are able to provide services more economically to the users.

Jobs for Low-skilled workers: Gig economy provides jobs to many low and semi-skilled workforce with minimum conditions.

Gain Experience: It enables the young undergraduates to gather valuable work-experience before joining formal employment.

Economical: Many gig workers work remotely and save costs (e.g., on office commute).

What are the disadvantages of Gig Economy?

Job Security: Most gig workers work on a day-to-day basis, and can be terminated from their jobs without any notice. Many gig workers were laid off during the pandemic.

Lack of Benefits: Gig workers have no social security benefits like ESI, PF or insurance. They have no paid leaves so failure to work means loss of wage. Gig/Platform workers are not covered in all the labour codes, specifically the ‘Code on Wages, 2019’ which prescribes minimum wages for various jobs. There is no wage regulation and the workers are at the mercy of aggregators.

Work Conditions: Most workers have to put in long hours of work in order to make the job viable. A large components of workers’ wages consists of incentive which coerces workers to work for long hours. This reduces the advantage of ‘flexible work’ in gig economy. There is lack of transparency on incentive structures.

Hidden Charges: Many aggregators/platforms are burning cash by giving large discounts to users in order to capture larger market share. Companies try to sustain this by charging high commissions on gig workers.

Low Bargaining Power: Platform workers have little or no voice. Technology has tilted the power and bargaining scales strongly in favour of the platform companies.

Platforms have multiple other issues like (a) Frequent and random changes to the commission structure, (b) Delays in payments, (c) Deliberate miscommunication of earnings potential to attract gig workers; (d) Lack of access to basic amenities.

What are the recommendations of the NITI Aayog Report?

The NITI Aayog Report, ‘India’s Booming Gig and Platform Economy‘ has analysed the gig economy from gig workers’ perspective and has made several recommendations.

Accelerating Access to Finance for Workers: Access to institutional credit may be enhanced through financial products specifically designed for platform workers and those interested to set-up their own platforms. FinTech and platform businesses may be leveraged to provide cash flow-based loans to workers.

Skill Development for Workers: Platform-led models of skilling and job creation need to be promoted for the gig and platform sector. Platforms can collaborate with the Ministry of Skill Development and Entrepreneurship, and the National Skill Development Corporation (NSDC) to nurture skilled workers and micro-entrepreneurship.

Transformational upskilling for workers presently engaged in the informal sector in trades such as construction, driving and other services can be undertaken. This will create avenues for horizontal and vertical mobility for workers to take up jobs in the gig and platform sector, empowering them to augment their earnings.

Platformization: A Platform India Initiative can be launched on the lines of Start-up India. The purpose would be to increase access to the platforms. This can be achieved by simplification and handholding, funding support and incentives, skill development, and social financial inclusion. The horizon of platforms can be broadened e.g., Self-employed individuals engaged in the business of selling regional and rural cuisine, street food, etc. may be linked to platforms.

Enhancing Social Inclusion: Gender Sensitisation and Accessibility Awareness Programmes for workers and their families should be undertaken. Platform businesses can undertake partnerships with Civil Society Organizations (CSOs) to enable different sections of workers such as women workers and PwDs to take up employment opportunities in the platform sector through skill development, access to finance and assets.

Platform businesses can create a more enabling environment for women and PwD workers through changes in the work-design and workplace facilities.

Extending Social Security: Platforms can offer paid leaves, and access to insurance along with pension and retirement benefits. Gig and platform firms may consider providing income support to workers. This will help in providing assured minimum earnings and social security from income loss in the wake of uncertainty or irregularity in work.

NITI Aayog has proposed RAISE Approach for operationalizing the Code on Social Security (CoSS), 2020.

What are the provisions for Gig Workers in the Code on Social Security 2020?

The Code on Social Security, 2020, gives a legal identity to the term ‘gig worker’. The Code defines gig worker as a person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer-employee relationship.

Chapter IX of the Code deals with Unorganized, Gig and Platform workers. Section 114 of the Code mentions that the Central Government may frame and notify suitable security schemes for the gig and platform workers.

The matters covered in the section 114 of the code are; (a) Life and Disability Cover; (b) Accident Insurance; (c) Health and maternity benefits; (d) Old age protection; (e) Creche; (f) Any other benefit determined by the Government.

The Code recommends that schemes  may be funded through a combination of contributions from Union and State governments, as well as gig platform aggregators.

The National Social Security Board will have oversight of the welfare of gig economy workers, and will include representatives of both aggregator companies and gig workers.

The Code also mandates that the Union government establish a Social Security Fund for gig economy workers.

What are the issues to be addressed in the Code?

The code should define the employee-gig worker relationship. The EU law determines this relationship in terms of levels of aggregator supervision. This could be a tricky exercise in India since there are many categories of self-employed workers who typically divide their time between multiple employers e.g., food delivery agents or cab aggregators.

There is a need to balance the benefits to gig workers against the cost advantages that platforms and aggregators derive from their low-cost business models.

There is no clarity on how the costs of social security will be distributed among stakeholders; the workers, the aggregators, Union and State Governments. The law lists various possibilities — Government contribution, a mix of Government and private sector money, Corporate Social Responsibility funds or even a 1 – 2% cess on revenues of these companies. The implementation process must be clarified and codified.

Another concern is the absence of redress for gig workers in the Code. Labour Courts exist, but they are expensive for ordinary workers to access. Instead, a responsive appeal institution needs to be created.

Why are platform companies reluctant to assign employee status to Gig workers?

If gig workers are classified as employees, platforms/aggregators will have higher operating costs and lower utilization of the workforce. To rectify, the platforms will have to cut down the number of employees, which will impact the customer experience by increasing service delivery time. The power of the platform model lies in the ability to deliver a great customer experience along with high operating efficiency by relying on gig workers. The whole business model will fail in absence of these cost efficiencies.

What is the way forward?

First, Platform companies should explore ways to ensure that every gig worker, irrespective of the number of hours put in every month, will be paid an equivalent living/minimum wages.

Second, Uber UK has committed to provide the national living wage, paid holiday time equivalent to about 12% of driver’s earnings along with a pension plan to its driver. Other companies can replicate this model.

Third, the provisions of Code on Social Security should be put into effect. However, the implementation should be undertaken in a gradual manner. Platform companies should be provided time to adjust their business to the new conditions that will increase their costs. NITI Aayog’s RAISE Approach can be adopted.

Conclusion

Gig Economy has the potential to create jobs for India’s large workforce, especially the low-skilled workers. The Government must take appropriate steps to support the expansion of gig economy and platforms. At the same time, the interests of the gig workers must be protected to provide them with just work conditions as well as social security benefits. Achieving the balance will need some effort from all stakeholders.

Source: The Hindu, Mint, Business Standard, NITI Aayog