Is the sharing economy a race to the bottom?

Dr B K Mukhopadhyay

(The author is a Professor of Management and Economics, formerly at IIBM (RBI) Guwahati. He can be contacted at m.bibhas@gmail.com)

Dr. Boidurjo Rick Mukhopadhyay

(The author, international award-winning development and management economist, formerly a Gold Medalist in Economics at Gauhati University)

As John McAfee rightly puts it, "The gig economy is empowerment. This new business paradigm empowers individuals to better shape their destiny and leverage their existing assets to their benefit." Broadly, gig work can be classified into: "geographically tethered work," which requires workers to be in a particular place (driving for ride-hailing companies, MFDA – mobile food delivery aggregators), and "cloud work" which refers to work that can be completed remotely via a computer (jobs in teaching, tax analyst, consultants – i.e., knowledge work). For either of these categories, there are several preconditions, A) Adequate and available platform infrastructure (e.g., 4G connectivity, cloud computing, GPS networks, etc). B) It involves the digital legibility of work – i.e., whether or not the work can be mediated via a digital platform. e.g., delivery work for MFDAs or couriers has a high level of digital legibility as it involves a discrete task that can be mapped onto a process with defined steps. C) Combining technological and social aspects - affordable smartphones coupled with regular internet connectivity is important for both workers and consumers of platforms.

"A remote work environment enables employers to recruit and employ people from anywhere, and gives those employees the flexibility to work from where they already are." – shared Michael Risse from a US-based software company Seeq. Contemporary debates argue that it's a lot easier to keep everything organized when a given workplace goes virtual. Although broader gig work has existed for a long time, the 'platformization' of this work is redefining the gig and sharing economy.

For example, Richard Heeks in his 2017 study estimates that around seventy million people have found work via a platform. McKinsey estimates that 540 million people could be seeking work through 'online talent platforms' by 2025, with a prediction that up to 230 million would find work. One-third of all work is estimated to be mediated via digital platforms. Across the countries in Europe, 9% of people in the UK had carried out paid work via platforms, with 9% in the Netherlands, 10% in Sweden, 12% in Germany, and 19% in Austria. In a US-based study, it was found that 8% of Americans worked on an online "gig" platform in 2016, rising to 16% for the eighteen to twenty-nine age bracket.

The gig economy is largely driven by independent contractors and freelancers instead of full-time employees. It has affected a wide range of industry sectors, which according to the Bureau of Labor Statistics (BLS) includes: arts and design; IT; construction and extraction; media and communications; and transportation and material moving. During the short-term, quick and cheap labour can help start-up companies in the tech and app development industry to keep their business models profitable. They have lower overhead costs by utilizing telecommuting or remote workers for specific gigs until they can fund a full-time team at a later stage in business.

A recent global Deloitte survey of over 13,000 millennials found almost half of respondents believe gig workers earn as much as those in full-time jobs, and the same number think gig workers have a better work-life balance. According to a 2018 report, 65 per cent of global hiring managers said the gig economy is increasingly becoming the new norm for how businesses organise workflow. Essentially, the global freelancer market has become an outsourcing free-for-all resulting in structural changes to the global labour supply. With this increasingly cheap outsourcing, SMEs seek to reduce labour costs when hiring freelancers online.

"Asia cemented its status as a gig-economy hub (of the world) in Q2 of 2019".

The ASEAN region has emerged as a freelancer hotspot. Digital marketing agencies in the West, responsible for delivering content marketing articles for businesses, can save up to 400% by hiring freelancers based in Southeast Asia. Also, eight in 10 talent managers in the Asia Pacific (APAC) region hire or use gig workers. Freelance revenues in Pakistan, the Philippines, India and Bangladesh were among the ten fastest-growing annual gig economy revenues and collectively recorded an increase of 138% compared against Q2, 2018. In the Asia Pacific, the report revealed that 84 per cent of hiring managers outsource to freelancers. 31% of the global population have taken to the Internet in search of non-traditional work contracts, including those in Southeast Asia.

Institutionalizing employment standards for digital career workers

In 2020, Senate Bill 1469 in The Philippines or the National Digital Careers Act would prepare Filipinos for the skills needed for the gig economy. Interesting, this bill seeks to establish a legal framework for the gig economy that will map out strategies to promote and strengthen digital careers and institutionalize employment standards for digital career workers. Similarly in Singapore - the Tripartite Alliance for Fair and Progressive Employment Practices guidelines for certain employment benefits available to term contract employees thereby ensuring employees are sufficiently protected under existing employment law.

Southeast Asia is going to be the fourth-largest economy in the world by 2030, and that speaks of the colossal opportunities lying to be exploited. The gig economy is a growing trend in Southeast Asia if we look at some statistics - 26 per cent of Malaysia's workers are currently freelance. Similarly, 56.9 per cent of Vietnam's working population are self-employed, and 50.9% in Indonesia (World Bank). According to official numbers in 2018, almost 75 million Indonesians are classified as informal workers, which include those with casual and part-time jobs.

Labour laws should guard against exploitation

Labour laws are different in every country, gig workers are an easy target to be overworked and underpaid in the unregulated market in Southeast Asia, also possibly in unsafe working conditions. In Indonesia, people find it difficult to earn a full-time income due in part to the decline of retail and manufacturing sectors from regional competitors that have more efficient markets like Malaysia and Thailand. On top of that, Southeast Asia also has its own set of limitations regarding the safety of workers and operating regulations, and one can remember the child labour scandal of Nike in Indonesia or the collapse of the Rana Plaza factory building in Bangladesh where Primark had an outsourced manufacturing base. Also, in the UK (i.e., where labour standards and laws are stricter than the above-mentioned countries) recently, an investigation exposed a sweatshop (making garments for the fast fashion industry) in Leicester where workers were being paid less than the minimum wage.

Local solutions to global problems?

Surely, as the Southeast Asian region is carving itself out as a start-up-friendly regulatory sphere, national governments are unable to protect gig economy workers out of fear of extensive economic destruction. The fear of start-up exodus is also real. Gig Economy is a race to the bottom that can feed off the competitive excesses of global capitalism. Venture capitalists financially nourish start-ups that can avoid employee liability and worker rights. This puts responsible players on the backfoot, effectively incentivising firms to become malign social actors.

Gig work in both the formal and the informal economy carries along variable levels and degrees of objective and subjective characteristics of uncertainty and insecurity. Arguably, we can consider gig work to be precarious work which inherently allows employers to shift risks and responsibilities on to workers. We need to understand that a gig work can have many faces, such as uncertainty as to the duration of employment, multiple possible/ disguised/ ambiguous employment relationship, a lack of access to social protection and benefits usually associated with employment, low pay, and substantial legal and practical obstacles to joining a trade union and bargaining collectively.

A labour study projects that gig jobs will outnumber traditional nine-to-five, office-based jobs, by 2027, by up to 60% that would put legislative pressure on both governments and also companies to spend up to $6 billion on improving the rights of freelance individuals. The impact of the gig economy is, therefore, not only about how many people are employed in freelancer work, geographically-tethered or cloud-based, it is also about how innovatively new ways of managing labour can be developed and managed responsibly thereby shaping the new future of work.