Casual ‘gig’ work through informal daily or task-based arrangements has long prevailed in the Indian labour markets. In its digital, more formalised avatar, however, the gig sector has shown more promise as an engine for economic expansion and jobs. Digital marketplaces can offer more personalised services (read decentralised, responsive and transparent) and deliver higher market efficiency through demand-supply matching. A recent report by Boston Consulting Group and Michael and Susan Dell Foundation suggests that, in the next decade, the digital gig economy will create 90 million jobs, and contribute 1.5 percentage points to India’s GDP.
Blue collar gig workers are characterised by earnings volatility, greater exposure to health and financial shocks, and a low but transferable skills base. While gig workers generate and spend significant amounts of cash, they lack financial tools to manage their cash flows, invest in their own futures, and mitigate risks. This has to do with the lack of social security benefits accompanying gig work contracts as well as the inability of traditional financial underwriting institutions to cope with high worker attrition rates.
In 2020-21, when the COVID Pandemic caused severe supply chain disruptions and a subsequent economic fall-out, a majority of gig workers witnessed their earnings plummet and vulnerabilities increase. According to a September 2020 study by Flourish Ventures, whereas most workers had monthly earnings above INR 25,000 before the Pandemic, 9 out of 10 earned less than INR 15,000 afterwards. The same study showed that without their income, 47% of workers could not cover one month worth of expenses without borrowing funds. 44% had already borrowed, 45% had reduced consumption, 83% had used their savings. During this time, most workers had no recourse to appropriate finance or safety nets to help weather the storm. Many lost savings, livelihoods, and opportunities.
Even apart from major shocks, over 75% of gig workers face regular paycheck shortfalls and prefer smaller credit packages that can be immediately accessed when in need, and that most gig workers do not have bank-issued credit cards and could benefit from ‘anytime anywhere’ access to some basic level of assured liquidity. If such credit were provided sustainably, it could mitigate worker debt cycles – even in the form of informal favours taken from peers and relatives. Further, it could contribute scarce working capital and help workers invest in productive assets and gradually grow their earnings capacity.
The good news is that key stakeholders - including policymakers, employers, and innovators - have swung to action to empower this young and burgeoning workforce. Under the new 2020 Social Security Code, the Indian government has extended first time recognition to gig and platform workers, and will soon implement welfare schemes related to life and disability, accident, health & maternity, and old-age protection. These schemes are to be financed through a specific Social Security Fund set up through annual platform contributions of 1-2% of their turnover.
Major digital gig platforms across key sectors like ride sharing, logistics, e-commerce and home services, are also realising that taking care of their more vulnerable gig workers is not only ethically sound but also constitutes good business.
Platform-intermediated financial wellness programs have been instituted wherein the employers and third-party solution providers collaborate on data sharing, payout-linked repayments and more, to channel relevant solutions to workers. This has reduced the worker’s day-to-day financial stress, and in turn increased productivity and retention at the workplace. Such programs not only serve as a cost-effective channel to scale access to finance, but also give workers upstream security benefits that are not covered by Social Security today.
The solution provider ecosystem has also spawned new technologies and business models on the backbone of new digital public infrastructure (e.g., KYC, UPI, AA) that are optimising customer experience and risk viability of serving the gig segment. The available solution spectrum in India now covers earned wage access, line of credits, instalment-linked loans, liquid savings, gold-based investments, micro insurance & pension, and even non-financial products such as targeted skilling.
Our own business insights suggest that beneficiaries of small, recurring liquidity feel more secure, self-reliant and energised about their finances. We also see that gig workers utilise over three-quarters of such credit whether provided weekly or monthly, with over 80% repeat rates. Over 80% of these funds are directed to essential and productive expenditures such as rent, fuel, and groceries. And employer platforms have consistently benefited from a 20% plus boost in worker engagement and retention.
The next 5 years is bound to usher a brave, new world for the Indian gig worker.