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Wednesday, November 25, 2020

Gig Lessons from California

As employment, facilitated and negotiated via digital platforms grows in India, a 'third-way' between formal and informal structures may be the path forward

Written by Vineet John Samuel | Updated: November 16, 2020 7:06:53 pm
NASSCOM supports exemptions to immigrants in US healthcare but terms IT workers 'essential' too, IT industry body NASSCOM, NASSCOM on US immigration ban, NASSCOM on us president donald trump's executive order to ban immigration, NASSCOM on it sector, it sector news, business news, indian express business newsThe bone of contention in California is a form of employment, facilitated and negotiated via digital platforms, that is popularly referred to as gig work. (Photographer: Wei Leng Tay/Bloomberg)

As the United States waited multiple days for results to trickle in from swing states across the country, one set of voters had already seen their demands vindicated by November 4. Here, Californian voters chose to overturn the states controversial AB5 bill that attempted to coerce companies into classifying independent contractors as employees. By overwhelmingly voting for a ballot measure referred to as Proposition 22, the voters granted platforms like Uber, Lyft and DoorDash an exemption to this particular element of California’s labour laws, and in doing so, may have provided a lesson to regulators, law makers and policy chiefs world over.

The bone of contention here is a form of employment, facilitated and negotiated via digital platforms, that is popularly referred to as gig work. The name itself stems from individuals performing such work as part time “gigs”, to make some extra money after work hours. By the very nature of this work, timings are flexible, and workers are supposedly free to enter and exit the market at will. Hence, these workers are legally designated as “independent contractors”. Over time however, a form of work originally designed with the sanguine intent of serving as an additional source of income to the employed, shifted, for a large portion of drivers, to being the primary source of employment itself. After this, came demands not only to increase compensation, but also to classify drivers as full-fledged employees entitled to the wide array of benefits and protections that would accrue to fully formal labour. These demands were written into law in 2019 through the AB5 bill.

For firms like Uber, Lyft and DoorDash, such a bill posed, what they perceived to be, an existential threat. With their business models premised on the concept of flexible, on-demand labour, formalisation would mean retaining only a fraction of existing partners as full-time employees or outright exiting the state of California while setting a dangerous precedent for their operations elsewhere. Faced with hostile courts and legislation, platform giants came together to propose the single most expensive ballot measure in the state’s history with more than $204 million spent on Prop 22. Through this effort Uber CEO Dara Khosrowshahi put to test his proposal for a “third way” outside the employee-contractor binary, where partners were guaranteed certain benefits but could opt-in to others. For critics, this was yet another case of a platform wriggling out of responsibility, but consistent and widespread support for the measure, followed by its resounding electoral success, may call for a rethink, including by gig sceptics back home.

Unlike the United States, India continues to be characterised by an economy that is primarily informal. For several decades, urban unskilled labour has had to rely on forms of employment that fall entirely outside the purview of Indian labour law leaving approximately 62-85 per cent of urban informal workers without access to benefits or social security. In this bleak environment, the arrival of gig platforms such as Uber, Ola, Zomato and Swiggy presented a quasi-formal source of employment offering a greater degree of protection than much of the marketplace. Quite naturally, their growth, both in terms of revenue and in terms of partners has been exponential with Uber and Ola now employing more than four million drivers between them. However, a compensation structure primarily centred on a low base fare and ever declining incentive bonuses has been at the heart of growing driver discontent. Driving longer hours for lower pay, the last four years have been characterised by regular protests by the larger partner community.

For gig platforms, these protests pose a unique challenge. While the pandemic has only grown the pool of workers willing to join their ranks, the slowdown has also translated into a reduced demand for their services. Platforms like Swiggy have responded to this unique environment by further cutting driver compensation, with drivers complaining of pay-per-order being cut from Rs 35 to Rs 15. After a week of protest, however, most drivers found their way back onto the platform, with Swiggy reporting a return to 95 per cent capacity. Such conflict, however, does not bode well for either the platforms or their partners.

While political support for gig workers remains limited at present, growth in the larger body of gig workers and increased unionisation will almost certainly translate to greater electoral pressure in the near future. Such pressure may compel regulators and lawmakers either at the state or centre to mandate harsher, California-like, regulation surrounding worker classification or specific price control measures that could hurt long term platform profitability.

A significantly better alternative to this conflict would be for platforms to preemptively construct Khosrowshahi’s “third way”. In many ways, Indian platforms are already well on their way. Unlike most informal employment, gig partners are guaranteed regular and timely compensation for their labour, have access to term insurance (since 2018), and as of 2020 can also contribute towards an Employee Provident Fund. Platforms could take this process a step further and voluntarily emulate their Prop 22 commitments guaranteeing greater daily minimum earnings, while ensuring drivers do not need to drive greater than 12 hours a day to make ends meet.

As a market, India remains an opportunity that simply cannot be sacrificed. While local platforms like Ola, Swiggy and Zomato rely on India as their core market, India also continues to be one of Uber’s largest marketplaces as well. In very much the same vein however, platforms continue to grow in stature as the future of urban Indian work, projected to expand into at least 250 cities by the end of 2021. The future of this relationship may hinge on developing a regulatory ecosystem that protects flexibility but guarantees social security. It is here that California’s electoral experiment may prove to be instructive.

The writer is a German Chancellors Fellow based out of the Hertie School of Governance, Berlin

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