The Woke Threat to the Gig Economy

When Rights Are WrongSHAIK SALAUDDIN IS one of the actors in Rahul Gandhi’s fantasy epic-in-the-works on how to ‘mend’ the Indian economy, broken or not. Salauddin—who was once an Uber driver—participated in a 20-minute walk with Gandhi in the Bharat Jodo Yatra in November 2022. That was his overnight launch pad from anonymity to celebrity. In that sliver of time, Salauddin claimed he managed to pitch his grievances and de­mands successfully to the cause-starved Congress leader. By 2020, as the head of two gig workers’ unions, Salauddin had upped his game to the next level. With the formation of the Indian Federation of App-based Transport Workers (IFAT) and the Telangana Gig and Platform Workers Union (TGPWU), he claims a large membership for his unions cutting across food, grocery delivery and e-commerce delivery platforms in Telangana. Salauddin had featured on no other political leader’s radar until that moment in the Yatra when he met Gandhi.

Today, Salauddin has a Wikipedia page and social media handles even as he con­stantly travels across India, coordinating pro­tests for what he says are efforts to protect gig workers’ rights. Self-confessedly “not aligned to any political party”, he has even found a seat at the table at the Union government’s Working Group on gig workers.

Time and again, Rahul Gandhi has dis­played a strong inclination to make a case for India’s supple economy as troubled, even shopping at woke malls on foreign soil to buttress his theories of a one- size-fits-all worldview. On the gig (a term borrowed from the music indus­try) economy in India, his lament echoes that in the European Union (EU) and the pre-Trump US: giant internet-based retail platforms offering flexible, non-permanent work to thousands of low-skilled workers are socialising risks and privatising prof­its in an exploitative relationship with delivery partners, thanks to lack of relevant government regulation and scrutiny.

The gig economy gradually took a big slice of the traditional economy when, in the US, it burgeoned after the 2008 financial crisis across sectors. In India, this is a more recent phenomenon that has been driven by the rapid expansion and growth of high-speed internet and the march of new technology, the impact of the pandemic years, and significant lack of permanent or steady income-generating employment. There is ample evidence by now that India’s gig economy or platform-based work has very strong potential to give a major boost to economic growth.

All this seems to have escaped Gandhi and he seems bent on leading the Western chorus that, in the gig economy, protec­tion of workers’ rights is weak to non-existent and is racing backwards in time to pre-trade union days. The facts about the Indian economy, its high rate of growth compared to its peers as stated by the International Monetary Fund (IMF), the World Bank and other agencies do not come in Gandhi’s way. For him, what matters are the views of academics displaced from the corridors of power in New Delhi and reports generated in woke corners of the world.

In March last year, the EU came to an understanding after two years of deliberation on the rights of gig workers across sectors. A presumption of employment and rights on algorithmic man­agement were at the heart of the ‘momentous’ platform-work directive, which caught many platforms by surprise. In the UK, all workers, irrespective of their employment status, are entitled to the National Minimum Wage as a fundamental protection against exploitation. Workers are also protected by the Working Time Regulations, which include a maximum 48-hour working week, paid annual leave, rest breaks and protection against dis­crimination through the Equality Act 2010 safeguards. In Califor­nia, the Assembly Bill 5 or AB5 regulates how companies classify and treat workers hired on a temporary or contractual basis. The Bill, which went into effect on January 1, 2020, was designed as a response to calls for increased legal protections for gig workers and others who make a living through flexible, temporary, and freelance working arrangements. Pushback from corporations and industries opposing these new regulations and protections, however, led to additional legislation modifying the impact of AB5 for gig workers.

But as with the EU and the UK, so also in California, gov­ernments are realising the negative impact of imposing tradi­tional labour laws and norms on gig economies that rely heav­ily on flexible and temporary delivery partners for profits and rapidly grow into major work generating sectors. Traditional industries that are increasingly relying on temporary workers and flexible staff to cut down overheads are also likely to be im­pacted negatively in a straitjacketed labour rights framework.

Imported to India, these ideas and regulations can kill a nascent sector that is a major source of employment generation now. Influential academic voices, for example Rakshita Swamy and Babu Mathew of the National Law School University of India, have made arguments favouring regulating the sector. But most such arguments are based on workers’ rights and not the overall complexion and nature of the sector in India.

Rahul Gandhi, however, has a proclivity to borrow bad ideas infecting economies elsewhere without paying attention to the lessons policymakers subsequently learnt. Quite apart from propping up Shaik Salauddin, this purveyor of terrible ideas managed to include his vision in the Congress manifesto. Both Congress-ruled Karnataka and Telangana have draft laws to protect gig workers’ rights based on Rahul Gandhi’s diktats. A similar law on the anvil in Rajasthan was thwarted by Congress’ resounding defeat in the Assembly election.

DOES THIS ‘UNIONISM’ among gig workers pose a threat to India’s gig economy? Does it matter when forming unions in a service economy is more difficult (due to the nature of work) compared to, say, manufacturing?

In 2022, NITI Aayog released a report on the status of India’s gig economy. The report, ‘India’s Booming Gig and Platform Economy: Perspectives and Recommendations on the Future of Work’ analysed the nature of the gig economy and presented estimates about the number of gig workers and future prospects of the sector. Some of its findings were interesting. For example, compared to the old economy, the elasticity of employment to GDP in the gig economy is positive and high. In plain language, for every 1 per cent increase in GDP, the gig economy generates more than 1 per cent jobs. From 2011-12 to 2017-18, this elastic­ity was 1.848. That means a 1 per cent increase in GDP led to a nearly 2 per cent increase in gig employment. From 2017-18 to 2019-20, this figure went up to 2.604. In effect, gig employment was booming. In contrast, overall employ­ment elasticity in the first period (2011-12 to 2017-18) was negative and barely crossed 1 in the second period (2017-18 to 2019-20).

The employment figures tell their own story. In 2011-12, gig workers numbered around 25 lakh. This figure went up to 68 lakh in 2019-20 and was projected to touch 1.27 crore in 2024-25. The estimated number in 2024-25 is a tad short of that, at just above one crore. By 2029-30, this number is expect­ed to shoot up to 2.35 crore. Similarly, a report by the Boston Consulting Group expects India’s gig economy to rise to 90 million jobs (nine crore) in the next eight to 10 years. Another industry report says that by 2024, more than 75 per cent of the services industry will be staffed by gig workers. Another report, by Ernst and Young, observes that Indian freelancers hold a 24 per cent share of the global online gig economy. One can conclude that gig work is booming.

Yet, the current prognosis of gig work among ‘progressive’ sections in India—NGOs, civil society activists, their global col­laborators, and political parties of a leftist persuasion—is that what is going on is more in the nature of Victorian “satanic mills” than gainful employment by which people from India’s rural hinterland are getting to participate in its economic rise.

One example of this kind of negative projection is the annual Fairwork report that has a report on India as well. The India re­port rates gig companies on the basis of “five principles”: fair play (basically income), fair conditions, fair contracts, fair manage­ment and fair representation. Most companies do well on three parameters (fair management, fair contracts and fair conditions) but do very poorly on fair play and fair representation. The last point, in particular, is extremely damaging. It seeks conditions that will allow unionisation of gig workers. No Indian platform-based company has scored positive on this point.

Much of this sort of reasoning is informed by Western prec­edents, such as the California law AB5 of 2019 and Proposition 22 of 2020 that regulate the gig economy there. AB5 prescribes a threefold test for classifying workers as employees. This requires that the company show the worker is free from its control and direction. The work done by the worker is outside the usual course of the company’s business and, finally, the worker in question is normally engaged in an independent trade or occu­pation of the same kind as the work he is doing. Unless this can be shown, it should be presumed that the worker in question is an employee as the word is normally understood.

If such ideas are imported into India, and efforts are being made to do so by enacting legislation, one can be sure that, given India’s history of labour regulation, the platform economy will experience sudden death.

By now alarm bells should have been ringing in Shram Shakti Bhawan in New Delhi that the sector witnessing the highest growth in work is being targeted as unfair by foreign activists. It is worth delving into India’s labour and employ­ment history to understand why the gig economy needs protection against pro­gressive ideas. India is yet to eliminate the worst aspects of the socialist experiment with its cesspit of laws that make it impos­sible for companies to hire and fire labour flexibly. In those sectors, which is to say most sectors of the Indian economy except the new gig work and agriculture, labour laws are stringent to the point they have choked the economy’s potential for much of its life since Independence. By 2020, the Narendra Modi government had simplified the jungle of labour laws into four codes. But to date only the Code on Wages (2019) has been notified. Even after 70 years, this remains a highly contentious area even if formal employment is very small com­pared to the sea of informal work that does not pay and is often disguised unemployment.

How real is the danger of the gig economy being derailed at the altar of this toxic politics? Some signs are already visible. The imprint of activist think­ing as reflected in the Fairwork report has now percolated to the political level across many Indian states. This is being done systematically.

The trend to regulate and choke the gig economy is visible most clearly in non-BJP-ruled states where legislation is either in the pipeline or has been passed. In July 2023, just months be­fore the Assembly election in the state, the Rajasthan legislature passed the Rajasthan Platform Based Gig Workers (Registration and Welfare) Act, 2023. The enactment received the governor’s assent in September but was not implemented as the Congress government lost power in December. Salauddin, sitting in faraway Hyderabad, urged Rajasthan Chief Minister Bhajanlal Sharma to implement the law by framing rules under the Act and creating a welfare board prescribed under it. He also asked for insurance and fair wages for gig and platform workers.

A BILL THAT IS similar to the one passed in Rajasthan is currently being considered in Telangana. The language of the Telangana draft Bill, the Rajasthan law and the Bill in Karnataka and the Jharkhand Bill are very similar. The X features that are worth noting in all these Bills are their efforts to regulate the gig economy. The first thing to note is that all these Bills provide for a fund for platform-based gig workers. This fund will collect a cess to be levied on the aggregator that engages gig workers. The Telangana draft mentions a cess of not less than 1 per cent per transac­tion (excluding taxes) but not more than 2 per cent per transaction.

This is an alarming proposition. The ad­vantage of gig-based delivery of goods—say, groceries—is that it reaps economies of scale over the traditional mom-and-pop stores found in neighbourhoods across cities. The other advantage is their much faster— home-delivery time compared to the state shop-based retailing. In all these operations, the margin in terms of advantage of their static rivals is not more than 4 to 5 per cent. It is within those margins that profits, wage payments to gig workers, taxes and other liabilities have to be met. If the cost per transaction goes up by 1 to 2 per cent, this can prove to be a deal breaker for this section of the services sector. Gig work in such circumstances can only survive in case the demand for the goods and services is relatively inelastic to the changes in price. As anyone establish­ing a business in India knows the Indian market and consumers are acutely price-sensitive. One does not have to exaggerate to say this can spell the death knell for gig work.

Much worse is, however, in store for the gig economy if these Bills/Acts are ever implemented. In the Rajasthan Act, for example, the cess to be levied per transaction is described as “…which shall be at such rate (per cent) of the value of each trans­action related to platform based gig workers as may be notified by the state government.” This, in effect, means the cess can be a higher amount or can be varied as the government wants. The Karnataka and Jharkhand Bills are worded similarly.

The other thing worth noting in these Bills is their attempt to bridge, if not eliminate, the distinction between gig work and formal employment. The essential difference—gig work is not formal and neither is it contractual labour in the strict sense of the term as gig workers are more in the nature of contractors— is lost sight of in the language of rights on which these Bills are based. The Karnataka Bill goes the farthest in this attempt. Section 15 of the Karnataka Platform Based Gig Workers (Social Security and Welfare) Bill, 2024 says: “The contractual agreement entered into between the aggregator and the platform based gig worker shall contain an exhaustive list of grounds for termi­nation of contract by the aggregator or deactivation of the gig worker from the platform.” The same section also provides that an aggregator shall not terminate a gig worker without giving valid reasons in writing and shall give a prior notice of 14 days.

Another part of the Bill, Section 24 (on resolution of disputes against the aggrega­tor) says: “Notwithstanding anything con­tained in this section, a platform based gig worker may seek resolution of his disputes through the mechanism under the Indus­trial Disputes Act, 1947.” The Industrial Disputes Act has its own paraphernalia of officers, courts and procedures designed to ensure employment cannot be termi­nated easily. It is also among the handful of laws to have ensured that employment on a scale India needed could never be gener­ated. Now, efforts are being made to ensnare what is probably among the more dynamic sectors of the economy where the potential to generate jobs is very high.

These two sections, in one fell swoop, seek to transform a very different way of working into a formal employment rela­tionship. This has the potential to derail the gig economy. This, ultimately, is what activists seek. In their view, all employment should be formal and permanent, with cradle-to-death security. It is safe to say there are very few jobs of that kind in the world when compared to the huge mass of people seeking work.

digital innovationgig economypoliticsRahul GandhiShaik Salauddianworkers