With the effective use of technology, the gig economy has transformed work as we knew it. Compare the service industry today with that of 15 years before. Be it customers finding a service provider or individuals finding work suitable to their skill, all it takes is a few clicks on your mobile.
Self-employment is no more a subtle term for unemployment. Today’s millennials prefer independent and project-based work over routine 9-to-5 (well, not exactly) full-time jobs. Unskilled workers also earn more on average as technology has made it easier to search and apply for contractual jobs.
Let us take you through the journey of the gig economy and understand how it is changing the employment environment.
Gig economy explained
Why is it called the gig economy? Interestingly, the term “gig” finds its roots in jazz music. The individual jazz performances were referred to as gigs as early as 1905. Thanks to the digital era, the gig economy moved up a gear in the late 1990s with the start of the likes of Craigslist, Upwork and other job platforms. Today, the gig economy has evolved into a marketplace of part-time contractual jobs or freelancers from all kinds of fields of work. As opposed to full-time employees, gig workers are paid on a per-project basis.
Gig workers encompass a wide range of sectors ranging from construction (daily wage workers, designers), and transportation (drivers) to personal services (such as beauticians, plumbers, electricians, etc.) and high-skilled jobs (like coders, designers, consultants). Well, you would say these types of jobs have been around for much longer.
What’s so special now? Technology has changed the way employers and workers participate in the job market and the prevailing pandemic is proving to be a pivotal point for the gig economy, especially the blue-collar workforce. While COVID resulted in massive layoffs in many industries, tech-enabled gig platforms at the same time have enabled many of the blue-collar jobs to migrate into the gig world.
This article will focus more on these tech-based platforms made for a blue-collared workforce than on gig services for a highly-skilled workforce. Before we delve deeper into this, allow us to provide a brief introduction to the gig world.
Gig economy landscape
Few basic definitions before we deep dive into the gig world:
Gig workers or Giggers comprise all contractual workers (such as construction workers, drivers, delivery partners) and freelancers who work for someone in a temporary capacity. The majority of gig workers comprise blue-collared workers.
Freelancers, on the other hand, are self-employed persons and comprise mainly highly skilled workers. Examples include independent consultants, designers, coders, among others.
The gig economy has been around in India for a long time, and the early participants in this economy have been mostly women. Gig work along with their household chores provide them a way to support their family through an additional income source.
Currently, less-skilled gig workers from across the industries make up a hugely unorganized high-growth labor market. And it is definitely heartening to know that India is also amongst the leaders in the world of freelancing. With nearly 15 million independent workers, India contributes about 40% to the total freelance jobs globally.
India’s gig economy growth is expected to ramp up and has the potential to expand at least 2x the pre-pandemic estimates. The sector is estimated to reach US$455 billion at a CAGR of 17% by 2024.
Gig economy size and key stakeholders
There are three major stakeholders in the gig world: Giggers, Companies, and Tech-enabled platforms.
Giggers would include part of the 450 million blue-collar workers doing unskilled work such as construction work, sewing, handicrafts, and housekeeping on a temporary basis. The majority of this section consists of unskilled laborers from the construction and real estate sectors. The other end of the spectrum includes skill-based jobs such as expert consultants, freelance designers, and coders.
The employers vary from individuals to legacy companies getting their work done from giggers. As the sudden economic crisis due to the COVID pandemic forced many companies to undertake large-scale layoffs, it has brought some irreversible disruptions in the labor market.
Employers, especially from the IT-BPM (IT and Business Process Management) sector, have realized that contractual jobs can prove to be more beneficial than permanent ones in the long run. This can be attributed to the cost savings from spending time and money on hiring and training. In fact, the IT-BPM sector saw a 42% increase in contractual staffing in FY21 over the previous year and is further expected to increase by 50% in the next year.
Coming to the youngest stakeholder in the gig ecosystem, tech-enabled platforms have played a paramount role in making it more organized. Thanks to the increasing internet penetration, the gig economy, which initially started in a very unorganized manner and is mainly restricted to the blue-collar workforce, is seeing the transition into getting organized and moving into other segments of workers (White collar and SMEs) as well. Technology is also bringing a transition into the core blue-collar workforce by organizing it systematically.
Though the majority of the gig workers work informally, the scenario is rapidly changing thanks to the tech-enabled platforms. The gig economy in India is estimated to serve 90 million jobs via the non-farm sectors which include construction and real estate, manufacturing and utilities, retail and transportation and logistics in the coming years. Nearly 70 million of these are estimated to come from just the four sectors – Construction, transportation, Manufacturing, and Household services.
Emerging business models in the gig economy
Several innovative startups have sprung in the recent decade. At a broad level, there are three major emerging business models of tech-enabled platforms in the gig economy.
1. Enterprise-focused freelance platforms:
Freelancing websites – enterprise-focused aggregator platform, allow freelancers to list their services and connect with suitable customers (read businesses) interested in buying their niche services. The individual service providers seeking work can find various verified leads available from different companies. These platforms are merely aggregators and do not take any guarantee regarding the services provided by these giggers. Apna, Teamlease, Upwork, and Freelancer are some of the prominent professional networking platforms.
A recent sharp rise in the number of freelancing platforms is one of the main reasons the gig economy has kicked off. India’s number of freelancing platforms has increased fourfold over the last decade – from 80 in 2009 to 330 in 2021.
Apna, the latest addition to India’s spree of unicorns, focuses on the blue-collared workforce (aka the emerging workforce) aiding this transition. In a short span of 21 months, it has reached a user base of 16 million people and is currently operational in 28 cities. The recent funding round valued Apna at $1.1 billion despite it not earning any revenue. But, it is not that surprising when we closely look at Apna’s business and the size of the blue-collared market it serves.
The likes of Zomato, Burger King, Delhivery, and 1mg depend on Apna for workforce supply. With community building through vocational training to the interested giggers, Apna goes beyond simply connecting employers with giggers and creates a second-degree use case. This can make Apna go a long way in transforming the unorganized sector into an organized sector and thus creating a pattern in chaos.
Another emerging business model in this space is on-demand part-time hiring. One such prominent startup Ogram (UAE-based) allows businesses to hire a workforce on an hourly basis. These platforms earn by charging commissions for managing the workforce for them and companies benefit from cost savings.
This business model also has huge potential in the Indian context as companies get the flexibility to hire workers whenever needed. Consider Big Billion Day for e-commerce companies where they can save huge amounts by hiring delivery partners and warehouse workers on an hourly basis or consider the festival season for restaurants that can hire chefs and delivery partners to meet the unusual demands.
2. Service marketplaces:
The B2C marketplaces include demand-driven services where the giggers provide their contractual services to the consumers. Unlike freelancing websites, these marketplaces act as an intermediary between both sides of the gig economy. The services range from beauty, fitness to plumbing and home repairs.
And the platforms earn money by providing customers with something they would not get otherwise: assurance of the service being offered and after-sales customer-care services. Naturally, this has become a go-to place for many metropolitan citizens after the outbreak of the COVID pandemic, where they can simply find a beautician or a plumber with a tap instead of going places to search for good service providers.
Urban Company has been the pioneer in the tech leveraged gig economy space. It was initially started as just a lead generation platform for the required service, but it soon realized that the customer preferred a full-stack model where they had more control.
3. Asset sharing platforms:
Remember the last time you caught a taxi by standing on the road or booked a hotel by physically visiting the place? The asset sharing platform is perhaps the most popular platform that we are familiar with. It involves low-cost asset sharing instead of ownership.
And undoubtedly, this has contributed a lot to improve our living standards through the effective use of technology. As the name suggests, the examples include cab aggregators like Uber and Ola and hyperlocal delivery/logistics companies such as Dunzo and Delhivery.
4. Gig enablers:
The root essence of any gig economy-based product lies in finding a problem that deals with an unorganized sector, has a large scale, and isn’t disrupted by any large organization. This also means the emergence of innovative business models where platforms offer more than just providing services. Gig enablers not only provide a platform to sell services they also help giggers set up their businesses. Simply put, gig enablers are to the tech marketplaces what Shopify is to Amazon.
Classplus, a freelancing SaaS platform, is disrupting the unorganized space of tutoring while going beyond the academic space to offer the full-stack solution and includes cooking, music, yoga, among others. The platform also provides the tutors with SaaS solutions, including a feature to run their coaching tutorials, assessments, payment tracking, attendance marking and various other student engagement programs.
With the additional services, Classplus has two revenue streams 1. Subscription fees for the SasS platform, 2. Marketplace fees for helping the tutors sell their content.
Here, we can also observe how a second-degree effect helped create a successful model that was initially restricted to academic space. BitClass, another EdTech platform, provides a PaaS (Platform As A Service) solution to the teachers in going online. By managing their business, it helps teachers become ‘teacherpreneurs’ and earns by sharing revenues with them.
While we are discussing this, you can dive deeper into the world of EdTech here.
What makes the gig economy successful?
Let us now understand the factors on both demand and supply sides that are driving the current and forecasted growth for the gig economy.
On the supply side, technology has played a major role in making finding jobs easier especially for the blue-collared workers. The unconventional work approach desired by millennials is also one of the key factors. With one in every four gig workers aged 18-23, the demographic profile is highly skewed towards a younger age group.
In addition to this, there is also an increasing focus on skill-based learning among youth which gives them the freedom to pick a skillset of their choice as well as the flexibility of time and allows them to maintain a good work-life balance.
On the demand side, the tech leveraged gig economy is helping improve an end-user experience by ensuring service quality at reasonable pricing, creditability checking, meeting the demand on time by reducing the response time, ultimately increasing the acceptance and reliability of the model of work.
The emergence of startup culture has also added to the number of gig workers as any organization in its startup phase prefers to keep its fixed cost minimum by not employing full-time employees and instead hire individuals with niche skills as per the project requirement, which they can’t afford otherwise.
In addition to the cost benefits, gig-based jobs also have higher output per worker since the task requires specific skills and has a clear demarcation of the goal. To benefit from these, legacy companies are also stepping onto this trend and hiring not only freelancers for entry-level jobs, but also for management positions.
Are we gigging it the right way?
You might be thinking about how great the gig economy is to us consumers who benefit from the improved service experience and the service providers who benefit from increased income. Sadly, we are not there yet. There are several challenges that we will have to fight to convert this rosy picture into reality.
The gig economy in the past has been developing on its own without any strict regulations. Many companies in the capitalist world naturally built their business model by taking advantage of this very point.
As the individual service providers (ISPs) or giggers present on the platform are not considered to be their employees, the companies don’t have any obligations and are not bound by employment regulation for providing them with what they would in case of permanent employees such as basic facilities, medical insurances, and paid leaves.
Algorithmic surveillance and system biases by these platforms have also adversely impacted the work culture for giggers. Gig workers are also vulnerable to other external issues. We are aware of the harassment of Zomato delivery workers by customers and the health risks faced by drivers of Uber during the peak time of the COVID pandemic.
There have been instances where the ISPs did fight back for their rights, but not many succeeded against the financial muscles of companies. A notable exception where the judiciary sided with ISPs was the Uber case of 2016 in the United Kingdom. A group of 19 drivers claimed that they were employed by Uber as workers, and entitled to workers’ associated rights. The court ruled that the workers should be classified as “workers” and not as “self-employed” and entitled them to benefits like paid holidays and minimum wage.
But this does not mean that the gig companies are all evil and rip all the benefits in the ecosystem. Urban Company has been in the news recently for protest by some women beautician partners alleging UC of unfair practices and low commissions. In its reply, UC publicly provided the data on the earnings of its partners and also mentioned other benefits such as insurance cover, training, and loans benefits that it has been providing to the partners.
If we were to believe in the data provided by UC, we could clearly see how gig platforms are vulnerable to the false accusations by one of the very important stakeholders in the value chain – giggers. Another issue is the limited control over the gig workers. Since workers are the face of tech platforms, any mistakes made on the job by workers (e.g., reckless driving in the case of drivers) would tarnish the company’s image.
Then there is also the risk of disintermediation where customers directly connect with gig workers directly, eating away their revenue and hindering the scaling of their business.
These types of challenges are inevitable, considering the pace and scale at which this space is evolving. And the government plays a crucial role in bringing stability and build confidence in the market. Many developments are happening across the world in terms of rules and governance.
One of them is the bill passed by the state of California which has legislated the workers in the gig economy to be classified as workers and not as independent contractors. Back home, India announced the code on social security 2020, which seeks to protect gig workers’ rights. This includes providing them with insurance cover and other benefits by mandating aggregators to contribute a certain amount of their turnover to the giggers on their platform.
What does all this mean for the gig economy? What shape will it take in the times to come?
What lies ahead?
The gig economy of the USA comprises around 36% of its workforce. India’s gig economy on the other hand employs less than 2% of the total workforce in non-farm sectors. Though this significant change is due to differences in the nature of jobs and economic progress in the two countries, the trend is rapidly changing. The workers are increasingly becoming open to working on a contractual basis, and employers are hiring more gig workers.
Nearly half of the Indian industry is actively employing gig workers. With evolving technology, the nature of jobs is also changing, and blue-collared jobs are shifting more towards skill-based jobs. And gig companies play a critical role in making this happen by providing additional solutions such as training, skilling and business management.
There is no doubt that the companies will still need permanent employees, but the gig culture is going to fundamentally change the employee-worker relationship. Companies will strive for efficiency while employing only the necessary workforce and hiring the rest on a contractual basis. Going forward, we should also be seeing more gig companies providing full-stack solutions. Pick any service industry, and we should not be surprised to see it being led by a gig platform (or getting Uberized if you like it) in the coming future.
This piece has been co-contributed by Akhilesh Kamble