The Gig Economy: Navigating Opportunities and Challenges

The entire economic system stems from the provision of factors of production be it land, labor, or capital. The Internet has facilitated the globalization of these factors of production, especially labor. The swift and convenient access to labor force by means of digital platforms has created a separate economic system which is now known as Gig Economy. 

What is a Gig Economy?

A gig economy pertains to a job market distinguished by a high occurrence of brief, impermanent, or independent positions, where individuals frequently engage in work on a per-project arrangement instead of maintaining conventional extended employment.

The gig economy predominantly depends on temporary and part-time roles that are undertaken by independent contractors and freelancers, as opposed to full-time, permanent staff.

The gig economy has the potential to offer advantages to workers, businesses, and consumers by providing a more flexible approach to work that aligns with current needs and the desire for adaptable lifestyles. However, it also comes with drawbacks as it can weaken the conventional economic connections between workers, businesses, and clients.

In this blog we will navigate the opportunities and challenges for gig economy in Pakistan.

By 2021, 1/3rd of America's workforce became part of the Gig economy, and experts anticipate that these numbers would continue to accelerate because of the flexibility of freelancing and independence that these workers seem to cherish. In spite of encountering various difficulties, a considerable number of Pakistanis have welcomed the gig economy as an avenue to enhance their earnings, and for some, it has even become their primary source of livelihood. Grasping the concept of the gig economy and comprehending its effects on the Pakistani workforce holds significant importance for both citizens and policymakers within the nation.

Delivery riders are at the vanguard of this new economic and technological development as these people belong from myriad backgrounds. Gig labor additionally opens doors for career progression. Numerous technology companies such as Foodpanda, Careem, and Cheetay furnish their riders with training and developmental initiatives. These programs can serve as stepping stones for riders to advance into higher-ranking positions within the organization. Moreover, these initiatives enable riders to acquire fresh proficiencies and transition into different domains of the business, including marketing, operations, and human resources.

Economic Outlook of Pakistan

For the year 2023, the IMF has predicted that the unemployment rate in Pakistan will rise to 6.4%. The World Bank also reveals distressing figures of 2% economic growth in Pakistan for the year 2023. Pakistan is grappling with severe economic downturn, characterized by record breaking inflation rates, debt traps, and curtailed economic growth. Women make up nearly 50% of Pakistan's population, but the cultural norms restrict women from working outside the four walls of their houses. Unfortunately such traditional teachings put restrain on the economic and financial resources of the country pushing the county into an unsettling economic environment. In light of the present economic circumstances, there is a need for inventive strategies, such as placing greater emphasis on the gig economy and nurturing a robust ecosystem of technology-driven startups and services. These approaches can play a pivotal role in generating employment opportunities and tackling the challenge of unemployment. The Ministry of IT and Telecommunication (MoITT) reported that freelancing brought in foreign remittances totaling US $397 million for Pakistan during FY 2022, and the potential for further growth remains promising. With over 54 percent of the total population now online, as indicated by the Pakistan Telecommunications Authority (PTA), the integration with the digital gig marketplace holds significant possibilities.

Gig economy, however, opens the door to remote employment opportunities for women and youth who are unable to find appropriate jobs in Pakistan due to economic turmoil, restricted mobility, and traditional gender roles.

Benefits to employers and employees

Gig economy allows people to work remotely from the comfort of their homes. They can get employed for projects by foreign companies, and earn remittances for Pakistan. These freelancers feel empowered and satisfied because of the independent contracting system. This extent of freedom and autonomy enables both entities to negotiate their terms and conditions. Any skill can be learned, and then relevant services can be provided either to the local companies or employers from abroad. While permanent roles traditionally form the foundation of any workforce, a growing number of positions are shifting towards project-based and temporary arrangements. This flexible work culture primarily advantages employers, allowing them to tap into a diverse pool of talent and deploy highly skilled individuals and teams, all without the burden of maintaining in-house staff on a long-term basis. The remote work dimension of the gig economy model is additionally inclusive, enabling the convenient involvement of women.

Gig economy has also driven a culture of entrepreneurship in Pakistan; an example of a women-led start-up is "SehatKahani", which is a digital platform that allows female doctors to practice medicine from their homes. In 2021, Pakistan achieved a revenue of $500 million solely through freelancing, securing its position as the fourth most rapidly expanding market globally for freelance professionals. Capitalizing upon these skills enables these individuals to create multiple income streams, diversification, and a stable employment.

Challenges faced to Gig Economy

Gig economy requires a well developed technological infrastructure as well as rules and regulations to govern this market, and unfortunately Pakistan lacks both of the prerequisites mentioned above. Internet and electricity provision are relatively unstable in Pakistan, hindering the development of gig economy. Previously, internet disruption in the country, due to political turmoil, proved to be devastating for the gig economy as this sector lost millions of rupees. Gig workers may not have the same legal protections as traditional employees, making it difficult for them to address workplace issues or disputes. Limited access to technology and the internet can exclude certain segments of the population from participating in the gig economy. The gig economy can present challenges for tax collection and reporting, as gig workers may be classified as independent contractors rather than traditional employees. It is also of paramount importance to teach these individuals about how to capitalize their skills. Lack of awareness and exposure can lead to exploitation of workers at the hands of their employers. A study conducted with the collaboration of Oxford University and Centre for Labor Research, Pakistan concluded that from 7 of the mainstream gig economy platforms, only 3 were able to earn a score, obtaining one out of 10 each. Modes of payment also stand as a major hurdle between foreign employers and local employees. There are several local modes of transaction, but foreign employers tend to use PayPal, which is unavailable in Pakistan and they are reluctant to make their payments via Pakistani gateways of payment.

Government's Role

It is the responsibility of the Pakistan government to realize the true potential of the gig economy as a major proportion of Pakistan's population is below the age of 30, and unemployment rates are unprecedently high. The government should step up and establish training workshops regarding learning and upgrading soft skills, so these individuals can contribute to the economic growth of the country. Effective collaboration between the public and private sectors has the potential to unlock fresh avenues and equip young individuals with the essential tools and expertise to leverage the gig economy. By joining forces, the government and private enterprises can provide training in crucial skill sets, including web development, graphic design, and digital marketing. This training can subsequently be transformed into sustainable livelihood opportunities through the gig economy and remote work.