Questions
Q1. Gig economy represents a fundamentally regressive future for employment with modest pay, long working hours, ephemeral jobs and no social security. Analyze. (150 words) 10 marks
Q2. Economic development requires a push towards improving the business environment, increasing labor and product market flexibility, and improving governance. Comment. (250 words) 15 marks
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Model Solutions
Q1. Gig economy represents a fundamentally regressive future for employment with modest pay, long working hours, ephemeral jobs and no social security. Analyze. (150 words) 10 marks
Model Structure
Introduction:
- Gig economy is defined as a free-market system which is characterized by temporary, short-term contractual jobs and freelance work, on a project-to-project basis. or
- In recent years, gig economy has grown significantly in India. The Global Gig Economy Index report ranked India among the top 10 countries with a rapidly increasing number of freelancers.
Main Body:
- Gig economy as fundamentally regressive for employment:
- Modest pay: Gig workers are modestly paid backed by complex contracts and changing rates of incentives.
- The parameters to measure efficiency and productivity are ambiguous, which prevent increase in wages and incentives.
- A study by the Institute of Public Policy on gig economy has documented below the minimum wage earning, despite working beyond eight hours a day.
- Long working hours: Due to lack of control over impossible targets and short timeframe, gig workers often end up doing more than 12 hours of work daily, without an off-day.
- Ephemeral jobs: Once the contract is over, there is no guarantee that the worker's contract will be renewed.
- Companies can fire anytime with no obligation to retain their gig workers.
- Lack of social security: Though, Social Security Code, 2020, mentions that platform (gig) workers are now eligible for benefits like maternity benefits, provident fund, etc., there are no enforcement measures.
- Modest pay: Gig workers are modestly paid backed by complex contracts and changing rates of incentives.
- Gig economy also provides significant benefits:
- Working on projects for multiple companies simultaneously, gig workers can grow their skillset and can earn more.
- Greater flexibility leads to increased productivity. Workers can work at hours and days that suit them giving their best to the organization.
- Increased women participation due to greater ownership over work-life balance.
- Gig economy allows work from distant locations, thereby increasing job prospects, and filling in for regional divides in development.
Conclusion:
- Though the gig economy has led to the transformation of work culture, various issues need to be addressed.
- There are examples of collaboration between government and private which can be scaled up.
- E.g Uber partnered with Ayushman Bharat to facilitate free healthcare for its workers.
- In addition, explicit rules for gig workers should be formulated to provide them social security.
Q2. Economic development requires a push towards improving the business environment, increasing labor and product market flexibility, and improving governance. Comment. (250 words) 15 marks
Model Structure
Introduction:
- The COVID-19 has led to devastating health and economic crises. Investment in the economy has collapsed impacting economic growth. There is a formidable challenge for the government to ensure recovery.
- To meet this challenge and to set a foundation for robust growth and development in the longer run, there is a need for a major push to improve business environments, increase labor and product market flexibility, and strengthen transparency and governance.
Main Body:
- Improving business environment:
- India ranked at 63 in Ease of Doing Business 2020. There is a lot of space in improving the business environment. Improved environment will lead to economic development by:
- Attracting global investments due to increased confidence in the economy.
- Better debt management and less fiscal deficit in terms of government spending.
- More socio-economic development due to the ability of the government to spend less fiscal on reviving the economy and more on socio-economic welfare.
- Capital formation due to more investment in the capital-intensive sectors.
- Increased aggregate demand and raising the potential supply of the economy.
- Increasing labor and product market flexibility:
- In the Index of Economic Freedom 2021, India was ranked at 121 reflecting very less economic freedom. India’s labor and product market are rigid. Excessive regulation and complex legal requirements have led to such a rigidity. Flexibility in these areas will lead to:
- Establishment of more businesses in India leading to economic growth.
- More job creation with increase in regular employment.
- Economic efficiency with formalization of economy.
- Labor welfare and their socio-economic security.
- Competitive and better-quality products leading to further economic growth.
- Improving governance:
- Increased confidence in the economy and making doing business easier in India.
- Less cost and delays in terms of regulatory needs and red-tapism.
- Better transparency thereby reducing chances of corruption which usually leads to increased cost of business.
- Clarity in terms of regulation and legal requirements, thereby preventing unnecessary legal fights.
- Measures needed/ Way Forward:
- Examining unnecessary interventions: Each department and ministry in the Government must systematically examine areas where the Government needlessly intervenes and undermines markets.
- Ease of doing business: The Government has recently achieved significant improvement in the Ease of doing business index. Government should continue similar efforts to remove procedural constraints.
- Government should further simplify the GST regime and labor laws. There is a need to reduce the average time for filing taxes and remove unnecessary laws and regulations.
Conclusion:
- Covid-19 has severely impacted all economies in the world. To ensure fast recovery and put India back on track, the Indian market should be made more flexible, business friendly and transparent.
- There is a need to eliminate unnecessary government intervention which will enable competitive markets and thereby spur investments and economic growth.