Changing Geographies of Work: India’s Online Gig Workers in a Digitalised Labour Market

Advances in digital technologies are accompanied by transformations of labour markets. Among these is the rise of the platform economy, and especially digital labour platforms – i.e. online marketplaces that connect work providers and work seekers. The first emerged in the early 2000s; since then, their number has multiplied worldwide from 142 in 2010 to over 777 in 2020.^[1] Their scope is broadening as they expand geographically, include more occupations, and add new services to their business models (e.g. financial services or tools for operational and risk management). The platforms are complemented by a growing ecosystem that includes payment and upskilling course providers, insurance companies, as well as social networks where workers can connect and get support from peers.^[2] There is little doubt that digital labour platforms will play a crucial part in shaping the future of work.

There are various digital labour platforms that currently exist, and they can be broadly classified into two: location-based platforms that mediate tasks carried out in person at specified locations (e.g. taxi, delivery, home services, domestic work and care services); and web-based platforms that mediate tasks performed online, either by a crowd or selected individuals.^[3] This brief focuses on the latter type of platforms targeted at online gig workers or freelancers.^[a] In the past, most services required the presence of workers on site, but advances in digital technologies have afforded new possibilities for producing and delivering services remotely. These services can then be sold through platforms, which connect geographically disparate buyers and sellers. On the one hand, freelancers create profiles to showcase their skills, bid for tasks, and find digital work opportunities in their home market and globally. Companies, meanwhile, that wish to outsource services, i.e. buy services that were previously produced in-house from external providers—can post their projects on the platform and recruit skilled professionals from a wider talent pool from different parts of the globe.

The rest of the brief is structured as follows. Section 2 explains the underlying technological and economic drivers of the increasing trend towards online gig work or freelancing, and how the pandemic provides further impetus to it. The subsequent section explores in more detail how this development plays out in India. Section 4 then discusses the potential benefits in terms of job creation and economic inclusion, as well as disadvantages that can negatively impact the livelihoods of online freelancers. The brief closes with recommendations for policy priorities.

The rise in freelancing in online work is driven by technological and economic factors, with the Covid-19 pandemic in the last two years exacerbating the trends. It is not restricted to a domestic market, but increasingly occurs across borders and is as such part of a broader trend towards increasing global services trade that is characterising a new phase of globalisation. In the past, globalisation was shaped almost exclusively by governments, multilateral financial institutions, and large multinational companies; today, digital platforms with global reach play a key role and facilitate more direct participation of freelancers (as well as smaller companies).^[4] It is estimated that some services, including outsourced business processes, are being “de-localised” and “globalised” to an extent and on a scale that may surpass that of multinational goods manufacturers.^[5]

Production and delivery of services traditionally relies on face-to-face interaction, requiring the physical presence of a service provider on site. In recent years, however, increasing digital connectivity and platforms, along with other digital technological innovations, are offering new possibilities to carry out work remotely and deliver work results via information and communication technology (ICT) networks. Today workers can sit in one geographical location, and work virtually for offices and organisations in another. With fewer restrictions on where in the world tasks are performed, freelancing platforms are the closest proxy to the idea of a “global” labour market where everyone competes for work regardless of where they are.^[6]

Besides platforms, other advanced digital technologies help bridge physical distances and make “remote” workers appear less distant. They include collaborative, cloud-based software packages and telecommunications hardware, machine translation technology that will soon enable freelancers to communicate in functional English, as well as telepresence rooms and robots that make it seem as if workers are in the same room with colleagues or clients in a different country.^[7]

In an increasingly fast-paced and uncertain business environment, flexibility is key; outsourcing tasks to freelancers allows companies to convert the fixed costs of hiring full-time staff into variable costs by paying only for tasks that are done on demand. Labour costs are further reduced, because of lower costs for recruiting freelancers through platforms, and the fact that competition between many qualified contractors puts downward pressure on wage levels.^[8] Moreover, a multi-nation survey in 2020 found that 83 percent of freelancers work from home, and 17 percent from other places such as co-working spaces, coffee shops, client’s offices, libraries, and private offices.^[9] This means reduced need for investments in office furniture and equipment or other fixed assets.

The economic rationale for hiring freelancers is even stronger when wage differences exist across countries and companies can take advantage of labour arbitrage. In developing countries, workers on freelance platforms earn 60 percent less than those in developed countries, even after controlling for basic characteristics and types of tasks performed.^[10] Therefore, companies in developed countries find it profitable to outsource tasks to service providers in developing and emerging countries. Evidence indeed shows that the demand for work on five big online web-based platforms largely originates from developed countries, and the labour supply, meanwhile, predominantly from developing countries.^[11] Thus, the production of services is increasingly shifting from high- to low-wage countries, and some scholars even expect that the emerging market export of services will “explode” in the coming years.^[12]

In the last five years, the global demand for online freelancing has been growing by 11 percent annually.^[13] Beginning in early 2020, the COVID-19 pandemic has pushed this development further and today, as much as 20 to 25 percent of the workforce can work remotely in the long term—this is four to five times the level of remote work before the pandemic.^[14]

When lockdowns were announced and offices closed, businesses had to rely on digital ways of working and also utilised digital labour platforms to keep operating, reach new markets, and reduce costs.^[15] Some companies in developed countries also used the pandemic as an opportunity to terminate the employment of workers whose jobs can be performed better by machines, including applications that perform office tasks. Since many such apps are yet to be fully automated and still rely on human capabilities, the pandemic could move jobs to freelance workers in lower-income countries.^[16] In India, the demand for online platform work was 50 percent higher in March and April 2020 as compared to the beginning of the same year, before the pandemic.^[17]

At the same time, the pandemic has also had an impact on labour supply. Employees in regular formal occupations shifted to the home office and relied more on digital tools, thereby becoming more experienced and skilled. As they got accustomed to working remotely, they faced lower entry barriers to switching to freelance work. Furthermore, some of those who have lost their jobs turned to digital labour platforms to look for other income-generating opportunities. In India, there was a 46-percent increase in new freelancers from the first to the second quarter of 2020.^[18]

A 2018 survey found that many Indian companies were experimenting with using freelance workers and 19 percent have hired at least one freelance worker in the year before.^[19] Beyond the relevance of freelancing platforms in the domestic market, India can benefit from the fact that many services, which were earlier difficult to trade, can now be bought and sold across borders. Platforms enable online freelancers to become service exporters, whereas the export of IT-enabled services, which has long been synonymous with business process outsourcing (BPO), is not a new phenomenon in the country. International outsourcing began to gather pace in the early 1990s, and in subsequent years many companies outsourced work to India. Over time the country became the second-largest global exporter of IT services (after the European Union), and today the IT industry is worth USD 167 billion, mostly comprising companies that provide software services and IT support.^[20]

A transformation is under way, as individualised online work via freelancing platforms is emerging as a new type of service outsourcing that is replacing traditional business models and making BPO organisations redundant, as business processes can be outsourced without their mediation.^[21] The second-largest share of digital labour platforms is concentrated in India (8 percent; following the United States) and the country is also home to several major freelancing platforms.^[22] Meanwhile, the country’s freelancers are significantly shaping the digital transformation worldwide as India is the largest supplier of global online labour (followed by Bangladesh, Pakistan, US, Philippines, UK, and Ukraine).^[23] India’s share rose further from 26 to 34 percent between 2018 and 2020,^[24] due to an increase in online gigs in the software development and technology category, which is dominated by Indians and makes up the largest share of all online gigs worldwide.^[25] Currently, India has an estimated 15 million freelancers and is the second-fastest growing freelance market in the world.^[26]

In addition to the quantitative increase in the number of platforms and freelancers in India, there have also been qualitative changes in the nature of outsourced tasks. Typical tasks that are now conveyed through platforms fall in the categories of software development and technology, sales and marketing support, creative and multimedia, writing and translation, clerical and data entry, and professional services.^[27] The work is no longer restricted to less knowledge-intensive tasks known from the traditional BPO industry, but work that is requiring higher skills is increasingly outsourced as well. India’s large and educated, English-speaking workforce can do any job – whether high- or low-skilled – for a fraction of the wages in the West. Offshoring will soon mainly depend on whether or not tasks are easily deliverable through an Internet connection, and less on traditional criteria like the worker’s education level.^[28] Furthermore, new areas of online work are emerging. In particular, artificial intelligence (AI) is a key future technology, but training underlying machine learning algorithms still requires people who work behind the scenes and use their human capabilities. Tasks such as content review, transcription, annotation, and image tagging are often outsourced to BPO workers mainly based in developing countries, or what are referred to as the “invisible” workers on online web-based platforms.^[29]

Going forward, there will still be space for full-time employees, but an increasing number of companies will recruit freelance workers for a wider variety of tasks.^[30] Thus, freelancing platforms will enable a growing number of Indian freelancers to work for clients who are located not just in India, but that could be based anywhere in the world. They can transcend geographical boundaries and limited job opportunities in the local market and tap into an additional source of employment and income. In geographically circumscribed labour markets, local workers of a certain skill set had few viable employers and high costs of migration prevented them from seeking better offers elsewhere. Digital work now enables them to sell their labour to whoever is willing to pay the most for it, regardless of the buyer’s location—this could imply that there is opportunity for higher wages.^[31] Some studies have indeed shown that experienced contractors, especially those in long-term relationships with their clients, can manage to secure relatively decent hourly rates.^[32]

Another common argument in favour of platform-mediated freelance work is its potential for economic inclusion of population groups who are disadvantaged in the regular labour market. Freelancing can afford flexibility regarding work time and place, which can help in combining work with other commitments. Women, for example, can at least in theory have the opportunity to earn some income while still expected to perform their domestic responsibilities. At the same time, however, such opportunities could end up perpetuating the existing gendered divisions of labour. Prejudice can be overcome by the provision of verifiable information on workers’ skills; platforms allow digital workers to access geographically distant markets where there might be less discrimination, and to access their local market under a veil of anonymity.^[33] Another group likely to benefit is the hitherto underutilised pool of educated and skilled people who live outside the main urban areas that so far have played host to the outsourcing services industry.^[34]

To be sure, however, there are downsides to online gig work. Primary of these is that digital labour platforms, in general, promote the casualisation of work since mediated employment relationships typically exist in a regulatory vacuum, limiting the effectiveness of national labour laws.^[35] Minimum wages, worker protections, and even taxes, are usually optional rather than required for both the platforms and the clients that source work through them.^[36] On the other hand, working conditions are shaped by platform design as well as algorithmic management and largely regulated by terms of service agreements.^[37] This gives platforms considerable control over freelancers’ freedom to work, and limits their much-invoked flexibility to decide when and where to work. Moreover, workers in developing countries often have to adapt to the schedules of customers based in developed countries, which can lead to unsocial hours that negatively impact their pursuit of work-life balance.^[38]

As freelancers work on demand, their work patterns tend to be volatile and offer little job security. Labour supply often exceeds labour demand, which leads to fierce competition for tasks and therefore, low wages. Further, the platform’s global reach makes it easy for clients to practice labour arbitrage and source services from where the price is lowest, which means that easily replaceable freelancers become price-takers who feel pressure to undercut one another. Freelancers can do little to counter this: Platforms offer little space for interaction, let alone for cooperation, and since freelancers are distributed across the globe, it is difficult for them to organise and to negotiate for better pay and working conditions. Their incomes are also further influenced by substantial time spent on unpaid tasks (e.g. searching for work or building up a profile), high commission fees, and non-payment due to rejection of work.^[39]

This brief has investigated the phenomenon of freelancing on digital platforms. It explained its technological and economic drivers, reinforced by the impact of the Covid-19 pandemic, how these developments are playing out in India, and the promises and perils of this type of work. Addressing the challenges concerns various policy domains and relies on steps taken on both national and international levels. Policy proposals should be based on consultation of all relevant stakeholders, including representatives of freelancers, their clients, platform companies, and the government. Policy priorities rest on certain pillars.

On one hand, people need to be empowered to seize employment opportunities offered through freelancing platforms. One basic requirement for potential freelancers to enter the market and also get access to the global demand for freelancing services is affordable and reliable Internet access, especially in more remote places outside the metro cities. Moreover, in order to support the youth to find and succeed in online freelancing jobs, the curricula in education and vocational training institutions must be adapted to the requirements of the new digital working worlds. This includes equipping students with basic digital literacy and teaching them further technology-related skills. On the other hand, aspects where digital freelance work does not serve the goals of sustainable development need to be tackled. This means lowering informality and designing framework conditions in ways that ensure decent digital work opportunities for all. The most important labour standards must also apply to freelancers in order to guarantee a minimum amount of social security and protection.

India has taken steps to address the aforementioned challenges. However, they have not been sufficient. The enforcement of regulations is made difficult due to the cross-border nature of the phenomenon and the fact that freelancers, clients, and platforms are based in different jurisdictions. National policies, therefore, need to be complemented by international policy dialogue and coordination to develop a more effective and consistent approach to digital labour platforms worldwide as to ensure regulatory certainty and the applicability of universal labour standards.^[40]

Sabrina Korreck is a Senior Fellow at ORF. The author thanks the anonymous reviewer for their valuable comments.

Endnotes

^[a] This brief interchangeably uses ‘online gig workers’ and ‘freelancers’ to refer to those who work on demand for different companies (instead of for only one), often on a short-term basis, and are paid on a per-time or per-task basis.

^[1] Niels Beereport, Bart Lambregts, “Competition in online job marketplaces: Towards a global labour market for outsourcing services?” Global Networks, 2015, 15(2), 236-255; “India largest supplier of workers on digital platforms: ILO,” Bloomberg Quint, February 23, 2021.

^[2] Jon Younger, “Payoneer: Building the ecosystem for the freelance revolution,” Forbes, February 19, 2021.

^[3] International Labour Organization (ILO), “World Employment and Social Outlook: The role of digital labour platforms in transforming the world of work,” February 23, 2021; International Labour Organization (ILO), “Digital labour platforms and the future of work: Towards decent work in the online work,” September 20, 2018.

^[4] McKinsey Global Institute, “Digital globalization: The new era of global flows,” March 2016; Niels Beerepoot, Bart Lambregts, “Competition in online job marketplaces: Towards a global labour market for outsourcing services?” Global Networks, 15(2), p. 236-255.

^[5] World Trade Organization, “World Trade Report 2019: The future of services trade,” 2019.

^[6] Niels Beerepoot, Bart Lambregts, “Competition in online job marketplaces: Towards a global labour market for outsourcing services?” Global Networks, 15(2), p. 236-255.

^[7] Richard Baldwin, “Digital technology and telemigration,” in: World Trade Organization, “World Trade Report 2019: The future of services trade,” 2019 .

^[8] Niels Beereport, Bart Lambregts, “Competition in online job marketplaces: Towards a global labour market for outsourcing services?” Global Networks, 2015, 15(2), 236-255.

^[9] Payoneer, “The 2020 Freelancer Income Report”.

^[10] International Labour Organization (ILO), “World Employment and Social Outlook: The role of digital labour platforms in transforming the world of work,” February 23, 2021.

^[11] International Labour Organization (ILO), “World Employment and Social Outlook: The role of digital labour platforms in transforming the world of work,” February 23, 2021.

^[12] Richard Baldwin, “Digital technology and telemigration“, in: World Trade Organization, “World Trade Report 2019: The future of services trade,” 2019.

^[13] Fabian Stephany, “How big is the online labour workforce? Our data-driven approach to this tricky question,” Oxford Internet Institute, The iLabour Project, March 24, 2021.

^[14] McKinsey, “How Asia can prepare for the future of work after COVID-19,” April 8, 2021, Podcast (transcript).

^[15] International Labour Organization (ILO), “World Employment and Social Outlook: The role of digital labour platforms in transforming the world of work,” February 23, 2021.

^[16] Tina Zintl and Elvis Melia, “Is the pandemic deepening the digital divide?” German Development Institute, April 22, 2020.

^[17] “India largest supplier of workers on digital platforms: ILO,” Bloomberg Quint, February 23, 2021.

^[18] Hemani Sheth, “India is second-fastest-growing freelance market in the world, says report,” The Hindu BusinessLine, September 11, 2020.

^[19] Terri Chapman, Samir Saran, Rakesh Sinha, Suchi Kedia, Sriram Gutta, “The future of work in India: Inclusion, growth and transformation,” Observer Research Foundation, October 2018.

^[20] World Trade Organization, “World Trade Report 2019: The future of services trade,” 2019.

^[21] Mark Graham, Isis Hjorth, Vili Lehdonvirta, “Digital labour and development: impacts of global digital labour platforms and the gig economy on worker livelihoods,” Transfer: European Review of Labour and Research, 2017, 23(2), 135-162.

^[22] “India largest supplier of workers on digital platforms: ILO,” Bloomberg Quint, February 23, 2021.

^[23] Fabian Stephany, “ILO report: The role of digital labour platforms in transforming the world of work,” Oxford Internet Institute, The iLabour Project, February 23, 2021.

^[24] “India largest supplier of workers on digital platforms: ILO,” Bloomberg Quint, February 23, 2021; Fabian Stephany, “ILO report: The role of digital labour platforms in transforming the world of work,“ Oxford Internet Institute, The iLabour Project, February 23, 2021.

^[25] Fabian Stephany, “ILO report: The role of digital labour platforms in transforming the world of work,” Oxford Internet Institute, The iLabour Project, February 23, 2021; Vili Lehdonvirta, “Where are online workers located? The international division of digital gig work,” Oxford Internet Institute, The iLabour Project, July 11, 2017.

^[26] Hemani Sheth, “India is second-fastest-growing freelance market in the world, says report,” The Hindu BusinessLine, September 11, 2020.

^[27] Categories as classified by ILO. See: “India largest supplier of workers on digital platforms: ILO,” Bloomberg Quint, February 23, 2021.

^[28] Niels Beereport, Bart Lambregts, “Competition in online job marketplaces: Towards a global labour market for outsourcing services?” Global Networks, 2015, 15(2), 236-255.

^[29] International Labour Organization (ILO), “World Employment and Social Outlook: The role of digital labour platforms in transforming the world of work,” February 23, 2021.

^[30] Hemani Sheth, “India is second-fastest-growing freelance market in the world, says report,” The Hindu BusinessLine, September 11, 2020.

^[31] Mark Graham, Isis Hjorth, Vili Lehdonvirta, “Digital labour and development: impacts of global digital labour platforms and the gig economy on worker livelihoods,” Transfer: European Review of Labour and Research, 2017, 23(2), 135-162.

^[32] Niels Beereport, Bart Lambregts, “Competition in online job marketplaces: Towards a global labour market for outsourcing services?” Global Networks, 2015, 15(2), 236-255.

^[33] Mark Graham, Isis Hjorth, Vili Lehdonvirta, “Digital labour and development: impacts of global digital labour platforms and the gig economy on worker livelihoods,” Transfer: European Review of Labour and Research, 2017, 23(2), 135-162.

^[34] Niels Beereport, Bart Lambregts, “Competition in online job marketplaces: Towards a global labour market for outsourcing services?” Global Networks, 2015, 15(2), 236-255.

^[35] Niels Beereport, Bart Lambregts, “Competition in online job marketplaces: Towards a global labour market for outsourcing services?” Global Networks, 2015, 15(2), 236-255.

^[36] Mark Graham, Isis Hjorth, Vili Lehdonvirta, “Digital labour and development: impacts of global digital labour platforms and the gig economy on worker livelihoods,” Transfer: European Review of Labour and Research, 2017, 23(2), 135-162.

^[37] International Labour Organization (ILO), “World Employment and Social Outlook: The role of digital labour platforms in transforming the world of work,” February 23, 2021.

^[38] International Labour Organization (ILO), “World Employment and Social Outlook: The role of digital labour platforms in transforming the world of work,” February 23, 2021.

^[39] International Labour Organization (ILO), “World Employment and Social Outlook: The role of digital labour platforms in transforming the world of work,” February 23, 2021.

^[40] International Labour Organization (ILO), “World Employment and Social Outlook: The role of digital labour platforms in transforming the world of work,” February 23, 2021.

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Changing Geographies of Work: India’s Online Gig Workers in a Digitalised Labour Market

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