Pandemic boosts gig economy, regulations struggle to keep up

Business Capstone COVID-19

The pandemic has forced many people to embrace gig work, making it more important than ever to codify and clarify the parameters of this new booming economy

Bengaluru: Before the pandemic hit, Manjula worked as a content creator, developing content for “smart-school” services for an ed-tech company. After the country went into lockdown in March 2020, she lost her job. Now she does the same job but for a different company almost every week.

Manjula is a gig worker.

The definition of “gig” work isn’t clearly laid out, but it broadly includes any income-earning activity that exists outside of a traditional employer-employee relationship. Over the last decade, participation in the gig economy has been growing. Platforms like Freelancer, Upwork, and more have provided marketplaces for professionals to market their services for close to a decade. 

Technologies like Slack and Zoom have existed for just as long. App-based gig platforms such as Ola, Zomato, and Swiggy have been fast-growing yet had remained relatively niche compared to the mainstream job market until the pandemic hit.

From a Zomato delivery agent to a web developer freelancing on Upwork, from Ola drivers to personal fitness trainers – the scope of gig work has expanded enormously, post Covid-19, to encompass a wide range of activities.

The pandemic has shaken up the country’s labor force and upended traditional employment, shifting the focus to gig economy jobs — or on-demand, part-time work given to contract workers. It has forced workers from mainstream jobs to pursue gig work for additional – or even primary – income during the pandemic. The reluctant adoption of these technologies and platforms has begun to blur the lines between freelancing and traditional employment.

Manjula had lost all hope at getting a job while her savings were depleting. She finally decided to listen to her former colleague’s advice and began to take up gig work.

“It’s easier to find task-based jobs than a full position right now,” she said. “The pay is more or less similar to my old job. But, it’s less stressful, more flexible.”

Manjula often works with clients abroad and has to work through the night when the rest of her family is sleeping.

“I don’t mind it, honestly,” she said. “I prefer this because I don’t have to travel every day. I can also take care of my children and stay close to my parents.”

The disruption caused by the pandemic has reset expectations and changed the fabric of work culture. With no choice but to embrace work from home, companies and employees have never been more willing to experiment.

Due to the pandemic, around 18 million Indian workers are expected to switch to newer occupations by 2030, according to a report by McKinsey Global Institute. At the same time, remote work is expected to be a more permanent fixture, with gig work and automation set to expand to fill in the gaps.

“A decade’s worth of change rushed through the industry in a span of a few months,” said Navkendar Singh, research director at IDC (International Data Group) India. “The industry has seen a structural shift. More and more companies are opening up to the idea of having a completely remote workforce. We expect the virtual and hybrid workforce to be the future standard across the industry.”

The most significant benefit of gig work is flexibility. Around 70 percent of gig workers said that they participated in gig work out of choice, before the pandemic as the work was more flexible and allowed them to earn additional income. The pandemic has afforded many “traditional jobs” the same luxury while also forcing many to join the gig economy out of necessity after losing their jobs.

The lockdown hit app-based gig companies hard initially, but these companies have managed to emerge from the economic fallout much better than other sectors of the economy. Not only has there been growth in the number of services on offer, but the most significant companies continue to hire people as more and more consumers are starting to use these services, often out of necessity.

A recent report by Boston Consulting Group (BCG) predicts that India’s gig economy could triple to 2.3 crores jobs within 3-4 years in the non-farm sector — from the current 8 million jobs. At the same time, the total number of gig jobs is predicted to be around nine crores within 8-10 years. The report also states that the gig economy could be worth over 1.25 percent of India’s total Gross Domestic Product (GDP) over the long term.

“Many large organisations tended to be overstaffed, especially in the IT sector, with scores of employees on a ‘bench’ at any given time,” said Krishna Kumar, former Human Resource executive at Concentrix India. “Organisations will not return to the same hiring processes and may stop hiring full-time employees. A pool of gig workers that can be hired on demand is much more cost-effective.”

“The increasing role of the gig economy was evident through the significant growth of online platform businesses during the pandemic-induced lockdown,” said Prof. Kaustuv Barik, professor of economics, Indira Gandhi National Open University. “The Covid-19 pandemic has led to loss of traditional jobs across both service and manufacturing sectors. On the other hand, it has also facilitated in the flourishing of platform businesses and the associated technology-enabled gig workforce.”

Beyond the growth: The Absence of Social Security 

While employment is changing, the policy to support it is yet to adapt to the change. Traditional employers are obligated to provide employees with certain benefits, such as health insurance, and abide by minimum wage and anti-discrimination laws. People working in the gig economy are usually not entitled to any of the benefits mentioned above. Often labeled as independent contractors, workers are usually paid as little as possible by companies.

India is known for having a large pool of informal workers, mostly youth from rural India who seek a better life in the country’s urban centers. Most of these informal “migrant workers” are employed in construction and other informal sectors of the economy. 

During the nation-wide lockdown, hundreds of thousands of migrant workers across the country were left without a means of livelihood, while they desperately tried to reach their hometown and villages. 

A World Economic Forum survey from early 2020 found that over 50 percent of gig workers had lost their jobs, while over 70 percent had little to no income and only 23 per cent had savings. Another survey by venture capital firm, Flourish Ventures revealed that nearly 90 percent of Indian gig workers lost income during the Covid-19 pandemic.

Despite the potential, India’s gig economy is still in its infancy. For a gig worker, the money it offers is attractive, but it offers none of the benefits that regular jobs offer— paid leaves, job security, limited working hours and insurance. Gig workers are often exploited as they have no guaranteed minimum wage and have little to no legal rights.

Krishna is a delivery partner with Zomato – India’s leading app-based food delivery startup, which at the time of writing is getting ready to go public. Hailing from a village near Mandya district, in rural Karnataka, he lost his job working as construction labourer after the pandemic hit. After spending eight months at his native place, struggling to find work, he got the gig at Zomato through a friend. 

“I’ve been working for Zomato for three months now, it’s much better than the last job I had. I get paid on time,” he said. Although he had to move Bengaluru from his native and rent a place shared with three other people, he makes just enough money every month to send back home. Yet, like many others working for delivery services, and in the wider informal labour sector have little to no awareness about social security and other benefits.

When asked how he feels about the lack of social security, he said he had no idea such a thing existed. Krishna previously worked odd jobs in the informal sector, mostly as a construction labourer, and says working with Zomato has been the best job he’s ever had. Despite the meagre pay for long working hours, many like Krishna are better off working as gig workers than they were before, working in the informal labour market.

This seems to benefit the ever growing number of App-based gig companies that are benefiting from the relatively cheap labour available to them. 

In early 2021, news broke that Amazon, a trillion-dollar company, used money that people had tipped its drivers to subsidize wages instead of paying them the national average. People were outraged by the revelations and promptly vented their disbelief and righteous anger on social media. The United States Federal Trade Commission announced that it had reached a deal with Amazon. The company agreed to pay the FTC $62 million in damages while promising to pay its drivers full pay with 100 percent of all customer’s tips.

Lack of Representation

In January last year, India witnessed one of the largest strikes in the world, when thousands of workers went on strike protesting the Indian government’s “pro-employer” legislation. The Bharat Bandh saw workers from various groups, from the banking sector, Anganwadi workers, ASHA workers, and domestic workers. But, workers under digital platforms had no representation in the bandh. 

Although gig workers have gone on protests asking for better wages, security, and stringent regulations over the years, the government has yet to formally recognize them as workers and hence entitled to minimum wage.

“Given the problems gig workers face, India needs to rethink its current labor laws to better protect them,” said Kaustuv Barik. “And promote an environment which ensures worker protections.”

So far, only scarce efforts have been made in policy, with Karnataka leading the way. Many delivery workers working for Zomato, Swiggy and more in Bengaluru are mostly migrants from different parts of the state and the country. Many of them spend long hours, every day, on the job just to earn the incentives in order to save enough to be able to send home money. None of them have any insurance or other social securities.

Last year, the Central government amended the Code on Social Securities (CSS) to include the definitions of workers under digital platforms. At the same time, the Union Ministry of Labour and Employment recommended setting up a board and a social security fund for the welfare of gig and platform workers following the recommendation of the parliamentary standing committee on labor.

During the budget announcement for FY 2021-22, India’s Finance Minister Nirmala Sitharaman announced measures that would extend social security benefits for workers in the gig economy.

“For the first time globally, social security benefits will extend to gig and platform workers. Minimum wages will apply to all categories of workers, and they will all be covered by the Employees State Insurance Corporation,” Sitharaman said in her budget speech.

Last year, the parliament introduced the draft Social Security Code, 2019, in the first step to provide social security to the unconventional workforce, operating outside employer-employee relationships. Among other provisions, it also directs companies that hire “contractors” such as ride-sharing services like Ola and Uber, food and grocery delivery services such as Zomato and Swiggy and ecommerce platforms that hire external contractors to deliver their goods such as Amazon to contribute up to two percent of their total annual turnover towards social security provisions for their workers. The benefits include disability and life insurance benefits, gratuity and provident fund contributions, accident cover, and more.

Currently under consideration by a Parliamentary Standing Committee on Labour, the draft lacks clarity in defining critical terms such as ‘aggregator’, ‘gig worker’, ‘platform work’, and ‘platform worker’. 

“Unlike the ABC test and EU Directive, employed in the United states and the European Union respectively, the Draft Code does not lay down any clear test or threshold to identify a ‘gig worker’,” said KL Sundar, a labour economist at Xavier School of Management. “The lack of clear definition may lead to problems, especially during implementation.”

Although the social security code is a step in the right direction, in its current form, it barely does anything for gig workers. If implemented without properly defining who a gig worker actually is, the regulations will most likely be interpreted by corporations to suit their needs. 

According to a recent report by Fair Work project, which monitors the working conditions of labour forces around the world, Indian platform workers have the worst working conditions of any country. The report says the most platform workers in the country are overworked, underpaid and tightly controlled by companies through constant surveillance. 

Furthermore, according to the report, India’s oversupply of labour allows companies to have little regard for their workers’ well-being. Zomato and Swiggy, two of the largest food delivery services in the country, have the highest employee turnover rate. On average, most people who join either of these companies either leave or are terminated after eight months.

With the pandemic ravaging the country’s informal labour market, more and more workers are expected to join the gig workforce in the near future. Hence, it is imperative that the draft regulations must be reworked to better define the booming gig economy, and provide a better future to the country’s vast workforce.