What is Gig Economy?
One common characteristic that puts services like Uber, Pathao, Foodpanda, AirBnB and Upwork under the same umbrella is that they employ “gig” workers, working not in traditional employment setting, but in a gig economy.
According to Investopedia,
“In a gig economy, temporary, flexible jobs are commonplace and companies tend toward hiring independent contractors and freelancers instead of full-time employees. A gig economy undermines the traditional economy of full-time workers who rarely change positions and instead focus on a lifetime career.''
In short, the gig economy is composed of three components. Here, technology platform companies working in the “access economy” serve as a medium between those (consumers) who ‘demand’ a certain task done such as a ride to a place or a delivery to be made, and those who are able and willing to work free-lance (gig employees who ‘supply’) and are paid for that particular job.
Size of the Global Gig Economy and its Demographic Profile
Although there is considerable uncertainty due to lack of appropriate data collection, as of 2017, the size of the global gig economy stands at a staggering $3.7 trillion. Data on global distribution of gig workers shows North America in the lead with 36% of its workforce doing freelance work, followed by Europe, Australia (32%), Asia, South America and Africa.
Bangladesh has recently entered the gig economy, with the launch of delivery services such as GoFetch, Pathao, Foodpanda or ridesharing services such as Uber, Obhai. Moreover, in February 2018, the State Minister of ICT Division, Mr. Zunaid Ahmed Palak inaugurated the2hourjob.com – an online platform that promotes women empowerment by employing female freelancers across the country. It will not be long till the gig economy in Bangladesh grows to match the size of that in developed nations such as UK or US.
The demographic profile of the gig economy, through research by Mckinsey & Co, 2016 shows:
Factors contributing to Gig Economy
Digitization plays a primary role in the development and expansion of the gig economy. Rapid technological advancements have largely simplified and sped up many complex and time-consuming tasks, thus facilitating freelance work. With the plethora of tools available in our pockets, being an employee in a gig economy becomes extremely easy for the tech-savvy.
Working remotely or from home is an increasing trend in most developed nations, and given the resources, most people prefer freelance jobs, as they do not require the employees to physically go to a workplace. This gives employers a larger applicant pool to hire from, since they do not need to choose someone based on proximity.
Often, employees do not have sufficient resources to employ full-time workers for all the tasks needed to be done, so they hire temporary employees to fill in when required at specific times or a particular project, similar to zero hour contracts. This saves them the costs and liabilities involved in hiring full time staff. For example, small business owners contract freelancers as it allows them to collaborate with a wide range of service providers and outsource services such as content writing and management, blogging, graphic design, IT support, app or website development, event management or editing.
Employees, who prefer a job that allows them to be at different places, or take up multiple jobs in order to complement their lifestyle, also end up in the gig economy. The gig economy also reflects workers tending to change careers multiple times, on a more magnified scale.
Benefits of working in a Gig Economy
The shift toward the gig economy is credited to the number of ways that make the gig economy more attractive in comparison to traditional employment opportunities.
In a gig economy, the possibilities and options are unlimited when it comes to the schedule, pay or type of work involved. Unlike traditional employment where the employee is required to do the same task daily, gig economy employees can choose the type of task they want to perform. Likewise, their pay is also dependent upon the kind of work they do, the level of difficulty involved, the time period, etc. The employee is free to go on vacations as they like and has more control over how they allocate their time.
Gig economy comes hand-in-hand with work variety – whether that is in the type of work involved, or the people. It allows the employee to acquaint themselves with different kinds of people from diverse socio-economic, religious or racial backgrounds.
Ease of Entry
There are rarely any barriers to entry in a gig economy. All one needs is a skillset, and the more specialized it is, the greater the chances of succeeding in the niche. It has become significantly easier to move from traditional jobs to freelance work in the gig economy.
Entering a gig economy is as affordable as is easy. Majority of the population tend to already possess the required equipment such as laptops or mobiles with an internet connection.
Taste of Entrepreneurship
Gig workers get an idea of the benefits of entrepreneurship without the costs involved in actually setting up a business, developing websites and acquiring customers.
Additional income and personal growth
Traditional employees often look towards the gig economy in hopes of “side hustles”. They get to exercise a skillset or passion that is not utilized in their existing workplace, or find a source of extra income.
Drawbacks of Gig Economy
The same reasons that make the gig economy net positive for employees may also be causing disruption in various other industries. The growing gig economy is the cause behind disruption in the taxi industry, as ridesharing grows in popularity. Similarly, more authors are opting out of traditional publishing by literary agents or publishing houses to self-publish eBooks. Hotels are losing potential customers to privately owned accommodation through home-sharing sites.
From the employees’ perspectives, the following drawbacks arise in a gig economy, making it precarious to work for companies like GoFetch.
Lack of Protection
Gig workers are often referred to as Precarians, defined as individuals lacking long-term employment and job security such that they are unable to predict the nature of their next job or income. They also lack benefits such as health insurance or annual / emergency leaves. (Cleave, 2016)
Standard protections for employees are:
• Minimum wages based on hours
• Overtime or bonus pay based on days worked or extra hours
• Unemployment protections
• Time-based leaves
• Payroll taxes
(Donovan, Bradley & Shimabukuru, 2016)
Gig economy workers are generally deprived of these measures of protection. According to World Bank, “The weakening of income growth and the economy may not be due to the gig economy per se, but rather to the lack of equal protections for gig workers” (World Bank 2015)
Lack of fair pay
In UK, on 8th October, 2018, UberEats and Deiveroo workers, for the first time launched a joint strike in order to increase their pay. Gig workers are often paid much less than they deserve. Some are even paid below the minimum wage in certain countries. For example, in UK, MP Frank Field implied that some workers are paid below £2.50 an hour, made legally fair since gig workers are not counted as company employees but rather as contractors.
Moreover, since gig workers do not belong to any unions as traditional workers do, the lack of collective bargaining also leads to lack of fair pay. This has recently seen changes as gig economy workers in the US and Europe have also started organizing strikes since 2016.
Not as flexible as advertised
Often gig workers are forced to work on days they do not want to, possibility due to pressure from companies who need them or incentives that are too attractive to pass up.
No fringe benefits
Traditional employees are often given certain fringe benefits or voluntary protection such as free holidays, sick leave, health benefits, wellness programs or gym memberships, reimbursements such as vehicle, or phone allowances. However, not all gig workers get the same opportunity. If they are unable to do the task for reasons personal or otherwise, they have to forgo the pay for that task.
Stress due to Constant Evaluation
Working in an online platform economy often subjects the workers to stressful situations where their performance is continuously evaluated and rated. These ratings in turn determine the availability of future ‘gigs’, adding to the stress.
Threat to Occupational Safety and Health (OSH)
Occupational Safety and Health laws are applicable in case of the existence of employee-employer relationships. As previously mentioned, it is debatable whether gig workers are to be considered as employees or contractors. In case of the latter, the OSH laws no longer apply.
Without relevant OSH laws, psychosocial or physical risks to gig workers increase. No longer shielded by a public workplace, the risks to physical safety and health can be increased for gig workers. Moreover, most of the online platform workers are young, and this acts as another common occupational injury. Rapid work pace without sufficient breaks in-between can also lead to health concerns. The lack of paid sick leave results in higher illness morbidity. Working in isolation develops or increases anti-social behavior or self or health - jeopardizing habits. Fatigue, Repetitive Strain Injury (RSI) and eyestrain are also common concerns for online platform workers. (Garben, 2017)
What complicates the regulation of the gig economy?
A moving target: The online platform economy is considered a moving target, i.e., businesses are entering the market as quickly as they are leaving or are being integrated into other online businesses. This could be partially due to the low entry barriers, the influence of millennial generation, or due to post 2008 economic crisis labor market or economic conditions.
“Fait accompli strategy”: The “grow first and ask compliance-related questions later” attitude of the companies in the gig economy make it difficult for them to be regulated, as they have already gained market share de facto. This made them exempt from existing regulations, such as employment law or OSH, or gave them enough influence for consumers to act in their favor.
Novel approach: The innovative approaches taken by companies in the gig economy make it difficult for regulators to determine what course of action to take, since regardless of the negative impacts they may have, these companies do end up promoting a “sharing society” and add to the development of the country.
Pre-meditated actions to render existing regulations ineffective
Companies often put up disclaimers stating they are mere intermediaries between two parties, and they hire workers on an independent, contractual basis, thus making it difficult for regulators to intervene.
However, it must also be noted that the Gig Economy has extended the scope of regulation. Many of the transactions that were previously being conducted in the shadow economy, are now a part of the formal economy, thus not only adding to our GDP but also creating an opportunity for these markets to be regulated. (Garben, 2017)
Future of Employment
As the gig economy grows larger, employment, and the laws surrounding employment become more susceptible to change. In case of developed countries, the growing gig economy is causing the traditional economy to shrink. On the other hand, the rise in gig economy is aiding the growth of developing nations, and helping to lower unemployment levels. It is encouraging workers to become self-employed and start their own ventures, which in turn is employing more gig workers.
Measures to resolve the issues
The issues addressed in the previous segment can be tackled using various policy or regulatory options.
Recognizing on-demand workers and Restructuring Labor Laws:
One UberEats protester in UK asked to “Create laws that mandate that gig economy workers receive the same benefits as ordinary workers,” and suggested that, otherwise, strikes would continue. Hence it is vital to restructure labor laws and consider employee benefits.
The first approach to consider adopting suggests using existing regulations and judging each worker on a case-by-case basis to categorize them as employee, self-employed or ‘in-between’. Once the labor status is determined, most employment and OSH rules would automatically apply. (Garben, 2017)
Secondly, according to Taylor Review, the government should create a new category of “dependent contractor” workers that fall between contractors and those in traditional employment, and introduce benefits and wage protection. The Trade Union Congress in UK also agreed that underpayment of employees end up costing the government more in terms of credits and benefits and earns less in taxes, so adopting a policy to ensure rights for gig economy workers would work in the government’s favor.
Lastly, shifting from ‘employment agreement’ to a ‘talent engagement statement’ will provide a single model for all gig workers regardless of the categories they fall under.
Changing the goal of regulation: The goal of regulation should be to ensure protection and benefits extend to all workers regardless of their contractual status. It should not be to decide which regulation matches which work type or arrangement (World Bank, 2015).
Incorporating gig workers into labor force surveys: In my opinion, including the criterion of gig workers with specificity in surveys such as those conducted by Bangladesh Bureau of Statistics (BBS) will help determine the employment structure in the economy and depict a more vivid picture of the growing gig economy. This will also reflect to what extent, if at all, the traditional economy is shrinking.
With globalization, most developed nations have already stepped into the gig era while developing nations such as Bangladesh are not far behind. The multifaceted nature of the gig economy in terms of defining a gig worker in the framework of employment, devising and revising employment, and occupational safety and health policies make it a very challenging subject, which I believe is in need of further research and regulation.
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