The Gig Economy to the Rescue

August 21 , 2021
By Christian Tesfaye ( Christian Tesfaye (christian.tesfaye@addisfortune.net) is a researcher and Fortune's Deputy Editor-in-Chief whose interests run amok in the directions of political thought, markets, society and pop culture. )

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Gig working gets a bad reputation. This makes sense considering that much of the debate takes place in the developed world, and narratives are constructed from the perspective of the Global North.

Gig workers are basically independent contractors. There is work to be done, and they have a job; there is not and they are out of luck. They have always existed in the form of temporary employees at companies or as labourers that get paid daily either in construction or on farmlands during harvest seasons. But the number and importance of gig workers has exploded with the growth of the internet and digital economic sectors.

Some sources suggest that as many as 163 million gig workers are registered on online labour platforms such as Upwork, Freelancer and Amazon Mechanical Turk. Unregistered freelancers are bound to bring the number even higher. The size of the gig economy is estimated to be 347 billion dollars, over three times Ethiopia’s GDP, while the number of gig workers earning above 100,000 dollars a year has reached 31 million people of the labour force, according to Brodmin, a fintech company. The average worldwide hourly rate charged by freelancers is around 21 dollars, comfortably above minimum wage in the United States.

A good example of gig workers are ride-hailing service drivers. While the debate between whether such drivers are hired employees or independent contractors has gone to the courts, the concept behind it is clear. Each driver makes a rate based on the trips they can make and does not have salaries from the company they are contracted out to for the work.

As flexible and unique as gig economy is, it is not that much cherished. There is a reason for this: economic security. The working time may be flexible, but financial security is not guaranteed. There are no benefits, healthcare plans or severance pay under normal circumstances. If there is an economic downturn, such as the COVID-19 pandemic, and employers want to cut costs, a gig worker is out in the cold without anything to cushion the blow from the company that contracted them out.

There is space for this debate in the developed world. There is not one in a country such as Ethiopia.

It starts with the nature of employment. Most people are often underpaid and usually see their wages decrease in value as inflation is a recurring problem. Even in good times, when inflation is kept in the single digits, a person’s wage needs to grow by at least 10pc to be comfortable that they are not working for lower and lower pay by the day. Losing a job is relatively not too much of a blow.

Then there is the fact that benefits are little to none. Companies providing healthcare as part of employment are nearly unheard of, while severance pays often do not materialise as there is high turnover in most industries. By migrating to the gig economy, employees in Ethiopia do not lose as much.

But people could gain much more by becoming gig workers. The most important aspect is flexibility. Most traditional work in Ethiopia is spent sitting around in the office doing nothing. In the same time frame, much freelance work can be squeezed in to make up for the difference in salaries. No doubt, gig workers will still be financially insecure, but for those with the skills and credentials, it can be made up for by using one’s time smartly and consumption smoothing to prepare for the rainy day.

Gig working is not for everyone and is entirely out of the question for professions in sectors such as healthcare. But it is a refreshing alternative to the drudgery of traditional employment. The key to reaping its fruits is accumulating skills, experience and networks. What underlies the gig economy is the increasing importance of the knowledge economy. This is work that can be outsourced anywhere and done from any location. But one thing that cannot be substituted is the skills and experience accumulated through education and hard work.

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PUBLISHED ON Aug 21,2021 [ VOL 22 , NO 1112]

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