Unleashing the Gig Economy During Regulatory Trailing

Jul 20 , 2024
By Birhanu Beshah

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From Addis Abeba's bustling streets to the digital realm, independent contractors are making waves. The federal legislative assembly is now eyeing a policy shift to let private vehicles join ride-sharing platforms. This could mean more than extra income. It might redefine work itself. But with great power comes great responsibility — legal frameworks must catch up. Will Ethiopia ride the wave or hit a legal speed bump, quip Birhanu Beshah (PhD), (birhanu.beshah@aait.edu.et)  associate professor in the School of Mechanical & Industrial Engineering of Addis Ababa University.

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A federal legislative assembly recently debated permitting private vehicles to provide ride-sharing services, a previously reserved function for vehicles registered under the commercial code. The move targets platforms like Ride and Feres, which could help alleviate urban transport needs. While the debate is not about whether private vehicles should offer public services, the crux lies in establishing a robust legal framework for such services.

Ride-sharing workers operate as independent contractors, requiring business licenses. To join this workforce, individuals need to register as enterprises, and their vehicles need to be classified as commercial. They also face a fixed tax system akin to other businesses. However, independent contractors occupy a unique space. They are neither traditional employees nor fully-fledged enterprises. Their work spans various sectors, including design, software programming, delivery services, tutoring, and personalised home services. Despite their business activities, they are not categorised under conventional employment.

Independent contractors, often freelancers or gig workers, have gained prominence with technological advances and legal reorientation. This form of work surged after the 2008 financial crisis and expanded further during the COVID-19 pandemic, providing a crucial coping mechanism. The rise of the sharing economy, epitomised by platforms like Uber and Airbnb, has turned idle assets into income sources.

In the U.S., independent contractors are distinctly classified, requiring business licenses and tax filings via 1099 forms.

In Ethiopia, particularly in Addis Abeba, a diverse range of individuals engage in independent contract work, including ride-sharing. These workers fall into three main categories: those residing locally but serving international platforms, those working on global digital platforms like YouTube, Facebook, and TikTok, and those fully operating on local platforms. Despite earning income, these groups operate under the radar, with no system to monitor or support their efforts. This lack of recognition and regulation is a major oversight.

These groups include professionals such as designers, software programmers, nurses, and home tutors, whose economic activities remain largely unregulated and undocumented. These independent contractors operate in an underground economy, unseen and unsupported by the state. As this segment of the labour market grows, there is an urgent need to address its legal and regulatory framework, considering its potential to tackle critical national issues.

According to the Central Statistical Agency’s 2022 report, urban youth unemployment hovers around 23pc. Recognising and integrating independent contractors into the formal economy could create opportunities not only for job seekers but also for those already engaged in such work. This integration could have a multiplier effect on the country's overall economic activity. However, the problems associated with independent work, such as access to insurance, pensions, job safety, and security, require policymakers’ attention.

The conversation around ride-sharing and independent contractors is part of a broader discourse on the future of work. In many ways, it reflects the global shift towards a gig economy, where traditional employment paradigms are being redefined. With its unique socio-economic dynamics, the Ethiopian context presents its own set of problems and opportunities.

Implementing a system that supports independent contractors should involve recognising their contributions, providing a regulatory framework, and ensuring they have access to essential benefits. The system should accommodate the flexible nature of gig work while offering protections typically associated with traditional employment. Policymakers must navigate these complexities to encourage, and not stifle, an environment where independent contractors can thrive.

The potential policy shift to allow private vehicles in ride-sharing services could catalyse broader reforms in the independent contractor sector. By formalising this segment of the labour market, Ethiopia could better leverage the skills and capabilities of its workforce, driving economic growth and addressing unemployment. The experiences from other countries, particularly the regulatory frameworks and support systems in place, can offer valuable lessons.

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PUBLISHED ON Jul 20,2024 [ VOL 25 , NO 1264]

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