Baba’s Explainer – Niti Aayog’s report on India’s gig economy

  • IASbaba
  • July 15, 2022
  • 0
Economics, Governance
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  • GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
  • GS-3: Indian Economy & challenges

Context: In a report titled ‘India’s Booming Gig and Platform Economy’, government think-tank Niti Aayog has made suggestions on Gig Economy.

What is Gig Economy?
  • A gig economy is a free market system in which organisations hire or contract workers for a short span of time. Simply put, the positions are temporary to meet the company’s requirements by having short-term engagements.
  • According to the Code on Social Security, 2020 (India), “A gig worker is a person who performs work or participates in work arrangements and earns from such activities, outside of the traditional employer-employee relationship.”
  • Gig workers can be broadly classified into platform and non-platform-based workers.
    • Platform workers are those whose work is based on online software apps or digital platforms.
    • Non-platform gig workers are generally casual wage workers and own-account workers in the conventional sectors, working part-time or full time.
What is the significance of Gig Economy for India’s overall Economic growth?
  • With a population of over 1.3 billion people, the majority of whom are under the age of 35, India requires the development of a “gig economy” to provide large-scale employment for a semi-skilled and unskilled workforce.
    • At present, about 47 per cent of the gig work is in medium skilled jobs, about 22 per cent in high skilled, and about 31 per cent in low skilled jobs.
  • According to the Economic Survey 2020-21, “the changing nature work with the change in technology, the evolution of new economic activities, innovation in organisation structures and evolving business models have grown the potential of the gig economy.”
    • The survey also stated that digital platforms played a significant role in discovering job seekers and job providers in the absence of middlemen.
  • According to the Boston Consulting Group’s report, in India, over 15 million workers are employed as gig workers across the industries. The number is projected to rise by over 24 million in the near-medium term and to 90 million in the long term.
  • An ASSOCHAM report reveals, that the gig sector has the potential to grow to the US $455 billion at a Compound Annual Growth Rate (CAGR) of 17% by 2024.
  • The Indian gig economy has the potential to add 25% to the Indian Gross Domestic Product (GDP) and provide over 90 million jobs in the non-farm sectors of India.
  • While in 2020-21, the gig workforce constituted 2.6% of the non-agricultural workforce or 1.5% of the total workforce in India, by 2029-30, gig workers are expected to form 6.7% of the non-agricultural workforce or 4.1% of the total livelihood workforce in India
What are the benefits of the Gig Economy?
  • Beneficial for Worker: Workers get to choose where, when and what they’ll work on
    • When you’re working in the gig economy you can decide the jobs you’re applying to or taking, which platforms you’re joining, where you’re working from and under what schedule.
  • Beneficial for firms: In a gig economy, organizations can reduce their costs with both time and money.
    • Companies aren’t hiring someone for a long period and with all the privileges of a fixed-term employee (like paid vacations or health insurance, as is the case in some countries). This allows them not only to save money but also to get the best person on board for a short time.
    • Furthermore, businesses also save time with long recruitment and selection processes. This allows them to be more agile and better respond to the market’s unpredictabilities.
  • Beneficial for Consumers: With the gig economy consumers get instantly gratified and the economy grows
    • Thanks to firms that are based on gig workers, transactions costs for consumers are lower, all types of products are delivered everywhere, almost at any time, and the idea of convenience is now at a whole new level.
  • Benefits for overall Economy: From a macroeconomic perspective, independent work brings many benefits too as it increases labor force participation and the number of hours worked in the economy.
    • Jobs from the gig economy are an extraordinary opportunity to lift up the unemployed and thus addresses the unemployment problem in an economy.
    • At the same time, they allow people to specialize in what they do best, making them feel more engaged and ultimately raising their productivity.
    • So from a point of view of artists or creatives starting a career, it’s a good way to making a living while dedicating time to make their art and build up a career.
What are the challenges or concerns with Gig Economy?

The benefits of the gig economy are decentralized and affect different actors, from workers to businesses and consumers. However, when it comes to its disadvantages, they rely mostly on workers.

  • Less social protection and no more perks in the gig economy
    • Traditional jobs often provide employees with a lot of protections and perks like bonuses, paid holidays, insurance, travel and housing allowances, and provident fund savings
    • However, independent workers don’t benefit from any of this as they’re just performing temporary works. They need to handle their own retirement plan and health insurance and use their own car and fuel.
    • Moreover, paid vacations or sick days are over. Independent workers are paid per assignment and they’ll only get all their money once the job is over and delivered. So if they’re not working, they’re not being paid.
  • Poor Service Conditions
    • Low wages, bait-and-switch incentives, Opaque payout calculations, commission deductions, and constant surveillance on aggregator platforms have all contributed to massive demonstrations by gig workers against the aggregators’ service conditions.
  • Burden on skilling
    • A worker must be sufficiently skilled. Unless a person is exceptionally gifted, his bargaining power is bound to be limited.
    • A gig-economy employee will have to upgrade his skills on his own at his own cost While companies routinely invest in training employees.
    • Lack of possibility for upward mobility within an organisation has triggered protests from workers at companies like Swiggy, Zomato, Ola, Uber etc.
  • Outdated Regulatory Framework
    • It is largely unregulated which results in less job security and nominal benefits. In another word, it is an extension of India’s informal or unorganised labour, which is yet to be reformed by the government
    • India has protected workers through heavy-handed industrial regulation and labour laws, which suit the factory floor. They are irrelevant, insufficient, and ineffective in addressing disputes that originate on these platforms.
  • Demand-Supply Mismatch:
    • There are already far more potential online independent workers than there are jobs, and the demand-supply mismatch will only worsen over time, lowering wages.
  • Algorithm dependent decisions
    • A large component of delivery platform’s cost is gig worker fees. An analysis of the grievances suggests that many are linked to the way gig work is assigned, performed and rewarded – all of which are decided by Machine Learning (ML) algorithms that try to cut costs & maximise profits.
  • The Gig Economy Can Bring Loneliness
    • Being an independent worker, depending on the type of job, can be very lonely. This is especially true for designers, developers or copywriters working on their laptop from home. They can be spending a whole week working at home without real-life interactions.
  • Challenges from traditional players
    • Companies that operate by the gig economy’s principles are posing a big challenge to the previously established businesses. For instance, Airbnb is putting the hotel’s industry on notice, and the same happens with Uber and the taxi industry.
    • Traditional players are lobbying with government bodies to bring in level playing legislations so as to protect the interest of existing players.
    • Given the electoral weight that these traditional players command, government regulations may lead to additional conditions on such gig principled based businesses. Such conditions can increase the costs and blunt their competitive edge.
What are the laws for the gig workers in India?
  • According to the Code on Wages, 2019, a universal minimum wage and floor wage should be provided to all organised and unorganised sectors, including gig workers.
  • Whereas under the Code on Social Security, 2020, the gig workers are provided with recognition as a new occupational category.
    • The SS Code also defines an unorganised sector worker as one who works in the unorganised sector and is not covered by the provisions of the Industrial Relations Act, 1947. Consequently, both gig workers and platform workers are also covered by the definition of unorganised sector worker.
    • The definitions of gig worker, platform worker and unorganised sector worker are overlapping and confusing.
    • As the Code envisions different social security schemes for each of these categories of workers, there is a lack of clarity about what scheme will apply to whom, potentially leading to challenges at the stage of implementation.
    • SS Code adopts a welfare-based approach towards social security and places an obligation on the union and state governments, rather than rights-based approach.
What are the recommendations by NITI Aayog for Gig Economy?
  • Catalysing Platformization
    • A Platform India initiative, built on the pillars of accelerating platformization by simplification and handholding, funding support and incentives, skill development, and social financial inclusion, like the immensely successful Startup India initiative, may be introduced.
  • Accelerating access to Finance for Platform 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.
    • Venture capital funding, grants and loans from banks and other funding agencies should be provided to platform businesses of all sizes at the pre-revenue and early-revenue stages.
  • Skill development for Platform Jobs
    • 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
  • Enhancing social inclusion in the new-age digital economy
    • 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.
    • Women led-platforms or platforms that encourage recruitment of women employees and those with disabilities should be incentivized.
  • Extending social security for gig & platform workers in india
    • On the lines of measures introduced to mitigate the challenges posed by
      the Covid-19 pandemic by platforms businesses, measures for paid sick leave, health insurance may be adopted by platforms for all the workers they engage, round the year.
  • Recommendations for future estimations of platform workers
    • Undertake a separate enumeration exercise to estimate the size of the gig economy, and identify the characteristic features of gig workers
    • During enumerations (census, PLFS, NSS or otherwise), capture the
      different occupations an individual might be performing, including whether or not they are a gig worker.
    • During enumerations, collect information to identify gig workers. This could include questions on the nature of contract between worker and job creator, use of technology in work, etc
  • RAISE Framework for Operationalizing the Code on Social Security (CoSS), 2020: As Central and State governments draw up rules and regulations under CoSS 2020, they could adopt the five-pronged RAISE approach to ensure realisation of full access to social security for all gig and platform workers:
    • Recognise the varied nature of platform work to design equitable schemes.
    • Allow augmentation of social security through innovative financing mechanisms.
    • Incorporate, while designing schemes, the specific interests of platforms,
      factoring the impact on job creation, platform businesses and workers.
    • Support workers to subscribe to government schemes and welfare
      programmes through widespread awareness campaigns.
    • Ensure benefits are readily accessible to workers

Mains Practice Question –  The rapidly burgeoning gig workforce is ushering in a new economic revolution globally. Critically analyse.

Note: Write answers to this question in the comment section.


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