Gig economy. Gig workers have derailed the formal-informal divide

The formal/informal dichotomy has governed Indian policymaking for decades.

What the dichotomy fails to understand and encapsulate is the vastly changed economic models that have come into existence and are now deemed legitimate economic structures. The gig/platform economy in particular, is one such model that has cemented its position over the last decade, strengthened by its criticality in the home-bound year we have all experienced. So why is it that when economic savants or even our own statisticians measure India’s economy, this new paradigm is swept under, so to speak, the dichotomy rug?

In its most simplistic definition, the platform/gig economy straddles the edges of both the formal and the informal, attracting millions, who do not want the baggage that comes along with being a member of either side of the dichotomy. In fact, this dichotomy hurts the most vulnerable section of workers, the most.

Which is why dismantling this binary system is also necessary to smoothen frayed labour relations of the past few decades.

Reinforcing inequalities

Policymaking targeted at retaining these categories as separate only serves to reinforce inequalities and yet again fails to appreciate the changing realities, aspirations and desires of a burgeoning workforce.

But in the larger picture, such inequalities are further exacerbated by its pervasiveness in economic thinking and policy-making, across the spectrum. Our economy today is judged on the lines of formal and informal, unwilling to recognise the grey area that the gig/platform economy brings to the table.

The 90.7 per cent to 9.3 per cent ratio (as per PLFS) is less applicable, with a growing section of the Indian economy finding its place between the two.

The uniqueness of the platform economy, where some parts are formal (that is, payments and credit access) and other parts informal (time management, dynamic work relations), should force policymakers to realise that by perpetuating the dichotomy, our economic outlook is not anchored on ground realities, and that we may not be accounting for a very large section that has the potential of changing our economic outlook dramatically.

In fact, the most visible example of this unrealistic perspective is in policy design, especially those policies that aim to elevate members of the informal economy to the formal. For example, a platform worker may not be in need of a Jan Dhan account, as any monetary transaction over the platform already requires a formal banking process.

The worker in this instance is exhibiting characteristics of the formal economy (paying taxes on assets, availing formal credit, etc.) but is still considered a member of the informal economy. With a growing number of people opting for flexibility of the gig economy, policies being designed to formalise our economy without recognising this cohort of workers, is for all intents and purposes, a wasted exercise.

Policy planning has always attempted to target a specific audience for a specific purpose.

Dismantling the dichotomy of formal and informal and adding the layers created by new models such as the platform/gig economy will allow policymakers to determine what intervention is needed where, based on a better understanding of the characteristics of different groups. For example, the gains made in formality from 7.6 per cent in 2011-12 to 9.3 per cent in 2017-18, are coincidentally in the same era where the platform economy emerged and flourished. The recent recognition of platform workers as a separate category in the new labour codes is perhaps a sign that this may be dawning on some. The longer we allow this now defunct dichotomy to define how we view the Indian economy and subsequently design policies, we risk ignoring the changing dynamics of the Indian economic outlook.

The writers are with Ola Mobility Institute

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