Modelling and analysis of the market dynamics and regulation of online gig work

Abstract

Purpose Digital platforms that offer on-demand gig work, while providing work opportunities in the economy, have raised social and economic concerns. Though extensive research on regulation of the gig economy exists, the effect of economic regulations on the welfare of the workers is not well understood. In this work, this paper aims to specifically study the effect of minimum wage and leisure regulations on the unemployment rate and offered wages. This paper also analyses the effect of up-skilling of the workers on unemployment and wages. Design/methodology/approach This paper builds an agent-based model of the labour market with heterogeneous workers and online platform firms that interact to match supply and demand. This paper also interviewed online workers in the two under-studied markets in online beauty and house maintenance services in India and included salient observations in to the model. This paper further validates the model findings with the interview observations. Findings Extensive simulations of the model indicate that the regulator's intervention on minimum wage and leisure reduces unemployment and offers better wages/leisure in the short term. However, these cannot be sustained unless the workers upgrade their skills, thereby improving their value to the employers. This paper also corroborates the authors’ interview observations on platforms deviating on stated worker contracts by simulating the same in the model. This paper finds that when platforms deviate on their stated incentive schemes, the unemployment rate tends to increase. This paper also finds that the emergence of online platforms in an erstwhile off-line market decreases the average unemployment rate with a moderate increase in the offered wage and leisure. Research limitations/implications In this work, the focus has been to determine the worker-platform dyadic relationship. However, this is affected by consumer-related attributes such as ratings and associated reputation systems to promote trust between different stakeholders. Examining such a triadic relationship between consumers, platform and workers is required to comprehensively address the challenges of online gig economy. Social implications Skilling and training are critical for worker mobility across tasks and jobs, especially in the gig economy. Gig workers, in general, seek to improve their skill level through self- or platform-enabled training programmes. The workers are able to generate more revenue through the new skills and hence can improve their reservation wage as well. This in turn increases average offered wages and reduces the overall unemployment in the sector. Despite attempts to classify gig workers as formal workers by labour laws across countries, there is resistance from online platforms. This is due to increased liability and responsibility that the platforms have to incur that possible increase their costs and expenses. This study shows that regulations, such as minimum leisure or minimum wage, increase the average wage or leisure in the market and increase unemployment. However, this might be a short-term phenomenon. In the long term, the gig workers benefit by enhancing their skills to not only stay employed but also bargain for better wages and leisure. The governments can play a larger role by facilitating upskilling programmes for the gig workers. Originality/value An extensive literature survey indicates that while most of the work on gig economy regulation emphasises the social and legal aspects, this work is unique in modeling the techno-economics of gig work. Further, while most of the economic research on gig work, focuses on consumers, this work focuses on the under-researched area of worker welfare. This paper also validates the model results with findings from the interviews with gig workers.