Food delivery companies will use almost any excuse to prompt you to order more from them and right now it’s peak cricket season. Push notifications on your phone and take-away containers in your kitchen are piling up at a rapid rate. Unfortunately, the rate of wage growth for the delivery personnel is anything but rapid.
A recent report by the National Council of Applied Economic Research (NCAER) titled “Socio-economic Impact Assessment of Food Delivery Platform Workers” informs us that real wages (nominal wages adjusted for inflation) of delivery workers have dropped significantly.
Nominal wages have increased, but at a slower rate (a paltry 4 percent) as food delivery companies are improving their unit economics in a bid to become profitable. Crucially, retail inflation, which includes fuel costs, has been on the rise, which makes real wages decrease by 11 percent.
The other finding that stood out was that gig workers were far more qualified than required. The study found that about a third (32 percent) of the food delivery workers had a graduate degree, a number that rose to 39.7 percent in tier-2 cities. Nearly all of them (93 percent) have finished 10th grade and about half of them have finished up to 12th grade. Further, 12.5 percent even had a technical and vocational degree or diploma.
These two statistics – falling real wages and overqualified work force – is a damning indictment of both India’s labour market and our educational set-up respectively.
The Job Market
Despite the falling real wages or even the modest growth in nominal wages, the fact that the gig economy continues to retain many people and attract more “freshers” into the fold indicates the state of the labour market in India. The report on the gig economy must be interpreted in the wider context of the Indian labour market.
The mismatch between the enormous supply of labour and the lack of demand for them (jobs) creates a scenario where the gig economy becomes one of the most attractive options despite its shortcomings.
Unemployment rate in India hovers around the 8.2 percent mark from 2018-2023 and was 7.8 percent in March 2023. It reached a peak of around 23 percent at the height of the pandemic, which also witnessed the greatest labour influx into the gig economy.
While 8 percent is significant, it only paints half the picture. Unemployment rate is calculated as the percentage of people who are willing to work (called the labour force participation rate) but do not have a job.
The bigger story is that India’s labour force participation rate is abysmally low. Only about half of the working age population in India are in the labour force. The paucity of jobs has driven the others out of the workforce.
Even among those in the labour force, youth unemployment rate (age 15-29) is about 8.7 percentage points higher than the overall unemployment rate. Further, unemployment rate among youth who are educated is the highest at 24.5 percent, compared to 7.2 percent rate amongst the illiterate.
In light of these facts, it shouldn’t come as a surprise that young graduates are signing up to deliver food and groceries (majority of food delivery partners are below 35 years). This also explains other scenarios where PhD. holders apply for peon jobs in India.
Quality Of Education
While we are not creating jobs that are commensurate with the education levels of the youth, we have to square this with the fact that only about 50 percent of India’s youth is employable i.e. they have the necessary skills for the existing jobs, according to India Skills Report.
This presents a dual problem – high unemployment on one side and scores of unfulfilled jobs on the other.
Even at lower levels of education, while India has solved the quantity problem in terms of enrolment, the quality of education leaves a lot to be desired. According to the Annual Survey of Education Report (ASER), about 30 percent of Standard VIII kids cannot read a Standard II level text.
Don’t Rush In With Regulations
While the shrinking real wages and higher educational qualification presents a cause for concern, it should not lead to any knee-jerk reaction to impose regulations. For starters, most media reports missed other important insights from the NCAER report, which shows the benefit of gig work in India.
These platforms are creating local jobs in tier-2 and tier-3 cities, which otherwise would have led to forced migration to the bigger cities. Importantly, the gig economy has pushed the needle towards formalising the workforce by having the workers open bank accounts with KYC and most platforms provide at least accident insurance, which forms a part of health insurance.
These platforms also act as the starting point for many students to earn an income. Finally, the report mentions that the platforms do provide some skills training, which also helps workers move on to other jobs.
Fixing The Basics
For the larger problem, three things need to be done: One, focus on manufacturing to create mass-scale employment. Two, create a basic social safety net for gig and informal workers in the country. While Rajasthan has taken the first steps, there are better ways to do this.
Three, focus on skilling of India’s youth. Apart from known solutions such as fixing India’s schooling system (no easy task), an idea like Career Impact Bonds can also be seriously considered.
In the desert landscape of unemployment, the gig economy is a welcome oasis, but it neither is nor should be seen as a long-term solution for job creation in India. For that we need to fix our manufacturing sector.
Anupam Manur is a Professor of Economics at the Takshashila Institution, an independent think tank and school of public policy. Views are personal, and do not represent the stand of this publication.
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