Employers planning to go the gig economy way sholud think again

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Employers planning to go the gig economy way sholud think again

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• Big decision: Uber was slapped with a big decision in the UK, on job-market and gig economy rules. Many Uber drivers had moved the court claiming that they weren't self-employed, but Uber-controlled (why? as customers and fares were controlled by Uber).
• Supreme Court of UK: It considered the question whether these drivers, who used Uber App, were 'workers' or 'independent contractors' working with Uber as a booking agent.

1. The answer would decide whether minimum wages were payable or not (as also other worker benefits)
2. The duration of work would be either the total time the were on the App, or only the time they were driving
3. There was no written contract at all, and UK SC had to infer the nature of relationship from the conduct of parties, rather than normal laws on contract law and agency.

• Favourable verdict: The SC ruled in favour of drivers, noting their subordinated position and dependency on Uber. They had no ability otherwise to improve their lives through professional skills. 
• Future of gig economy impacted: Clearly, this ruling will deeply impact gig economy employers everywhere. 
• Gig economy: It refers to economic activity involving use of temporary or freelance workers to perform typical service sector jobs. Examples - delivery, white-collar consultants, taxi drivers etc. People hired through digital platforms.
• Frictional unemployment: When people are out of jobs but looking for new jobs, they are "in between jobs" and that's "frictional unemployment". Slowdowns can be reversed by temporary employment also. But in the 2020's pandemic recession, the gig economy may have reversed this strengthening of part time employment.
• What happened exactly: Both job-seekers and providers may have actively sought a gig framework model.

1. Employers - They now wanted to simply avoid the headaches of recruiting and training full-time human resources. Plus, they get very low overhead cost structures, and a lot of fluidity in gig models. Direct costs of full time employees too is eliminated.
2. Workers - They get the chance to decide whom to work for, at what rates, and when. Multiple jobs are possible. Boring nature of full time jobs is avoided.

• India's gig economy: Major sectors like pharma, real estate, FMCG, banking, insurance, mfg., services and technology is going from 50% to 76%. Most firms are hiring more of such workers now. The size of 'gig economy' may touch $455 b by 2023. 
• Not so simple: Engaging and managing the gig workforce is not easy at all, if one under-invests in it. They are physically dispersed, and the company culture has to be infused into them. The UK decision is a warning for Indian firms planning to move into these models. Government has to evolve some regulatory mechanism. And finally, economists have to educate us on the macroeconomic meaning of an economy that's always "temporarily" at full employment.

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