The Gig Economy in the Pandemic

While pandemic has destroyed jobs across segments, its impact on the gig economy in terms of fiscal and social deprivation is largely ignored.

What is Gig Economy?

The term “gig economy” was first used by Tina Brown the then editor of the New Yorker in 2009. It was essentially used for workers engaged n the knowledge-based economy pursuing “a bunch of free-floating projects, consultancies, and part-time bits and pieces while they transacted in a digital marketplace.” Since then it has caught on to describe a greater variety of labour market with short-term contracts or freelance work, instead of permanently employed workers.  

In fact, Ronal Coase, a Nobel laureate went as far as to predict the demise of traditional large companies in favour of gig workers if there are low costs (money or time) to a customer in the search for alternative suppliers who are small scale, can assure quality and enable easier contracting as compared to large firms. This was proven by the market success of gig platforms focussed on ride-sharing, economy hotel rooms, home deliveries etc. at the expense of big corporations.

What the gig economy companies, such as Uber, Airbnb, Lyft, Etsy or TaskRabbit, do is that they connect the worker and the consumer. They make it easier for workers to find a quick, temporary job (i.e., a gig), which can include any kind of work depending on the industry. 

The global gig economy generates $204B in gross volume, with transportation-based services (e.g., ride-sharing) making up 58 percent of this value, according to a survey by Mastercard. Gig workers are not employed solely by people either - companies also outsource tasks to already-trained workers, which also gives workers a chance to work for multiple companies in temporary positions. As per a report from the New York Times, Google employed 121,000 contract-based freelancers in its global operations in March 2019, compared to 102,000 full-time in-office employees. 

It is important to note one distinction here - freelancers can be seen as those who mostly associated themselves with companies that have an economic turnout themselves, while gig workers are those who are associated with companies who simply connect workers to customers - the companies don’t make any profit through any other means other than contracting employees. 

The fragility of Gig Economy Workers

The fragile situation of gig workers stands exposed by the pandemic.  Lacking the innate protection provided by traditional jobs-guaranteed regular wages, medical cover, insurance etc-they are an extremely vulnerable lot. Businesses like public transportation (Uber, Ola) are bleeding, and the victims are these workers. These human-based businesses depend on real people providing services from end to end. Work from home (WFH) is not a possibility for most in this segment.

What is disconcerting is that this segment involves huge numbers.  In India itself, close 1.5 million drivers work for platforms like Uber and Ola. As per a report published by Invest India, the share of the gig economy is as high as 25 percent in the services sector in the urban labour force in a total force that is over 35 million.  Before the pandemic, the industry body ASSOCHAN had estimated the growth rate for the gig economy at 17 percent annual to top at around $ 23 billion by 2023.

In the UK, gig work makes up for nearly 50 percent of the income of 35.7 percent gig workers in 2018. During the 2008 recession, gig economy steamrollers like Uber and Airbnb emerged and turned successful, but right now, the pandemic is defeating their business models. 

Mitigating Strategies

Not that all gig businesses have abandoned their workers; efforts have been made to protect them.  Swiggy and JustEat have advocated for “contactless deliveries” and have offered free medical consultation to its workers. Uber suspended pool rides in the US, India, and Canada, and offered financial assistance to workers in the event they test positive for the virus. There have also been tie-ups with other retailers to help keep the gig economy working -- with Flipkart, BigBasket and Spencer’s Retail to provide essentials to customers. Swiggy, Dunzo, and Amazon have also done the same. Possibly, a similar initiative and reorientation of business model could have been innovated to stem the migrant exodus from urban centres

Despite these moves, there has been an increased number of lay-offs. Out of the approximate 450 driver centres, Uber operates worldwide, 40% will shut down. Lyft Inc., the alternative to Uber in North America is said to be dismissing 17% of staff and reducing salaries. Airbnb Inc. has said that the company would be cutting a quarter of its workforce. Only recently, Swiggy announced that it would be laying off nearly 1,100 people in India while providing them with a few months of salary based on their tenure.

Reportedly the Indian government is seized of the matter and is ramping up plans to bring the gig workers and unorganised sectors within the ambit of social security schemes.

Redefining Labour Laws and Work

Lack of clarity in classification/definition of gig workers has led to their exclusion from the extended coverage of labour laws and protection.  The counter debate is that modern work realities demand labour laws to have greater flexibility and not be hidebound with moribund traditional definitions and classifications; there being no “one size fits all” solution industry-wise.

With the prevalence of the pandemic, workarounds must be found to keep people safe and employed and also to make money. This can be done by minimising contact between consumer and workers, providing safety equipment to workers, and ensuring some form of medical assistance in case they test positive.

Future in a Post COVID World

Ultimately, despite the havoc it has unleashed, the pandemic has given most digital platforms an opportunity to show that there is the long-term necessity of a flexible workforce. The cooperation between industries, such as Uber and Flipkart, shows how there can be an inherent support network in the gig economy itself, which can work towards providing for its workers and consumers.

Assessment

  • The pandemic could well be the turning point for the “gigification” of work.  Attracted by the prospects of savings in terms of direct and indirect costs that the gig economy offers, it could well become the normal in years to come.  However, since it has till date been more successful in the arena of knowledge work, there is a risk of over-reach and too much investment too early. The segment has to keep pace with the trends in a post-COVID economic environment. 
  • There are definitely marked advantages in the gig model, which makes it attractive for a post COVID world where capital would be hard to obtain.  If remote workers are going to be the new normal, then whether they are gig-based or full time is of no relevance. During the pandemic, many companies have successfully entrusted knowledge work to external contractors.
  • In the educational field, gig workers could be used as graders, teaching assistants or for pre-recorded online lectures.

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