GIG ECONOMY
1. Context
Five years from now, by roughly the end of the current government’s term, the IMF expects India’s GDP to have increased to $5.8 trillion, up from $3.5 trillion now — implying an addition of $2.3 trillion, which is just shy of the combined size of Spain and Netherlands today
2. What is the gig economy?
The gig economy refers to a labor market characterized by short-term contracts or freelance work, as opposed to permanent jobs. It includes a wide range of activities, from ride-sharing and food delivery to freelance writing and graphic design. Workers in the gig economy are typically independent contractors who perform specific tasks or projects, often mediated through digital platforms. This economy offers flexibility and autonomy for workers but also presents challenges such as lack of job security, benefits, and consistent income
3.What is the difference between the formal and informal labour markets?
| Subject | Formal Labor Market | Informal Labor Market |
| Regulation | Regulated by government laws and policies | Not regulated by formal labor laws |
| Job Security | Generally offers job security | Often lacks job security |
| Benefits | Provides benefits like health insurance and retirement plans | Rarely provides benefits |
| Legal Protections | Employees have legal protections and must adhere to standards | Workers lack legal protections |
| Income | Regular and predictable income | Irregular and uncertain income |
| Employment Contracts | Jobs usually involve formal contracts | Work is often done without formal contracts |
| Examples | Corporate jobs, government positions | Freelance work, informal vendors, day labourers |
4. What is the current state of the labour market in India?
- Maintaining the impressive growth rates of recent years into the medium to long term, while expanding the consumption base, will be difficult given that a significant portion of the country's workforce remains stuck in low-productivity jobs.
- Recent government surveys indicate that the number of informal businesses in the country has increased from 57.6 million in 2010-11 to 63.4 million in 2015-16, and further to 65 million in 2022-23
- If the economy were generating more productive employment opportunities, both the number of informal firms and the workforce within them would be significantly decreasing.
- Combining the 110 million workers in non-farm informal businesses with the approximately 230 million engaged in agriculture accounts for almost two-thirds of the labor force still employed in low-productivity jobs in less efficient sectors—sectors that now contribute an even smaller share of the total economic value added than before.
- This is in addition to those informally employed in construction and the formal parts of the economy.
- In the absence of low or semi-skilled job opportunities in the more productive formal manufacturing sector, and without the necessary education to enter more skilled formal employment in both manufacturing and high-end services, their only alternatives are precarious forms of employment in the gig economy.”
- The issue of job scarcity has long been a part of India's development narrative, not limited to the current administration.
- However, recent changes include the youth bulge, increasing labor force participation rate—particularly among women driven into the workforce by financial distress—the declining share of value added by the informal sector, and the growing capital intensity in production sectors that contribute more to value addition and are labor-intensive by nature
- The consequences of failing to create a sufficient number of more productive jobs, and the resulting deepening labor market duality, are likely to be manifested in various ways, including reduced social mobility and high-income inequality.
- As others have noted, this will determine whether the country follows the path of East Asia or takes the route of Latin America
5. What are the causes of the rising gig economy in India?
- The proliferation of smartphones and the internet has facilitated the growth of digital platforms that connect gig workers with customers. Apps and websites have made it easier to find and offer short-term jobs
- India has a large youth population that is tech-savvy and open to flexible work arrangements. The gig economy offers opportunities that appeal to the younger generation seeking autonomy and varied work experiences
- The formal sector has not been able to generate enough jobs to match the growing labor force. As a result, many individuals turn to gig work for income, as it often requires lower barriers to entry compared to traditional employment
- Financial distress and the need for supplementary income have pushed more people towards gig work. This includes individuals who may already have a job but need additional income to meet their financial needs
- The gig economy offers flexibility in work hours and the choice of assignments, which attracts individuals who prefer non-traditional work arrangements over the constraints of full-time employment.
- Companies are increasingly outsourcing tasks to freelancers to reduce costs associated with full-time employees, such as benefits and office space. This shift towards a more flexible workforce model has contributed to the growth of gig work
- The ability to work remotely has opened up international opportunities for gig workers. Indian freelancers can now find work with companies around the world, broadening their employment prospects
- The regulatory framework in India is still catching up with the gig economy, providing a more lenient environment for gig platforms and workers compared to the heavily regulated formal sector
- The gig economy allows workers to leverage diverse skill sets and explore multiple career paths simultaneously. This appeals to individuals looking to diversify their professional experience
- There is growing consumer demand for services that gig workers provide, such as food delivery, ride-hailing, home services, and freelance professional services. This demand fuels the expansion of gig opportunities
6.What are the advantages and disadvantages of the gig economy?
| Advantages | Disadvantages |
| Workers can choose their own hours and work location | Gig workers often face uncertain income and job stability. |
| Diverse Opportunities | No Employment Benefits |
| Access to a variety of job types and industries | Absence of benefits like health insurance, retirement plans, and paid leave |
| Increased Income Potential | Income Variability |
| Potential to earn more by taking multiple gigs or high-paying tasks | Earnings can be unpredictable and inconsistent. |
| Opportunity to develop and diversify skill sets. | Many gig workers are not protected by labor laws and regulations |
| Easier entry into the workforce without extensive qualifications. | Limited opportunities for career advancement and long-term growth |
| Greater control over the type of work undertaken and methods of working | Flexibility can lead to overworking and blurred boundaries between work and personal life |
| Ability to work for international clients and companies | Gig workers may miss out on the social aspects and support networks found in traditional workplaces |
| Companies can save on costs related to full-time employees (benefits, office space, etc.). | Potential for gig workers to be underpaid and overworked without proper oversight |
| Can quickly adapt to changing market demands and consumer needs | Limited access to training and professional development resources |
7. What are the challenges associated with the gig economy?
- Gig workers often face unpredictable and inconsistent income, making financial planning difficult
- Gig workers typically do not receive traditional employment benefits such as health insurance, retirement plans, paid leave, and unemployment benefits
- The temporary and project-based nature of gig work means that workers lack job security and can be easily terminated
- There is often a lack of clear legal frameworks to protect gig workers, leading to issues with worker rights, minimum wage enforcement, and job classifications.
- The flexibility of gig work can lead to overworking and difficulty in maintaining a work-life balance, as the lines between personal and professional time can become blurred.
- Gig workers can be vulnerable to exploitation, including low pay, long hours, and lack of proper working conditions, without sufficient oversight and protection
- Gig workers may miss out on the social interactions and support networks that come with traditional workplaces, leading to feelings of isolation and lack of community
- There are limited opportunities for career advancement, professional development, and skill enhancement in the gig economy
- Gig workers often lack access to training and development programs that can help them improve their skills and advance their careers
- Gig workers are usually responsible for managing their own taxes, which can be complex and burdensome without proper knowledge and resources
- Reliance on digital platforms and technology can pose challenges, including the need for constant internet access and the risk of being affected by platform changes or technical issues
- Without formal workplace regulations, gig workers may face unsafe working conditions and lack proper health and safety protections
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For Prelims: Gig Economy
For Mains: GS III- Gig Economy and Associated Problems around
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Source: Indianexpress
