Economy

How platform-based gig economy can generate millions of jobs

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Platform based gig economy is the most significant disruption of the labour market that we have witnessed in a long time. The concept of gig based livelihood is not alien to India. A range of skilled personnel have for years offered their services based on word of mouth, neighbourhood referrals and past reputation in areas such as home improvement and construction.

What is significant is that from a base of 10 million workers and increasing at a compounded annual growth rate of 25%, the gig ecosystem will have significant knock-on effects on the Indian economy as it doubles in size by financial year 2023 and leave the same footprint over the next three years as it did in the last decade. The gig economy will impact every major sector in the cou, transforming the way India consumes.

With a large working population of over 500 million, India needs to create jobs at a record pace to provide employment to the reportedly one million youth that get added to the workforce every month. Given the right impetus, the platform-based gig economy can generate millions of jobs in the future.

Rules and regulations by different government departments will go a long way in this enablement. Smahi Foundation’s recently released report on gig economy makes several such recommendations. The new labour codes have specifically identified the workers in this ecosystem as “platform based gig workers”.

The rules pertaining to Code on Social Security talk about a benefits funds for these gig workers. There is further scope of finetuning. The ideal design will be to keep a voluntary contribution up to 5% out of the pay-out to platform workers to be contributed to a ‘portable benefits fund’. For e.g., out of a pay-out of 100 to the platform worker, a maximum of 5 could be contributed to the portable benefits fund and balance 95 to the worker. This fund to be used as a monthly retirement pay-out after attaining 60 years of age. “Portability” is important as the platform workers work on multiple platforms in a month and contribution from each of these platforms can go simultaneously to the fund.

There should be mandatory coverage of all platform workers under Bharat Pradhan Mantri Jan Arogya Yojana (PM-JAY) (erstwhile The Ayushman Bharat Yojana). Similarly, there should be a mandatory coverage of all platform workers under the Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY). This can be facilitated through the approved aggregator companies.

Several gig workers will find it difficult to bounce back to the same level of business activity which existed before the pandemic hit us. To ensure that the capital stock for these workers – two wheelers, four wheelers, storage equipment – is not destroyed permanently, the government should extend the Emergency Credit Line Guarantee Scheme (ECLGS) to platform workers who have taken loans for income earning assets. It may also be prudent to classify loans to platform workers for funding income earning asset as Priority Sector Loans, so that the bank treatment of such loans on their balance sheets doesn’t require harsh collection measures.

Access to financial services from traditional financial institutions has historically been a challenge for platform workers. Lenders have faced two challenges which is accessibility of income and volatility of income. This problem is solved by tracking their income on platform. Although platform workers on digital platforms can earn regularly and get paid on a predictable basis (i.e. weekly, biweekly, or monthly), they do not have fixed salaries or pay-slips. Their earnings can fluctuate based on variations in the number of orders they deliver and the amount of time they dedicate. However, while platform workers are not formally employed by the platforms, they can earn regularly and their earnings can be tracked via the platform’s digital infrastructure.

Smahi Foundation also recommends creating a National Registry of platform-based workers. For regulators, a big challenge is to get accurate data about the size of platform-based gig economy workforce. A database of all platform workers with the government through which a single social security number (or Aadhar) can be marked on a particular worker and that person can be followed and benefitted will go a long way in better governance and targeted benefits dispensation. This could also include background checks or references and verification from previous employers, thus making the worker onboarding seamless, quick and cost efficient.

The new business models of cab services, home delivery and home services driven by technology, touch the lives of millions of Indian consumers every. They have made various services affordable, accessible and convenient for the Indian consumer. At the same time, platform-based gig economy has generated millions of jobs and has given flexible and dignified earning opportunities to the less fortunate youth of the country. This has had a multiplier effect on the economy leading to indirect employment creation as well. The gig economy is also working towards government’s objectives by formalizing the hitherto informal workforce through large-scale usage of the JAM trinity (Jan Dhan- Aadhar- Mobile).

Regulatory unlocks on some fronts can help accelerate the growth of this gig ecosystem. While some key issues around social security of the gig workforce need resolution, policymakers need to balance the social objectives with economic objectives of the platforms. A policy push in the right direction, can steer platform-based gig economy to lead India to the path of economic prosperity.

Nimish Joshi is Director and Ritu Bhandari is Head of Research at Smahi Foundation for Policy and Research. Views expressed are their own.

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