Rise of the GIG Economy

Key Takeaways:

  1. The Gig Economy typically makes use of digital platforms to connect freelancers with clients or businesses for short-term contracts.
  2. It is fueled by startups such as Uber, Ola, and Swiggy by hiring independent employees for part-time work.
  3. During covid 19, the gig economy grew significantly as gig workers provided goods to homebound clients and people who had lost their jobs turned to part-time and contract labor for money.
  4. The global gig economy is predicted to increase from $204 billion in 2018 to $455 billion in 2023, representing a 17.4 per cent compound annual growth rate (CAGR).
  5. Though the Gig economy is becoming a new way of earning money, it excludes employee benefits that permanent employees get.

What is a Gig Economy?

The gig economy is the rise of a new free market under which organizations hire independent employees or freelancers for the short term instead of hiring full-time employees. Many people work in part-time or temporary jobs, or as independent contractors, in a gig economy. A gig economy results in cheaper, more efficient services for those willing to use them, such as Uber or Airbnb. People who do not use technical services like the Internet may miss out on the benefits of the gig economy. Tier I and Tier II cities have the most sophisticated services and are the most involved in the gig economy.

A gig is a broad category that includes a wide range of positions. Startups such as Ola, Uber, Zomato, and Swiggy have established themselves as the primary source of the Indian gig economy. Contract employees or freelancers, as opposed to fixing term employees or tenured teachers, including adjunct and part-time instructors. By recruiting more adjunct and part-time teachers, colleges and universities can save costs while also better matching instructors to academic needs. In India, there are presently about 15 million gig workers. The gig economy includes delivery boys, cleaners, consultants, bloggers, and others. These occupations are typically platform-enabled. Because the work is job-specific, workers on these platforms can work for more than one contractor. A food delivery driver can work for both Swiggy and Zomato while also driving for Uber. Similarly, aggregators may offer multiple types of services. Women are gaining ground, and the gig economy is improving gender economic equality. To get a wider perspective woman to make up the majority of workers in the food delivery industry in South East Asia and make up more than a third of the 15,000 users of the digital platform Souktel in the West Bank and Gaza territory, but comprise just 19 per cent of the region’s total labor force. There is no discrimination based on caste, religion, gender, or geography in the gig economy.

The gig economy has numerous advantages for both employees and employers. An employer has access to a diverse pool of talent from which to hire. If the talent turns out to be less than satisfactory, there is no commitment to keep the employee or concerns about letting them go. Furthermore, in a period when it is difficult to find full-time labor, firms might hire from the gig economy. Furthermore, hiring gig workers might be less expensive because employers do not have to pay for health insurance or other perks. The perks of the gig economy for employees include the ability to work many jobs, work from anywhere depending on the specific job, freedom, and flexibility in their daily routine. It is worthwhile for those who work in the gig economy. According to studies, 79 per cent of those who work in the gig economy are happier than those who engage in traditional occupations.

How does it function?

“A gig worker is a person who performs work or engages in work arrangements and earns from such activities, outside of the typical employer-employee relationship,” according to the Code on Social Security, 2020 (India).

In the lack of middlemen, the poll found that digital platforms played a significant role in connecting job searchers and employment providers. The world is already on its way to building a gig economy, with predictions indicating that as of 2023, up to one-third of the working population will be working for the same. Experts predict that this number will grow as these professions promote independent contracting work, with many not requiring a freelancer to come into an office. Gig workers are far more likely to work part-time and from home. 

Employers also have a broader pool of candidates to pick from because they are not required to choose someone based on their location. Furthermore, computers have advanced to the point that they can either replace people’s former professions or allow individuals to work just as efficiently from home as they could in person. People working remotely or from home are becoming more common in today’s digital age. During the 2020 crisis, this trend accelerated.

Economic considerations also play a role in the growth of the gig economy. Employers who cannot afford to recruit full-time staff to accomplish all of the necessary work may frequently hire part-time or temporary employees to handle busier periods or specific projects. On the employee side of the equation, people frequently discover that they must relocate or take multiple occupations to finance the lifestyle they desire. It’s also normal for people to change occupations several times over their lives, thus the gig economy might be considered a large-scale representation of this.

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Growth in the near future:

In 2020, the gig economy grew significantly as gig workers provided goods to homebound clients and people who had lost their jobs turned to part-time and contract labor for money. Employers will need to prepare for changes in the workplace, particularly in the gig economy, once the crisis is over. Companies like Tesla already faced backlash from their employees when they were asked to join their respective workplaces because they preferred to work from home.

Gig workers are independent contractors, online platform employees, contract company employees, on-call employees, and temporary employees. According to the India Staffing Federation study (2019), India is the world’s fifth-largest Flexi-staffing market, trailing only the United States, China, Brazil, and Japan. According to a Boston Consulting Group report, nearly 15 million workers in India are working as gig workers across industries. The figure is expected to climb by more than 24 million in the short term and by 90 million in the long run.

According to ASSOCHAM research, the gig economy has the potential to grow to $455 billion by 2024 at a compound annual growth rate (CAGR) of 17%. The Indian gig economy has the potential to add 1.25 per cent to the Indian GDP and create over 90 million employments in India’s non-farm industries. “The changing character of work with the shift in technology, the creation of new economic activities, innovation in organizational structures, and expanding business models have grown the potential of the gig economy,” according to the Economic Survey 2020-21.

The global gig economy is predicted to increase from $204 billion in 2018 to $455 billion in 2023, representing a 17.4 per cent compound annual growth rate (CAGR). The number of freelance workers in the Western World is gradually increasing. For example, the number of freelancers in the United States is expected to increase from 57 to 86 million by 2027, while the UK’s gig economy workforce more than doubled from 2016 to 2019, accounting for 4.7 million workers. The global average hourly rate for freelancers is $21 which is roughly 1600 INR.  The number of high-earning freelancers in the United States (reported income of more than $100,000) is increasing year after year, and it now stands at 3.1 million persons (20 per cent of the workforce).

Hurdles for the gig economy:

Despite its benefits, the gig economy has significant drawbacks. While not all businesses want to recruit contract workers, the gig economy trend can make it more difficult for full-time employees to advance in their careers because temporary workers are generally less expensive to acquire and more flexible in their availability. In other businesses, workers who desire a traditional career path and the stability and security that comes with it are being pushed out. For some employees, the flexibility of working gigs can disturb the work-life balance, sleep patterns, and everyday routines. In a gig economy, flexibility generally implies that workers must be accessible whenever gigs arise, regardless of their other obligations, and must continually be on the lookout for new opportunities. Competition for gigs has also increased. Furthermore, unemployment insurance often does not cover gig workers who are unable to find a job.

Workers in the gig economy are, in effect, more like entrepreneurs than regular workers. While this may imply more flexibility for the individual worker, it also implies that the stability of permanent employment with a regular salary, benefits, and a daily routine that has characterized work for decades is swiftly becoming a thing of the past. Gig workers are more concerned about their finances: 45 per cent of full-time gig workers had a high Economic Anxiety Index score, compared to 24 per cent of regular full-time employees. Freelancers are generally concerned about their working conditions: 54 per cent of gig workers do not have access to employer-based benefits. According to the 2019 Pay Code, all organized and unorganized sectors, including gig workers, should receive a universal minimum wage and floor wage

Finally, the fluid nature of gig economy transactions and relationships can damage long-term ties between employees, employers, clients, and vendors. This can negate the advantages of long-term trust, conventional practice, and familiarity with clients and employers. It may also deter investment in relationship-specific assets that would otherwise be beneficial to pursue because no side has an incentive to spend heavily in a relationship that would only survive until the next contract comes along. Opportunities in the gig economy are ones that people discover and access through internet platforms that offer such jobs. These are frequently one-time or contract work. Driving for a ride-sharing service, painting someone’s house, freelancing job, coaching, fitness training, and tutoring are examples. There are no further benefits, such as health insurance, and the work is exchanged for cash. The majority of full-time freelancers in the United States are unprepared for an unexpected financial crisis, with 80 per cent indicating that a $1,000 unexpected bill would be difficult to pay.

What are the legal issues?

In the US, gig workers are recognized as a new occupational category under the 2020 Social Security Code. However, there are a few issues with the law, since even though gig workers are now eligible for benefits such as maternity benefits, life and disability insurance, old age protection, provident fund, employment injury compensation, and so on. The eligibility does not guarantee that workers would receive the benefits mentioned. The gig economy is not without flaws. Upholding labor rights in the gig economy presents significant issues. Standard employee contracts do not cover gig workers. There is little room for compassion for personnel who fail to complete their duties due to factors such as illness or a general economic crisis that reduces business. Because of the commoditization of labor, gig workers are exposed to fluctuations in demand. The lack of social security complicates matters for gig workers. Those who regard gigs to be their full-time job are not even employees of the company, therefore they do not receive any of the company’s other perks, such as health insurance, paid time off, family leave protection, and so on. In 2018, the California Supreme Court issued a landmark decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, enacting a new law (later popularly known as Assembly Bill) requiring companies (such as Uber and Lyft) to consider and treat their workers as employees rather than merely as ‘independent contractors.

According to the test (dubbed the ABC test), a worker is presumed to be an employee unless the employer can demonstrate that it has met three distinct requirements: (a) the work is free from the hirer’s direction or control in relation to the performance of its work; (b) the worker does work that is outside the usual course of the hiring entity’s business; and (c) the worker is customarily involved in an independently established trade, business, or profession. Even though California was the first state to strive to strengthen the rights of gig workers, it appears that this reform has given businesses more say than the gig employees were expected to have.

Furthermore, there are no rules in place to prevent firms from conspiring to exploit both labor and consumers. Recently, the Competition Commission of India ordered an investigation against Swiggy and Zomato for unfair trading practices. Also, on the consumer side, data privacy policies must be developed and implemented. In today’s digital age, a massive amount of data about individuals and their activities collected by platforms is bundled and sold to other companies without the users’ consent. A market can be developed in which, for example, users are offered discounts on online platforms in exchange for agreeing to sell their data. Furthermore, major corporations such as Facebook and Netflix and Google, for example, have no social obligations and continue to pump money into the growth of their respective companies to please their shareholders. These firms rarely make an effort to reach out to particular governments to implement any social clause. Individual governments can combat rising income disparity by making taxation necessary and reinvesting the proceeds in public services.

To conclude according to the studies, the most prevalent reasons for working for gig economy platforms include earning more money and having more work freedom, overall, most gig workers are content with their jobs, and working for gig economy platforms appears to reflect that most are voluntary decisions rather than a lack of other possibilities. However, a sizable proportion of platform workers use platforms because they are unable to find work as dependent employees. Public policymakers face the challenge of keeping everyone satisfied in the gig economy. There are many obstacles to the gig economy to work fluently, but they are not unsolvable. 

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Sanchit Kelkar

Content writer

Oshi Jain

Graphic designer

Swathi

Editor 

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