A gig economy is a labour market that heavily relies on temporary and part-time job positions, which are often filled by independent contractors and freelancers rather than traditional full-time permanent employees.
In the gig economy, workers do enjoy a certain level of flexibility and independence, but they often need more job security. Many employers find cost savings in this arrangement by not providing benefits such as health coverage or paid vacation time. Some do offer limited benefits to gig workers, but they often outsource benefits programs and other administrative tasks to external agencies. According to a report by Boston Consulting Group, India’s gig workforce encompasses approximately 15 million individuals employed across various sectors, including software, shared services, and professional services.
In a 2019 report published by the India Staffing Federation, India was recognized as the fifth-largest contributor to the global flexi-staffing market, ranking just behind the United States, China, Brazil, and Japan. This signifies the significant presence and impact of India’s gig economy on the world stage.
Who’s the part of gig Economy
The gig economy is a diverse ecosystem comprising companies, workers, and consumers, with various types of gig workers contributing to its dynamism. These workers encompass:
- Freelancers: Individuals compensated on a per-task basis, offering specialized skills and services.
- Independent Contractors: Workers engaged in projects and compensated based on contractual agreements, often moving from one contract to another.
- Project-Based Workers: Professionals remunerated for their contributions to specific projects, reflecting their expertise and dedication.
- Temporary Hires: Individuals employed for predefined durations, contributing their skills and efforts during these fixed time frames.
- Part-Time Workers: Those who engage in work for less than full-time hours, providing valuable contributions while retaining flexibility.
The gig economy serves as an appealing alternative for consumers seeking convenience, enhanced services, or both, compared to traditional commercial products and industries. Notable examples include ride-hailing platforms like Ola and food delivery services such as Zomato. This diversity within the gig economy caters to the evolving needs and preferences of both workers and consumers.
Impacts on India’s gig Economy during COVID-19
Certainly, the COVID-19 pandemic has had significant impacts on India’s gig economy, reshaping the landscape in various ways:
- Increased Demand for Gig Workers: The pandemic accelerated the digital transformation of businesses, leading to a surge in demand for gig workers. Sectors like online delivery, customer support, and software development witnessed heightened opportunities as companies adapted to remote work setups.
- Reduced Demand in Specific Sectors: Conversely, certain segments of the gig economy, such as ride-hailing and travel services, experienced a substantial decline in demand due to lockdowns and travel restrictions. This downturn resulted in income loss for gig workers associated with these sectors.
- Uncertainty and Job Insecurity: The pandemic introduced a sense of uncertainty and job insecurity among gig workers. Many faced job losses or significant income reductions, making it challenging to cover expenses and plan for the future.
- Health and Safety Risks: Gig workers, particularly those in delivery and transportation roles, faced heightened health and safety risks during the pandemic. Extended work hours and interactions with numerous people increased exposure to potential health hazards.
The Indian government has taken steps to support gig workers in these challenging times, including the launch of social security schemes. However, further measures are needed to safeguard their rights and welfare:
- Expanded Social Security Schemes: Extending the coverage of social security schemes would offer financial support to gig workers during periods of unemployment, illness, or injury.
- Establishment of Minimum Wage: Implementing a minimum wage for gig workers ensures fair compensation for their services, addressing income disparities.
- Health and Safety Regulations: Enforcing health and safety regulations tailored to the gig economy safeguards workers from occupational hazards and ensures their well-being.
- Collective Bargaining Rights: Granting gig workers the right to engage in collective bargaining empowers them to negotiate improved wages and working conditions with employers.
The gig economy holds great potential for economic growth and job creation in India. However, prioritizing the protection and support of gig workers is paramount. Through these measures, the Indian government can foster a more equitable and secure gig economy that benefits all stakeholders.
Code on Social Security 2020
The Code on Social Security, 2020 stands as a transformative legislation in India, consolidating and amending nine existing social security laws. Its primary objective is to establish comprehensive social security coverage that encompasses all workers, notably gig workers and platform workers.
This landmark Code introduces several innovative elements, including:
- Universal Coverage: The Code breaks down barriers by extending social security coverage to all workers, regardless of their employment nature or industry. Gig workers, platform workers, and those in the unorganized sector are all included.
- Portability of Benefits: A noteworthy feature is the provision for the portability of social security benefits. Workers can now seamlessly retain their entitlements when changing jobs or sectors.
- Streamlined Administration: To enhance efficiency, the Code centralizes the administration of social security schemes under a single Social Security Authority.
Though the implementation of the Code is in its nascent stages, its potential to revolutionize social security in India is evident. By offering comprehensive coverage and benefit portability, the Code holds promise in enhancing the quality of life for millions of workers and their families.
Here are some of the key advantages of the Code on Social Security, 2020:
- Financial Security: The Code provides a safety net, ensuring financial security for workers in situations of unemployment, illness, or death.
- Enhanced Health and Well-being: Access to healthcare and related benefits contributes to improved health and overall well-being for workers.
- Poverty and Inequality Reduction: By establishing a robust safety net, the Code plays a role in mitigating poverty and reducing inequality among workers and their families.
- Economic Growth: Improved worker well-being and productivity can stimulate economic growth, benefitting both individuals and the nation.
The Code on Social Security, 2020 signifies a significant stride in the government’s commitment to extend social security to all Indian workers. It embodies progressive principles and has the potential to positively impact the lives of millions, fostering a more inclusive and secure society.
Some best example of gig economy management
1. Private sector best practices
Companies are actively implementing best practices to effectively manage the gig economy, ensuring seamless operations and a positive experience for both workers and customers. Here’s a look at how some prominent companies are incorporating these practices:
Upwork: Upwork operates as a platform bridging freelancers with clients. To streamline gig economy management, Upwork offers a comprehensive set of tools and services. These include robust time tracking mechanisms, secure payment processing solutions, and efficient dispute resolution processes. These features empower freelancers and clients to collaborate efficiently while maintaining transparency and trust.
Fiverr: Fiverr is another platform connecting freelancers with clients, known for its unique pricing structure, starting all services at $5. To manage the gig economy effectively, Fiverr provides essential features like escrow payments, where funds are held securely until services are completed to satisfaction. Additionally, buyer reviews play a crucial role in maintaining quality and reliability within the platform.
Uber: Uber, a renowned ride-hailing company, relies on gig workers to provide transportation services to customers. To manage this dynamic gig workforce, Uber has introduced several best practices. Driver ratings and feedback mechanisms help maintain service quality, while insurance coverage ensures the safety and security of both drivers and passengers. Rigorous background checks further contribute to a trustworthy and reliable gig workforce.
Instacart: Instacart specializes in grocery delivery services facilitated by gig workers. To optimize gig workforce management, Instacart offers features such as real-time order tracking, responsive customer support, and driver ratings. These elements enhance the overall customer experience and contribute to the efficient functioning of the gig economy within the grocery delivery sector.
2. Government’s best practices
United Kingdom: In a landmark decision, the UK Supreme Court ruled that Uber drivers should be classified as ‘workers’ under the UK Employment Rights Act 1996. This classification granted Uber drivers certain employment rights, including the right to receive the national minimum wage and paid holidays. The decision marked a pivotal moment in recognizing the employment status of gig workers in the UK.
Germany: The Temporary Employment Act in Germany has been instrumental in ensuring equal pay and equal treatment for gig workers. This legislation aims to prevent wage disparities and discrimination by requiring that gig workers receive remuneration and benefits on par with regular employees. Germany’s approach reflects a commitment to fairness and equity within the gig economy.
Singapore: Singapore is proactively addressing the rights and welfare of gig workers through proposed legislative changes. These changes seek to extend work injury insurance and pension coverage to gig workers, providing them with crucial financial protection and retirement benefits. By taking such steps, Singapore demonstrates a commitment to ensuring the well-being of its gig workforce.
United Kingdom: In the United Kingdom, the government has implemented several initiatives to bolster the gig economy. These include tax incentives for companies that hire gig workers and specialized training programs aimed at upskilling gig workers. Additionally, a dedicated task force has been established to comprehensively examine the gig economy and propose strategies for its sustenance and growth.
United States: While the United States has offered some guidance on classifying gig workers as either independent contractors or employees, there remains room for further support. The US government can enhance its backing of the gig economy by introducing tax incentives and extending social security benefits to gig workers. These measures would contribute to the economic stability of gig workers.
India: India has made significant strides in supporting the gig economy through the introduction of the Code on Social Security 2020. This legislation ensures that social security coverage is accessible to all workers, including those in the gig economy. Moreover, India is actively developing training programs to enhance the skills of gig workers and fostering a more conducive regulatory framework for the gig sector’s growth.
UPSC Mains Question
Q. Analyse how development of gig economy can affect inclusive growth. What suggestions do u have to improve both efficiency and equity with this development
A gig economy is one in which the production relation between workers and employers is contractual and temporary—for example, drivers working for Uber or carriers for Amazon, etc. The rise of the gig economy is a major result of the 4th Industrial Revolution. The Indian market has also seen its growth in the recent past.
It has an efficiency advantage, they are
- flexibility in the deployment of the workforce
- cost-effective hiring for firms
- improved and decentralised delivery mechanism
- flexibility of work hours for employees
- choice of type of job for a worker
- no constraint on the factory floor
However, the distributional impact could be better because Social Security is minimised, training by firms is less, worker turnover is high, fluctuations in employment are more, and there is no scope for contract support due to the poor bargaining power of workers.
There can be steps taken to improve these; they are - taxing the beneficiary firms and using it to formulate a Social Security fund for pension, unemployment allowance, basic income, etc
- provision of public support for training and employment
- developing portals for seamless information regarding opportunities, redeployment and connecting to the factory floor
- diversify training methods to make workers capable of fitting in multiple jobs.
- legislation to protect contracts protecting benefits of both employees and employer
Therefore, the challenges of the gig economy must be tackled through market, administrative and legislative reforms with social security support to get both efficiency and distributional benefits and provide stable growth to the economy.
