It seems the gig economy needs a rejig because right now it is in dire straits. The turmoil caused by COVID-19 has derailed an economy that was slated to reach $455 BN by 2023. Companies like Uber, Zomato, Swiggy and even hospitality leaders like Airbnb and Oyo are bearing the brunt of the crisis brought on by the disease. These companies are riddled by a plethora of problems, from lack of demand to supply-side disruptions, shortage of manpower & the travel restrictions. These have impacted not only the growth rates of the Companies revenues but also the wages of the contract-based employees. And it seems their problems are not going away any time soon.
DEMAND SIDE WHAMMY
With the entire world putting into practice the buzz word of the month ‘Social Distancing’, people are apprehensive of any form of physical contact. With doubts about the hygiene and number of times the parcel undergoes change of hands (or in case of cab rides/hospitality, the number of occupants/passengers or sharing of spaces), people refrain from availing these services. Although there is still demand for orders from quick-service restaurants, demand has definitely been hit. International Travel ban that has brought the aviation sector to a grinding halt has also spilt over to the hospitality industry and resulted in drastic drop in footfalls for AirBnB and Oyo.
SUPPLY SIDE DISRUPTIONS OF GIG ECONOMY
The gig economy has suffered on the supply side from multiple fronts. Shortage of manpower has severely impacted various sectors, owing to the lockdown imposed by the government of India. Mobility of employees has been completely frozen. Stays at home orders have now reached inviolable status and any lapses have to be answered for to the patrolling police. Harassment by the police is a common cause cited by the gig workers and delivery executives to not show up at work.
Supply chain has also been disrupted with falling stocks of raw materials and inventories for restaurants. Restaurants are also burning through their cash and can’t expect to survive for long without resources and near-source raw materials. The following study by JP Morgan Chase illustrates this vulnerability:
HOW WAGES WILL BE IMPACTED
Food Delivery executives earn around Rs 75-100 per order delivery and additional incentive for deliveries over 15/day. The average wages for these food delivery workers per day amounts between Rs 600 and Rs 800. The Lockdown has been imposed only last month and there isn’t sufficient public data available, but a rough estimate can be made that in major cities of the country, orders have fallen to almost 70% of the daily average.
These workers are not permanent employees with uncertain wages. Nor they protected by any safety net. Even in the US, the number of gig workers filing for unemployment allowance has skyrocketed over the past two weeks itself. It’s safe to say this is the plight for many gig workers even in other industries like hospitality and ride hailing. Unless demand picks up, these workers will continue to languish in this situation and be subject to large scale company downsizing.
Because of the falling employment opportunities and dwindling orders, many gig workers are returning back to their native places and villages. Delivery executives now and now their fuel and EMI expenses outstrip their revenues. These workers do not have the savings to tide past this lockdown and are not able to work much.
HOW COMPANIES ARE DEALING WITH THIS
Japan’s Softbank Backed Ola have put on hold their operations in many large cities to comply with the lockdown order. However it may start limited services to support essential services in some cities to help combat the lockdown. Food aggregators like Zomato and Swiggy have been trying to make things work with a staff strength between 20% and 30%.
Jumbotail, an online wholesale marketplace for food and groceries has had it leaders and management visiting supply chain locations and motivating the gig working staff and trying to lead by examples and trying to allay the fears of the staff about movement to & fro from their residences.
The Gig-economy neo-bank Avail Finance has designed a special COVID-19 package called avail-Assist for Gig Economy platforms in India. This offering is purported to help gig economy companies across ecommerce, food delivery, transportation sectors to give support to the workorce (who are not eligible for their company’s employee benefits) in the form of instant loans and COVID- Protection Health Insurance to take care of medical expenses of the workers and insure themselves from any unforeseen hospitalization. These loans have a repayment holiday for the period of the pandemic. Ola has availed this facility.
Read More: Everything Covered about Work From Home
WHEN WILL NORMALCY RETURN
It is difficult to predict when the gig economy will get back on its feet. Even post the lockdown and a flattening of the curve of the disease spread, there is bound to be a continuing lull period. Some companies like Urban Co. might observe a rise in demand such as cleaning, sanitizing, barbers, beauty treatments etc while companies like AirBnB are bound to face a trust deficit on sanitation and hygiene, and it would be difficult to win it back.
WHAT IF LOCKDOWN IS EXTENDED – Gig Economy
The government of India is mulling an extension to the lockdown to around end of April (possibly even more) given that the progression of the disease is not slowing down. If that comes to pass, stocks of these companies will go for a tailspin. (See Uber Stock Below). The Govt must dip into its coffers even more and inject a grand package of around 8 Lakh Crores (Roughly 5% of GDP, at present it is just 1%). In addition, Industry experts (all sectors combined) are also suggesting Rs 2 lakh Cr revival fund for ensuring business continuity.
But it is also likely that there might not be second complete lockdown, but a partial one. So one can expect a partial revival in the gig economy for quick service restaurants, limited window cab hailing services etc. It could also present the opportunity for these companies to diversify with services like delivering groceries and essential food items. Both Zomato and Swiggy have already seized the opportunity and started making inroads into the service.
But, for now the workers will have to rely on consumption loans and the direct benefit transfers (as part of the Government stimulus package) and the companies will have to slash their estimates of growth and function with lean organization manpower.