Gig Economy Startups Are Getting Bigger, But Can They Get Better?

The gig economy may seem relatively new, but it’s actually hundreds of years old. And in many parts of the world, it’s exhausting.

For example, a “casual” worker in Mumbai might wake up before 5 a.m. to get her kids ready for school and finish preparing meals and cooking for the tiffin service she runs from home. At 9:30 a.m., she leaves home for her first employer to make food. She spends hours in three or four different homes, cooking and cleaning, before returning home in time for her kids to get home from school. For many workers, this was a typical day, dating back to the days before Uber came along.

However, this informal work style – offering flexibility but with no protection for employees – is developing dynamically thanks to the spread of digital technologies, the ability to work from anywhere, the globalization of business and many other trends.

As corporations push for efficiency to optimize costs, they see value in turning to contingent workers instead of full-time employees. And it’s no surprise that tech founders and investors continue to seize this massive and growing opportunity. In the past two years alone, some 35 venture-backed companies have raised nearly $800 million for gig economy technologies. As participation and demand in emerging economies grow, companies and investors are increasingly targeting them.

But companies should think beyond how to make the gig economy grow. They should seize the opportunity to improve it and make the informal economy less draining for the global workers who depend on it.

New technologies, same problems

The global workforce is growing, which is creating exciting opportunities for gig economy companies. But looking at how things have gone so far, it’s natural to ask: Could we better protect workers? Here are some facts that show we can — and must — do better:

• A recent study of gig drivers in India found that 83% work more than 10 hours a day. Despite these long hours, 72% said they struggle to manage basic household expenses.

• In Argentina, women in temporary work earn only 68% of what men earn.

• In Venezuela, the gig economy involves temporary workers earning below minimum wage to train artificial intelligence models in a multi-billion dollar market.

It is clear that national governments in some parts of the world have not done enough to ensure fair treatment of workers. Whether they will do more remains to be seen.

But startup founders should feel a sense of responsibility to workers as they build and deploy gig economy platforms in developing countries. They can help ensure that the problems that exist in the brick-and-mortar economy don’t spill over into the tech-based gig economy—and they need to address that. Doing so won’t just help workers; it will give gig platforms a better chance of success.

What can gig economy companies do?

A platform that simply connects people with jobs won’t succeed—not in the long run. Gig economy companies also need to ensure that the workers on their platforms are happy and successful. This is what will give gig platforms an advantage, reducing churn and building a brand that is synonymous with trust.

With that in mind, here are five gig economy problems that need to be addressed, and examples of companies that are investing in the long-term success of their contingent workers:

Authentication. Interns have traditionally been valued for gaining hands-on work experience. We need to reimagine this concept for the gig era, recognizing employees for their skills and accomplishments. Platforms have tried to do this with reviews and star ratings, but that often doesn’t translate to external opportunities. If employees can show off “Cisco Certified” and “SalesForce Certified” on their resumes, gig platforms can do something similar. This not only reinforces the company’s brand, but also associates the platform with the high quality that customers love.

Payments. The gig economy includes mom-and-pop businesses, including tour operators, transportation companies, or small inns and AirBnBs that operate on gig platforms. These micro-entrepreneurs need multiple business solutions to run successful businesses. They need solutions that provide them with digital tools that help them not only transact and reconcile payments, but also comply with all regulatory requirements and seamlessly manage reservations across multiple gig platforms. By integrating the payment stack, small businesses can easily reconcile reservations received across multiple platforms, including WhatsApp and word-of-mouth, reducing cancellations and fraud.

Loan. The informal sector is often ignored by formal banking institutions because it lacks tracked cash flow and formal accounting, resulting in a significant need for credit for temporary workers. Without this, many workers struggle to pay for daily operating expenses like fuel and other essentials. In India, platforms that use a large casual workforce are partnering with lending company KarmaLife to offer microloans to temporary workers. Such models require strong partnerships, where the platform shares the workers’ extensive digital footprint with fintech firms that know how to underwrite and structure lending solutions.

Insurance. Informal and gig workers have little to no job security, and their earning potential is variable and uncertain. For example, family emergencies or seasonality in some jobs can cause workers’ incomes to fluctuate wildly. Providing them with insurance, especially for sickness and disability, is a no-brainer. This creates greater certainty for employees and significantly increases platform stickiness. Employees are more likely to stay longer — as opposed to hopping from one platform to another — when a gig platform offers a safety net. This leads to better employee retention and better customer service. However, founders should learn from the mistakes of others: tying access to health insurance to hours worked, as Swiggy tried with its insurance-as-a-game (where coverage is solely dependent on meeting various performance targets), is a counterproductive way to build loyalty.

Improving qualifications. Apna, a job-tech platform and one of India’s startup unicorns, recognized early on that simply connecting employees to jobs wasn’t enough, as employees wanted growth and a long-term career path. Learning from Apna’s example, companies should provide employees with paths to upskilling. The platform leveraged the power of its own large employee community and created opportunities for peer-to-peer learning. This increased engagement and had a networking effect on the platform, where employees shared tips on how to find jobs, improve their English, and acquire other skills.

These are just a few examples of how gig platforms can realize their full potential.

The global gig economy is not only here to stay, it’s expected to grow into a nearly $2 trillion business sector by 2031. It’s fueled by a global job shortage and workers’ growing need for flexibility. But there’s no reason why the rise of this new, tech-driven economy can’t be good for both workers and businesses.

The brick and mortar economy may serve many people, but far too many around the world are excluded from prosperity or treated unfairly every day. The new, digital gig economy does not have to reflect these problems.

On-demand work can be a much better experience for workers than it is today, but only if gig economy founders start responding to the aspirations of these workers. Founders should collaborate when needed to provide workers with the tools to achieve both short-term and long-term success.

Those who take this path will grow their companies into powerful, trusted, and successful brands. Those who don’t will simply be offering a Band-Aid to hundreds of millions of workers around the world who need so much more.

Read more stories by Rahil Rangwala.