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THE GIG ECONOMY: PROBLEMS AND CHALLENGES FOR WORKERS

By Namrata P. Rajiv, Kinjal Sharma, Gautum Kumar Mishra and Manini Agarwal 

The year 2025 marked a significant turning point for India’s gig economy. Prime Minister Modi’s decision to provide gig workers with a legitimate identity through the e-shram portal and health insurance coverage under the Jan Arogya Yojana scheme demonstrated the government’s commitment to formalising this sector (Investopedia & Munichiello, 2024). 

As illustrated in the chart below, the gig economy has experienced exponential growth particularly driving the youth to this sector as an alternative employment, driven by the rise of online platforms such as Zomato, Instamart, Blinkit, and Zepto. This growth is expected to continue as more workers join the platform. The recent budget has acknowledged the sector’s potential by introducing measures to formalise it (Boston Consulting Group, 2021). 

From an economic perspective, investing in the gig economy offers numerous benefits, including cost-saving advantages for businesses and greater customer acquisition for consumers seeking doorstep delivery. According to NITI Aayog’s report, “India’s Booming Gig and Platform Economy,” the workforce in this sector is projected to exceed 1 crore in 2024-25 and reach 2.35 crore by 2029-30 (One Crore Gig Workers to Benefit Under PM Jan Arogya Yojana Healthcare Scheme, n.d.). 

However, this growth also presents challenges, particularly regarding fixed-period contracts, seasonal employment, and the ability to hire and fire workers flexibly. To address these concerns, it is essential to understand the challenges, prospects, and recommendations for taking this economy forward.

Increased digitalisation and the growth of e-commerce have led to a rise in the number of gig economy participants. With projections indicating a total of 86.5 million participants by 2027, it becomes pertinent to address the challenges and analyse the workings of the gig economy (Upwork, n.d.). 

CHALLENGES:

The gig economy has revolutionised the nature of work all across the world providing new job opportunities and flexibility of labour to millions of gig workers. Whether it is Uber, Zomato, or Swiggy, the gig economy is said to have revolutionised India’s economy with at its forefront the demographic dividend of half a million labor force comprising the youth. However, despite the enormous benefits provided there are several challenges causing adverse effects on the workers and the economy as a whole. Most specifically these issues include the legal insecurities due to the regulatory frameworks and the job instability posed by the gig economy.

Online transport services like Ola, Uber, Rapido, etc have a huge number of gig workers spanning across the country, in cities like Mumbai, Bangalore, Chennai, Delhi, etc. In a study, it was found that 60% of drivers work for more than 12 hours a day, and up to 83% work for more than 10 hours a day. Compared to the Indian Factories Act, of  1948, which sets working hours at 8 per day and 48 hours per week, gig workers often work beyond legal work limits, without any overtime. Furthermore, these companies have a ‘’30 min delivery policy’’ to maintain competition in the market, putting immense time-bound pressures on gig workers. Most of these companies work on demand-based services with no fixed working hours and low wages. 

1.1 Regulatory Framework

One of the most significant challenges faced by the workers is concerning workers’ classification. The majority of the companies classify the workers as independent contractors rather than employees to avoid obligations entitled to them resulting in blatant discrimination of workers. Gig workers in these scenarios are suffering from minimum wage laws, overtime pay, and workplace protections (Rogers, 2016). This classification undertaken by companies has often led to legal battles, with courts for example, in the landmark case of “Dynamex Operations West, Inc. v. Superior Court of Los Angeles” (2018), the Supreme Court of California ruled in favour of stricter worker classification standards, leading to the passage of Assembly Bill 5 (AB5) mainly due to pressure from gig giants like Uber. There are rulings which are held which have favoured workers while others have upheld the gig worker’s classification as independent contractors.

In India, gig workers face several challenges especially due to the ambiguous labour laws. There are attempts made to address these concerns such as the Code on Social Security 2020 to recognise gig workers and to offer social security benefits. However, this law does not mandate companies to provide employment benefits like minimum wage, social security, and job security and the implementation of this law remains very weak. This has resulted in gig workers continuing to operate in the grey area, with uncertainties.

Another significant issue faced is concerning tax contributions. Most of the time gig workers do not receive employer support. In the traditional workforce, taxes are automatically deducted by employers easing the complex procedures of filing taxes. Whereas in the gig economy gig workers themselves must set aside money, calculate, and then pay their self-employment taxes. This at times leads to financial strains for the gig workers(Collins et al., 2019). Research indicates that gig workers struggle with the complexities of tax filing as the majority of them are unaware of tax regulations. Moreover, the absence of employer contributions to social security and insurance also places an additional burden on gig workers, adversely affecting their earnings and long-term financial stability (OECD, 2021).

1.2 Job Insecurity and Lack of Benefits

In the case of the traditional workforce which typically requires a workforce full time the gig workers lack job security as their employment depends on the fluctuating demand and platform algorithms. Studies indicate that gig workers often experience income volatility due to unpredictable work availability (Woodcock & Graham, 2020) and it was also found that 29% of gig workers rely on gig work as their primary source of income, making them increasingly vulnerable to sudden shifts in demand as per a study conducted by the Pew Research Center (2021). Algorithmic adjustments tend to prioritise the workers leaving them without work affecting their long-term financial stability. Rosenblat and Stark (2016) found that ride-hailing platforms use opaque algorithms to determine worker availability and compensation, which reduces earnings without notice. In terms of demand fluctuations which are influenced by seasonal trends, economic trends, and changing consumer preferences. Demand for ride-hailing services tends to fall during economic recessions as consumers tend to cut down on discretionary spending (Hall & Krueger, 2018). Similarly, food delivery services see massive rise during holidays and lockdowns but experience sharp declines in normal periods (Chen et al., 2021)

Unlike the traditional full-time employees gig workers do not receive employment benefits, health insurance, paid leaves or retirement plans.A  report by the Economic Policy Institute (EPI, 2020) found that 87% of gig workers lack employer-provided health insurance, which makes them dependent on private plans or public assistance. A study by NITI Aayog stated that India‘s gig economy is growing rapidly but lacks structured benefits and protection for workers. Gig workers lack social security, health insurance, and fixed income making them vulnerable to financial instability. The absence of these regulations and rights has sparked several debates on the classification of gig workers.

1.3 Impact on the health of the workers

Studies show that 98.5% of gig workers suffer from depression and stress (PAIGAM, 2024). Long working hours, lack of breaks, and financial insecurity contribute significantly to their declining mental and physical well-being. They are not provided any formal compensation for any injury or health-related subsidies. This proves that there is a severe lack of portable benefits which are usually granted in more formal employment sectors.

RECOMMENDING POTENTIAL SOLUTIONS:

As previously illustrated, the gig economy has resulted in an asymmetrical relationship between employers and workers beyond legally binding contracts. Workers enjoy no permanent benefits (including insurance, healthcare, etc), have a lack of structured work hours, have to take on multiple jobs to survive, and struggle with monetary upliftment because of a lack of hard skills, etc. However, the instabilities and resulting inequalities from the gig economy can be alleviated through the implementation of new regulatory frameworks, grievance redressal mechanisms, worker-centric programs, and legal recognition of gig workers (Khan, 2024). Upon careful consideration of the pros and cons of the gig economy for all stakeholders (namely, the workers, employers, and the government), we would like to propose a list of measures to battle worker concerns:

  1. Wage regulations: The establishment of a minimum wage policy applicable to gig workers will go a long way in contributing to financial security and raising their standards of living in the long term (Sharma, 2024). 
  2. Flexible working hours: Flexibility in the work hours of gig workers is a double-edged sword, acting both as an advantage in terms of no formal loyalty to one single job while also creating a huge roadblock in healthy work-life balance. Workers have to take on multiple jobs to sustain themselves while also making sure they are available on demand to their employers. Therefore, more predictable work hours which retain their flexibility create a more advantageous work relationship – with workers not losing out on sources of income due to lack of notice and employers retaining a reliable workforce (Ganguly & Ramesh, 2023). 
  3. Welfare schemes and benefits: Portable benefits issued to gig workers are a group coverage mechanism which would include health insurance, unemployment insurance, and disability pay. To recognise the need to establish easy-access by gig workers for such required benefits, these portable assistance measures can be issued as group-fund coverage by either governmental or non-governmental entities (National Fund for Workforce Solution, 2024). 
  4. Redressal of grievances: Grievance redressal of the gig workers would help record their dissatisfactions and provide long-term solutions. 
  5. Enhancement of skills: Employers can issue skill-building programs to foster personal employment of workers by helping them create individual USPs which can help in recruitment in the long term (Posterity Consulting, 2024). 

These measures propose the restructuring of the gig economy along equitable lines to prioritise worker satisfaction and the protection of workers’ rights. By allocating autonomy and flexibility to the workers and allowing them to develop their skills, the labor market would see dynamic growth both in terms of workers’ skill sets and the diversity of opportunity. 

References

Ganguly, S., & Ramesh, A. (2023, January 25). India: Rules Governing the Gig Economy. Acuity Law. https://acuitylaw.co.in/india-rules-governing-the-gig-economy/#_edn3

Khan, A. (2024, June 12). Navigating the Challenges of the Gig Economy and Freelance Work. Rushford Business School. https://rushford.ch/insights/navigating-the-challenges-of-the-gig-economy-and-freelance-work/

National Fund for Workforce Solution. (2024, August 5th). The Gig Economy: Improving Job Quality for Gig Workers. National Fund for Workforce Solution. https://nationalfund.org/the-gig-economy-improving-job-quality-for-gig-workers/

Posterity Consulting. (2024, June 14). Navigating Gig Economy: A Survival Guide for Gig Workers. Posterity Consulting. https://www.posterity.in/post/navigating-gig-economy-a-survival-guide-for-gig-workers

Sharma, V. (2024, May 29). The Gig Economy: Challenges. Centre for Development Policy and Practice. https://www.cdpp.co.in/articles/the-gig-economy-challenges#

Collins, B., Garin, A., Jackson, E., Koustas, D., & Payne, M. (2019). Is gig work replacing traditional employment? Evidence from tax returns (NBER Working Paper No. 25425). National Bureau of Economic Research. https://doi.org/10.3386/w25425

De Stefano, V. (2016). The rise of the “just-in-time workforce”: On-demand work, crowd work, and labor protection in the gig economy. Comparative Labor Law & Policy Journal, 37(3), 471–503.

Dubal, V. (2021). AB5 and the politics of platform labor: The California fight for gig worker rights. Harvard Law Review Forum, 134, 65–78.

European Commission. (2022). Directive on improving working conditions in platform work. https://ec.europa.eu

Prassl, J. (2018). Humans as a service: The promise and perils of work in the gig economy. Oxford University Press.

Rogers, B. (2016). Employment rights in the platform economy: Getting back to basics. Harvard Law & Policy Review, 10(2), 479–520.

Woodcock, J., & Graham, M. (2020). The gig economy: A critical introduction. Polity Press.

(Investopedia & Munichiello, 2024) 

Boston Consulting Group. (2021, 3). Unlocking the Gig economy potential. 84.

Ganguly, S., & Ramesh, A. (2023, January 25). India: Rules Governing the Gig Economy. Acuity Law. https://acuitylaw.co.in/india-rules-governing-the-gig-economy/#_edn3

          Investopedia. (n.d.). What is a Gig economy. https://www.investopedia.com/terms/g/gig-economy.asp. https://www.investopedia.com/terms/g/gig-economy.asp

Khan, A. (2024, June 12). Navigating the Challenges of the Gig Economy and Freelance Work. Rushford Business School. https://rushford.ch/insights/navigating-the-challenges-of-the-gig-economy-and-freelance-work

National Fund for Workforce Solution. (2024, August 5th). The Gig Economy: Improving Job Quality for Gig Workers. National Fund for Workforce Solution. https://nationalfund.org/the-gig-economy-improving-job-quality-for-gig-workers/

  Posterity Consulting. (2024, June 14). Navigating Gig Economy: A Survival Guide for Gig Workers. Posterity Consulting. https://www.posterity.in/post/navigating-gig-economy-a-survival-guide-for-gig-workers

    Sharma, V. (2024, May 29). The Gig Economy: Challenges. Centre for Development Policy and Practice. https://www.cdpp.co.in/articles/the-gig-economy-challenges#

          Upwork. (n.d.). Gig Economy Markets and Takeaways. https://www.upwork.com/resources/gig-economy-statistics

            Margaret James. (n.d.). What is a Gig economy? https://www.investopedia.com/terms/g/gig-economy.asp

          One crore gig workers to benefit under PM Jan Arogya Yojana healthcare scheme. (n.d.). https://www.thehindubusinessline.com/

            PAIGAM & University of Pennsylvania. (2024). Working and living conditions of app-based workers in India: Prisoners on wheels report. The Gig and Platform Workers Union. https://tgpwu.org/2024/03/13/prisoners-on-wheels-report/

Government of India. (1948). The Indian Factories Act, 1948. Ministry of Labour and Employment. https://labour.gov.in/sites/default/files/factories_act_1948.pdf

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