The exploitation of the gig economy in India

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An emerging trend, yet not many know of the emerging term. A labour market where work is done through freelancers and contracts is termed as “Gig Economy”. This definition is in contrast with permanent jobs. Short-term engagements between organizations and employees are assigned a slang word called ‘gig’. The gig economy comprises part-time workers, freelancers, independent contractors, contract workers, and project-based workers. Additionally, there is a new entrant in the gig economy in India, namely internships. The gig economy has become popular in the United States. It has been projected by Intuit that by 2020 over 40% of Americans would be working independently on a contract basis. India is not far behind, it ranks 2nd in the global freelance workforce after the United States. 

 

The gig economy is soon to takeover a large labour market.

 

The rise of the gig economy is mainly due to the following reasons: there is a persistent competition in the labour market due to digitization, mobile and portable work, the millennial generation, changing lifestyles, work-life balance, and the notion of “India is a cheap labour market”. At an average the minimum wages for Indian freelancers is Rs. 10,500 per month. As opposed to China’s freelancers which stands at Rs.16,600 per month. The Government of India has also begun its initiative to push freelancers through the Digital India Program (DIP). But, does India’s economic situation support a gig economy?

 

The gig economy concept is helping companies reduce labour costs. Few freelancing work, internships, independent work done by Millenials remain unpaid. Unpaid work affects the labour market aggressively. The unpaid ‘gig economy’ falls under the secret cutting costs bracket. The paid work in the gig economy doesn’t prove to be ‘good enough’ for the workers. India’s current economic situation does not support a gig economy concept due to the fall in aggregate demand and fall in wages. The demand-side constraints that Indian economy is currently undergoing provides weak support to the gig economy. With 15 million freelancers in India who comprise of the temporary workforce both paid and unpaid, the gig economy may tend to be unfruitful for the country.

 

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The Fair Labour Standards Act under United States Department of Labour has established norms for minimum wages and overtime pay for the private and public sector. Additionally, it prescribes at least the federal minimum wage for freelance or independent workers. According to a survey conducted by the Economy at Columbia University’s Teachers College and the Institute on Education the quality of paid internships remains higher than unpaid ones. 

 

The summer months, from April to July prove to be the time of seasonal employment in the labour market. The summer break for Millenials prove to be a boon for companies who want to introduce ‘stealth labour costs’ meaning, the labour costs which can’t be seen as they haven’t been incurred. 

 

Make in India initiative has added investments in industrial and domestic operations. This indeed boosts the technical jobs, factory, and assembly work. Most companies’ manufacturing units remain in two and three-tiered cities. These cities boasts of India’s skilled labour market. According to TeamLease, 1.3 million Indians have migrated to the top 5 cities namely, Hyderabad, Delhi, Bengaluru, Mumbai and Chennai. Close proximity to the skilled labour market and the gig economy helps companies reduce operational costs. But, are companies exploiting the gig economy?

 

Gig economy tends to be exploitative due to the overburdening and stress caused to the workers.

 

The availability of ‘cheap labour’ pushes the companies to draw the most work from what they consider their advantage. Indian start-ups employee most freelancers and unpaid interns. They hire 50% of freelancing workforce. Not only are the lower management employees freelancers and gig economy members, but also the CFO’s have been hired as temporary workers for organizing and auditing the company’s finances. This helps in increasing the operational savings by 70%. 

 

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Therefore, the gig economy may not benefit the Indian economy to a large extent. Moreover, it is derived from the theory of ‘work more, earn less’. According to Payoneer, out of the many freelancers, women account for 22% and are paid less as compared to men. The level of income satisfaction across the world is 46% but India stands at 36%. According to TeamLease, Delhi has contributed 560,600 people to the gig economy. As of 31 March 2019. Bengaluru forks out 252,300 workers in the second half of 2019. 

 

The gig economy may not cater to the whole but to a part. It as a niche where it seems feasible for a few companies and employees. Most of the Indian firms that associate themselves to gig economy are Swiggy, Zomato, Ola, Uber, But, exploitation remains a cause of concern. According to experts like Lawrence Katz and Alan Krueger, the former being from Harvard University, said that there was a steep rise in gig economy in 2015. The reason being financial constraints of workers, and seasonal employments like internships. 

 

Businesses have now taken advantage of the gig economy and have settled their liabilities in the balance sheet by adding independent workers as their assets. 

 

The gig economy is taking over due to the digital era. The gig economy pioneers the virtual workforce. The Millenials who will account for 75% of the workforce across the world will have a major role to play by being a part of the virtual labour market. The want for work-life balance, side-finance, portable work, and an obligation to comply for acquiring a degree may tend to be the reasons for Millenials. For companies, on the other hand, a cheap labour market, higher productivity, opportunity costs, operational savings, remain the major reasons to takeover the gig economy concept, and why not? It has been reported that 53% of telecommuters work for over 40 hours in a week as against the non-telecommuters. 

 

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Though the gig economy is a collaboration, it tends to exhaust over time as it matures and the loopholes are capitalized on. 

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