The ‘gig’ economy and developing countries: beyond hype and false hopes

A sizeable literature has grown up trying to understand how digital technology has enabled relatively new forms of work and employment to emerge. There are various terms used to describe this evolving feature of the labour market. Examples include: the ‘sharing economy’, the ‘gig economy’, the ‘platform economy’, ‘digitally-enabled independent work’, ‘digital labour’ and ‘online labour’. In the discussion that follows, these terms will be used interchangeably while recognizing that the common tie that binds these terms is the ILO’s notion of ‘non-standard form of employment’ (NSFE).

Sundararajan is probably among the most influential scholars making the case that the ‘sharing economy’ propelled by a community of ‘micro-entrepreneurs’ and working through digital platforms has transformed – and will continue to transform – the world of work as we know it. He even suggests that one might be witnessing the ‘end of (formal) employment’.

One can readily think of iconic examples of the digital economy that ‘commercialize’ personal assets, whether they pertain to transportation (Uber), short-term accommodation (Airbnb), buying and selling of goods (Amazon) or freelance labour platforms (Upwork). The absolute numbers are impressive. Airbnb, for example, has more than two million users; Upwork has 12 million registered free lancers.

Sundararajan argues that the ‘sharing economy’ holds a great deal of promise for developing countries where ‘full-time institutional employment is not yet dominant and traditional economic institutions vary in effectiveness’. In such situations, economic exchange through credible and reputable digital platforms can ‘stimulate a self-employed and entrepreneurial population…and raise …living standards’.

There are, it appears, governments in the developing world that have embraced digital labour as an innovative strategy of employment creation. As one analyst puts it: ‘For policy makers in the Global South, the digital labour market is seen as an infinite source of employment that should be tapped rather than restricted or regulated.’

Some studies that have evaluated the market for digital labour in developing countries based on surveys of online workers and transactions in leading online platforms find a mixed picture. An OECD study concludes that:

(Much) work in the platform economy is carried out in small units and irregularly. Platform workers may therefore have multiple jobs, work long hours and under high stress…In addition, such work frequently has no social security coverage, can be terminated at will, and wages are low due to a high level of competition. While platform work has created many opportunities for workers in emerging economies, it has also risked engendering a “race to the bottom” in both pay and working conditions. Moreover, it is likely that a great deal of work remains undeclared, fomenting the informal economy.

Media reports do not seem to paint a positive picture of the conditions faced by some types of workers that form part of this new wave of ‘micro-entrepreneurs’.  Consider, for example, the case of the 900,000 ‘driver-partners’ for Uber and Ola in India. For Uber in particular India has turned out to be the biggest market in Asia. However, expansion of this kind of business is constrained by the low level of car ownership in India. Not surprisingly, both Uber and Ola have instituted car loan programmes for their driver-partners as a means of increasing car ownership which then can be converted into a commercial asset. However, loan repayments form a major part of the expenses of maintaining a car. This drives down the income of Ula and Ola drivers. Discontent has broken out among Uber driver-partners leading to temporary stoppages of the ride-hailing service.

The idea of large numbers of flourishing micro-entrepreneurs enabled by digital technology seems to ignore a well-established literature that document disappointing labour market outcomes of the self-employed in developing countries as revealed by rigorous evaluations of interventions intended to stimulate self-employment and entrepreneurship. Banerjee and Duflo have coined the term ‘reluctant entrepreneurs’ to depict this situation. They draw on a survey of poor people’s attitude to self-employment in a number of developing countries. Their conclusion? ‘The poor don’t see becoming an entrepreneur as something to aspire to’ and overwhelmingly prefer stable jobs in the formal sector and that too in public services.

One should not, of course, downplay the tangible benefits that flow from the evolution of new work opportunities enabled by digital technology. On the other hand, it is essential to engage more critically with the future of the platform economy and the way it will shape the world of work. Systematic evaluations of wages and working conditions in the digital economy are required. This will enable policy-makers and regulatory authorities to devise appropriate policy interventions, such as amending labour laws to cover wages and working conditions in the platform economy. The challenge is to reduce the incidence of precarious work in the digital economy while preserving the benefits that flow to consumers in the form of lower prices and wider options.

 

 

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