Gig Economy: Definition, Structure, Benefits, Gig Workers

By meenakshi|Updated : July 12th, 2022

Gig Economy is a temporary, flexible, or freelance market system wherein potential workers are connected to customers or clients through online portals. Gig economy is often called the freelance economy. It is an emerging economic model in which flexible part-time workers are hired to work in the firms instead of hiring full-time employees. 

Gig economy is one of the emerging economies in India. Gig Economy UPSC is a crucial topic in view of the IAS exam. Below you will get to know about what is gig economy, its parts, the factors that contribute to it, its benefits to employees and employers, and the major problems that have come its way

Table of Content

What is Gig Economy?

Gig economy is an emerging segment of the market. The gig economy essentially refers to a business or workforce model built around temporary work that an individual can deliver without formal commitment. The mobile advancement of the workplace and the introduction of online platforms have been the crucial reasons that led to the evolvement of the concept of the modern gig economy.

The Individuals who are a part of the Gig Economy are termed Gig workers. They are further divided into two types-

  • Platform workers
  • Non-platform workers

The workers whose job depends on the digital/ social or online platform are Platform workers, while the others are casual wage workers. The non-platform workers can be part-time, or full-time employees and are also called own-account workers.

The gig workers can further be divided based on their skills into-

  • Highly-skilled workers
  • Medium-skilled workers
  • Low-skilled workers

Download Gig Economy Notes PDF

Gig Economy Latest News

India’s Booming Gig and Platform Economy report was released by NITI Aayog on 27 June 2022. According to the NITI Aayog report, about 47% of the gig work is in medium-skilled jobs, about 22% in high-skilled jobs, and about 31% in low-skilled jobs. Trends show that the concentration of workers in medium skills is gradually declining and that in low and high skills is increasing.

NITI Aayog suggested that fiscal incentives, including tax breaks or startup grants, are for businesses that employ roughly one-third of women and persons with disabilities (PwDs).

Gig Economy Structure

The gig economy comprises three units: corporations, employees, and customers. However, there is a difference between the work done by different employees. These are explained as under:

  • Temporary employees: These are also called project-based employees, which means they are hired for a short period for a particular project.
  • Freelancers: These employees are compensated per the job contract. They conduct the work assigned and are rewarded on a project-by-project basis.
  • Project part-time workers: These employees work fewer hours than the work shifts.

With the introduction of the Gig Economy, the consumers have the convenient option to use the service offered by the employee as per his demands.

Factors contributing to Gig Economy

The concept of the Gig Economy is driven by a few factors like the unconventional work approach by millennials and the rise in freelancing platforms. The crucial factors that contribute to Gig Economy are-

  • The rise in freelancing platforms
  • The emergence of a start-up culture
  • Unconventional work approach by millennials
  • MNCs are hiring contractual employees
  • Business Models
  • Impact of Covid-19

Labour Code for Gig Economy

As per the existing legislation, The Code on Wages, 2019 provides for universal minimum wage and floor wage across organized and unorganized sectors, including gig workers. However, The Code on Social Security, 2020 recognizes gig workers as a new occupational category and defines gig workers as a person who performs work or participate in work arrangements and earn from such activities outside of the traditional employer-employee relationship.

But, there are a few issues associated with the labor code for Gig Economy, and these are-

  • No fixed responsibilities: The Code states the provision of basic welfare measures as a joint responsibility of the Central government, platform aggregators, and workers. But. it does not clarify which stakeholder is responsible for delivering what quantum of welfare.
  • No guarantee of benefits: The platform workers are not necessarily getting benefits like maternity benefits, life and disability cover, old age protection, provident fund, and employment injury benefits, though they are eligible for availing these benefits.

To improve the condition of the Gig workers, there is a need to-

  • empower the gig workers by forming an umbrella union that provides them with collective bargaining power.
  • Offer mandatory coverage to platform workers
  • need to build the right physical and social infrastructure that supports the engagement of women in gig work.

Benefits of Gig Economy

Gig Economy is an evolving sector that has changed how people look at jobs because it offers many benefits to employees and employers. The benefits of the Gig Economy can be summarized as follows:

Why is Gig Economy preferred by workers?

The Gig Economy serves benefits the workers in the form-

  • Flexibility to work: One of the major reasons that people are opting for the Gig Economy is the flexibility to work as per their availability and convenience. There are no restrictions on attendance or the work-hours. Some employees consider this option as a part-time job to earn side income.
  • Jobs for Low-skilled workers: SInce it is a project-based or a less time job, there are chances for the low-skilled workers.
  • Chance to gain experience: Since a full-time job consumes time and more effort, this option enables college-going students to explore and gain the required skills and experience before entering the full-time work employment market.
  • No worry about Expenses: Most of the Gig workers have the privilege to work remotely. This saves a lot of time and money, which is generally required to commute to an office.
  • No age barrier: While most jobs are offered to young individuals, the concept of the Gig Economy also serves employment to the aged and retired people. They can keep busy even after retirement and earn independently without depending upon others.
  • Beneficial for Women: The idea of the Gig Economy is highly beneficial to women who want to take a break from careers either because of marriage or childbirth.

Why is Gig Economy preferred by Employers?

Yes, the concept is designed specifically for serving the best to the employees, but it also benefits the employer. This is why employers prefer the Gig economy-

  • Efficiency in Work: It is undebatable that the efficiency, efficacy, and productivity of workers in the gig economy are much more than that of a stable full-time job.
  • More Economical Option: It is highly beneficial for small-scale businesses that can’t afford to hire full-time workers. In such a scenario, they offer jobs to the gig workers and get the task done by paying them for the particular project.
  • Less use of resources: The companies working with the concept of the Gig Economy can save resources in terms of office space, training, and other benefits.

Problems with Gig Economy

Gig economy has a brighter side that influences the employees, firms, and users simultaneously. However, one cannot deny that it also has a few drawbacks, which depend on the labor. The major disadvantages of the concept of the Gig Economy are as follows:

  • Less social safety and fewer benefits: An employee enjoys endless opportunities and benefits when it comes to a full-time pay role, but this is a hustle in the Gig economy. Since the individual is employed on a contractual/short-term basis, he is not allowed to receive the benefits like housing and travel expense, paid sick, provident funds, and a lot more. Here, the employee has to manage their own healthcare and retirement insurances, making it a bit unsuitable for them.
  • Risk of isolation: Since the introduction of the concept of the Gig Economy, the employee may find themselves in a situation of isolation. However, this situation can be solved with Co-working spaces.
  • No scope of growth: It is quite obvious to understand that the employees are hired for a short period or for a particular task. This means there is very little or almost no hope for upward mobility within the company.
  • No Guarantee of Confidentiality: Since this job culture involves hiring people for a short term only, there is no guarantee that there must be Confidentiality of documents, etc of the workplace.
  • Lack of flexibility: Gig economy lets the employee work for long hours to make the job viable. This reduces the concept of flexible work and ultimately leads to a lack of transparency on the incentive structure.
  • Demand-Supply Mismatch: With the influence of digitalization, there is a huge number of potential workers as compared to the tasks/ jobs available. And, not to surprise, this condition will worsen more in the future, leading to lower wages.
  • Lack of accessibility: This is a new concept and is confined to the urban areas only. The rural areas lack access to electricity and the internet.

Impact of Pandemic on Gig Economy

The Covid 19 pandemic has hit almost all sectors, especially the business sector, and got drastically disrupted. The unemployment rate increased because people started looking for new and convenient ways to earn money, which ultimately led to the demand for gig workers.

For instance, in August 2020, Google announced the launch of its Kormo Jobs app to connect job seekers with opportunities in industries like on-demand businesses, retail, and hospitality. However, the workers have complaints of falling income because of which the concept of the Gig economy seems to be in danger.

Also, there were two significant implications for the contractual labor ecosystem. It created new business models to cater to the growing requirement for on-demand staffing. Along with this, it once again puts the spotlight on the labor codes that recognize gig workers and provide for a universal minimum wage.

Gig Economy UPSC

Gig Economy UPSC is one of the chief topics for the IAS exam point of view and falls under the Current Affairs and Economics section of the UPSC Syllabus. A lot of questions have been asked about the Gig Economy topic in the UPSC Prelims and UPSC Mains exam.

You can also refer to the NCERT books for UPSC and Economics Book for UPSC to better understand the topic. You can also go through the UPSC Study Material to prepare the whole syllabus easily.

Download Gig Economy UPSC Notes PDF

Gig Economy UPSC Questions

Gig Economy has been a trending topic, and several questions have been asked about the topic in the prelims and mains exams. A few among them are:

Question. Consider the following Statements:

  1. This type of economy has been on the increase in many countries in the past few years in this more person working as freelancers.
  2. This economy provides workers the options for a hyper-flexible way of working.
  3. This economy undermines the traditional economy of full-time workers who rarely change positions and instead focus on a lifetime cover.

Which of the above statements is/are correct

  1. Socialist Economy
  2. Capitalist Economy
  3. Gig Economy
  4. Mixed Economy

Correct Answer- B) Gig Economy

Question: What is gig economy?

  1. Agricultural economy
  2. Public sector economy
  3. Services sector economy
  4. A labor market is characterized by the prevalence of short-term contracts and freelance work.

Correct Answer- D) A labor market characterized by the prevalence of short-term contracts and freelance work.

Other Important UPSC Notes
Olive Ridley Turtles Economic Survey 2022
Mullaperiyar Dam Multidimensional Poverty Index
National Intelligence Grid FCRA Act
Panchayati Raj System in India NCBC
Earthquake Great Indian Bustard
UNCLOS Public Interest Litigation in India

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FAQs on Gig Economy

  • Gig economy or the freelance economy is an emerging segment wherein potential and flexible part-time workers are appointed/hired to perform certain tasks instead of hiring full-time employees. This is a temporary, flexible, or freelance market system that uses online portals to reach out to part-time workers. Here the employees are paid according to the tasks performed.

  • The Code on Social Security, 2020 recognizes gig workers as a new occupational category and defines gig workers as those who perform work or participate in work arrangements and earn from such activities outside of the traditional employer-employee relationship.

  • Zero-hours contracts and Gig Economy have a few similarities, but they are different concepts. Zero-hours contracts are specific employment agreements used by employers. Employers don’t have to guarantee work or employees can refuse work, but it is not the case with Gig Economy.

  • The Gig economy offers plenty of benefits to employers, employees, and consumers. These can be summarized as follows-

    • Flexibility to work
    • Jobs for Low-skilled workers
    • Chance to gain experience
    • No age barrier
    • Efficiency in Work
    • Less use of resources

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