Replacing full-time employees with freelancers and independent contractors has given place to the Gig Economy, (which sounds jazzy) and that is where the term gig comes from, at least in the 20thy century. Gig feels trendy; a gig economy, less so.
In developing countries, referring to a gig economy might even feel as if the advanced economies have finally caught up with us. After all, doing gigs is what almost 80 percent of Indian workers have been doing for many years. It is also what about a third of Brazilians and Chinese workers are doing. We used to call it hand-to-mouth work, and for most, it still is. So make no mistake, gig economy in developing countries bares only a pale resemblance to the same namesake in advanced ones.
But what are the differences?
Perhaps most gigging in the advanced economies results from workers “exiting” the formal sector, willingly or not. This may also apply to workers in the small “modern” sector in developing countries. Yet, more frequently than not, in developing countries, gigging results from exclusion from the formal sector. This exclusion may lock-in workers into gigging for a lifetime and is usually the result of discrimination on the basis of gender, caste, ethnic background, education and more. The true difference between gigging here and there is the locking-in for giggers in developing countries where the family might be the only safety net available.
Both in developing countries and in advanced ones, workers in the gig economy operate outside the legal and regulatory frameworks. This usually translates into working in flexible hours and offering services for a lower pay but also means that gigging workers lack whatever protection that the law and the State can provide.
The protection the State may provide might be meager in developing countries where competition for a habitat is more stringent. For instance, in many developed economies population is aging rapidly. This enables workers in the gig economy to find a place to sleep where others have recently died. Not so in countries with young populations and migrations into cities where the newcomers are out bidden by higher paid formal sector workers. Thus, the shantytowns so frequently developing in developing countries. It is no wonder that shantytowns are also more prevalent where the share of gigging to total employment is highest, i.e. about 33 percent in Brazil and China to almost 80 percent in India, but only 7 percent in the Russian Federation.
Gigging is also far from the panacea in advanced economies. There are plenty of creative and operational services that benefit from flexible hours and diverse occupations, from cyclists distributing Uber Eats to designers and software developers. Overall, gigging may allow for a better allocation of talents. But such flexibility comes at a steep cost; besides low pay, there are no paid holidays, no sick leave, no pension, no safety net of any sort. This is a type of insertion into the labor market that works best when young, but it does not foster a secure base for family building. One must rightly wonder whether this type of employment is socially sustainable in the long run.
Still, one might be tempted to say that it is better for the unemployed to be able to gig than finding no job at a higher pay. Which is true, except for the fact that the dynamics are perverse: the larger the pay differential, the greater the incentive for established corporations to shed workers from payroll and thus increase the number of contenders for gig jobs, further lowering their pay. It is a fast race to the bottom.
There is another problem to deal with. Steady jobs provide a long-term assessment of attitudes and performance. In the gig market, all there is to build is reputation, i.e. as in Uber drivers’ reputation. Not only do Uber drivers, and similar gig workers, have little option than to put up with undue criticism when working, they cannot take their reputations with them should they move to a competing platform such as Lyft, effectively restraining them into bondage to one platform.
Surely the worst of the current gig economy’s savage traits will eventually be restrained through regulation. But then labor costs will rise again, perhaps not to earlier levels, but we will be left with a labor force with fewer incentives to either study more or even reproduce itself at similar levels of education. Overall the gigging economy is worrisome because it is socially inauspicious.