Understanding a Gig Economy?

The gig economy is all the rage these days. We are all aware of the changes in our jobs, professions, economies, and societies, affecting various professions and individuals’ daily lives. The gig economy is characterised by a free market system where organisations hire independent workers for short-term commitments, with temporary positions being common. Freelancers, independent contractors, and project-based workers are examples of gig employees.

Sometimes people think that the gig economy is similar to outsourcing. While there can be some overlap between the gig economy and outsourcing, they have different focuses. The gig economy primarily revolves around the flexible engagement of individuals for short-term tasks or projects, whereas outsourcing entails the delegation of specific business functions to external entities for long-term operations.

Status Quo shifts Big to Gig

The shift towards a gig economy in recent years can be attributed to several factors. The workforce is becoming increasingly mobile, and remote work facilitated by digital platforms is on the rise. This dissociation of job and location allows freelancers to access temporary jobs globally, while employers can choose from a larger pool of talent for specific projects. The use of digital labour platforms, which connect employers with on-demand workers, is also becoming more prevalent. The economist Guy Standing (2016), estimates suggest that by 2025, one-third of all labour transactions will be mediated by digital platforms.

According to the OECD, gig-economy platforms currently account for a modest share of total employment, ranging from 1% to 3%. However, this share is growing rapidly. A report from Mastercard predicts that global gig-economy transactions will increase by 17% annually, reaching approximately $455 billion by 2023. As the gig economy expands and larger companies emerge, policymakers and officials face the challenge of striking a balance between promoting job-creating innovation and ensuring fair treatment for workers. Gig-economy companies pose complexities in areas such as product-market regulation, competition policy, tax regulations, and labour-market policies.

From the lens of a Gig Employee

A UK government survey revealed that individuals working in the gig economy were primarily satisfied with the independence and flexibility it offered. However, respondents expressed less satisfaction with work-related benefits and income levels, with one in four stating they were fairly or very dissatisfied with these aspects of their work. Further 23 per cent were dissatisfied with career development and training opportunities in the gig economy (UK Government., 2018). For individuals such as students who want to earn income while studying or primary carers seeking work that fits around school or daycare hours, gig-economy companies can provide flexible working patterns.

Spyholing Gig’s Impact

The rise of technology, cheap labour, and entrepreneurial spirit is aiding the growth of the gig economy. The platforms enable workers to connect across geographical boundaries. 

1. Potential to Improve Productivity and Specialization:

The rise of the gig economy is expected to have a positive impact on overall productivity. It will lead to increased labour force participation rates and improved access to lower-wage workers from abroad, resulting in greater specialisation and standardisation of work. The net population growth rates in many Eurozone countries have fallen below the replacement rate threshold, exacerbating the problem of fall in labour productivity. However, the gig economy has the potential to change this scenario by increasing productivity through digital platforms and expanding labour participation beyond borders.

Companies can assign specialised tasks to freelancers, resulting in increased accountability and performance standards. The connected global labour market will contribute to a rise in economic productivity, even in countries facing labour shortages. Workers from labour-abundant developing countries like India are likely to benefit from this trend.

2. Employment and Labour Participation:

Labour participation in the gig economy is influenced by income levels, with lower-income individuals being more likely to participate than higher-income counterparts. According to JPMorgan Chase, In 2016, 0.7% of people in the lowest income quintile earned income from labour platforms like Upwork and Uber, while 0.4% relied on capital platforms like Airbnb. The lower-income group also showed higher persistence in using labour platforms, with 56% of participants in the lowest income bracket continuing to access the platform within a year.

The gig economy transcends spatial location, whether urban, rural, or small towns, as online labour markets such as Freelancer and Upwork provide opportunities for work that can substitute for physical labour migration. The gig economy has spill-over effects on labour markets, such as the reduction of taxi fares in major Indian cities after the introduction of services by Uber and Ola.

3. Widening Distributed Inequality:

The gig economy brings complex and unevenly distributed benefits. Full-time gig work can lead to lower income and vulnerability for lower-skilled workers in developed countries, while workers from developing countries may experience faster wage rate increases. Wage inequality and outsourcing of low-skilled work contribute to skewed income distribution. Gig workers often earn less than the minimum wage and lack benefits like health insurance. Another possible source of unequal income distribution arises from ownership of capital platforms. Exogenous shocks, such as COVID-19, can also change distribution of income. In a survey conducted by APPJOBS, comprising 1,400 workers from 58 different countries, the study finds the sectors which benefited from the pandemic includes delivery, consulting, freelancing, and online surveys. Whereas the in-person sectors, such as house sitting, babysitting, driving, and hospitality (hotel and tourism) industries, were negatively impacted. 

The India Story and COVID-19 

The COVID-19 pandemic has had a significant impact on the job market, with many gig workers struggling to find work while others experiencing an increase in demand for home delivery of commodities. Delivery services like Swiggy and Zomato have seen a surge in popularity as people turned to home delivery for food and supplies.

According to a Niti Aayog report, the gig workforce in India is projected to reach 23.5 million workers by 2029-30, a significant increase from the current 7.7 million. The demand for gig workers has grown by 10 times, and their participation has increased by 3 times in 2022 compared to 2021, as per the Task report. The gig economy is seen as a key driver in India’s goal of becoming a $5 trillion economy by 2025, contributing to income generation and reducing unemployment. A study by Boston Consulting Group (BCG) suggests that the Indian gig economy has the potential to provide up to 90 million jobs in non-farm sectors, contributing around 1.25% to India’s GDP through efficiency and productivity gains.

The gig economy is gaining attention among Indian professionals due to factors such as downsizing, the rise of the digital age, and globalisation. This economic model allows independent contractors to expand their client base nationally and internationally, while businesses can access professional services from the global market.


The gig economy has emerged as a significant force reshaping the way people work in the 21st century. It offers flexibility, independence, and increased opportunities for individuals to participate in the labour market. The rise of digital platforms has enabled the growth of gig work, allowing individuals to connect with job opportunities globally. While the gig economy has its advantages, such as providing income and employment opportunities, it also presents challenges such as income inequality, lack of benefits, and job insecurity. As the gig economy continues to evolve, it is important for policymakers, businesses, and workers to adapt and find solutions that balance the benefits and drawbacks, ensuring fair treatment and protection for all participants.


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Gaurav Jain

[email protected]

B.A. (Hons.) Economics, 2nd Year

Hansraj College, D.U.