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

The gig economy might seem relatively new, but it is actually centuries old. And in many parts of the world it is grueling.

An “informal” worker in Mumbai, for example, might get up before 5:00 am to get her kids ready for school and complete the meal prep and cooking for the lunch tiffin service she runs from home. By 9:30 she’s headed out the door to her first employer’s house to prepare their food. She spends hours at three or four different houses cooking and cleaning before getting home in time for her kids’ return from school. For many workers, this has been a typical day, dating back to long before the advent of Uber.

This informal style of work–which offers flexibility but little to no worker protections–has nevertheless been growing rapidly thanks to the proliferation of digital technologies, the work-from-anywhere phenomenon, the globalization of business, and numerous other trends.

Corporations pushing for efficiencies to optimize costs see value in turning to gig workers over full-time employees. And it’s no surprise that technology company founders and investors are continuing to jump on this massive and growing opportunity. In just the last two years, some 35 venture-backed companies have raised nearly $800 million for gig economy technologies. With both participation and demand ramping up in developing economies, companies and investors are increasingly setting their sights there.

But companies should be thinking about more than just how they make the gig economy bigger. They should seize the opportunity to make it better, and to make the informal economy less grueling for the workers around the world who depend on it.

New Technologies, Same Problems

The global labor force is growing, and this opens up exciting opportunities for gig economy companies. But looking at how things have gone so far, it’s natural to ask: Could we be doing a better job of protecting workers? Here are just a few facts that suggest we can—and must—do better:

• A recent survey of gig drivers in India found that 83% work more than 10 hours per day. Despite these long hours, 72% reported they struggled to manage basic household expenses.

• In Argentina, female gig workers earn as little as 68% of what their male counterparts make.

• In Venezuela, gig workers earn below minimum wage for training AI models in a multi-billion-dollar market.

Clearly, national governments in some parts of the world have not done enough to make sure that workers are treated fairly. Whether they will do more remains to be seen.

But startup founders should feel a sense of responsibility toward workers as they create and roll out gig economy platforms to the developing world. They can help ensure that problems that exist in the brick-and-mortar economy do not extend into the tech-enabled gig economy—and they must take this on. Doing so won’t just help workers; it will give gig platforms a better chance at success.

What Can Gig Economy Companies Do?

A platform that just connects people to work will not be successful—not in the long run. Gig economy companies must also ensure that the workers on their platforms are happy and successful. This is what will give gig platforms an edge, reducing attrition and building a brand synonymous with trust.

With that in mind, here are five gig economy pain points that need to be solved, and examples of companies that are investing in their gig workers’ long-term success:

Credentialing. Apprentices have traditionally been recognized for achieving practical work experience. We need to reimagine that concept for the gig age, giving workers recognition for skills and performances. Platforms have attempted to do this through reviews and star ratings, but this is often not translatable to outside opportunities. If workers can brandish “Cisco Certified” and “SalesForce Certified” on their resumes, gig platforms can do something similar. This would not only boost a company’s brand but associate the platform with high quality, which customers love.

Payments. The gig economy includes family-run businesses, including tour operators, transportation companies or small inns and AirBnBs that engage on gig platforms. These micro-entrepreneurs require a host of business solutions to run successful enterprises. They need solutions that provide them with digital tools that help them not only transact and reconcile payments but also adhere to all regulatory requirements, and seamlessly manage bookings across multiple gig platforms. By integrating the payments stack, mom & pop businesses can easily reconcile bookings they receive across multiple platforms including WhatsApp and word of mouth referrals, reducing cancellations and fraud.

Credit. The informal sector is frequently ignored by formal banking institutions because there is no traceable cash flow and formal accounting, resulting in a severe credit need for gig workers. Without it, many workers struggle to pay for day-to-day operating expenses like fuel and other necessities. In India, platforms that leverage a large gig workforce are partnering with lending company KarmaLife to offer micro loans to gig workers. Such models require strong partnerships where the platform shares the vast digital footprint of workers with fintechs who 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. Family emergencies, for example, or the seasonality of certain jobs can cause worker incomes to fluctuate dramatically. Providing them insurance, especially for when they are sick and unable to work, is a no-brainer. It creates more certainty for workers and adds significantly to the stickiness of a platform. Workers will be more likely to stick around long-term—as opposed to jumping from one platform to the next—when a gig platform offers a safety net. This leads to better worker retention and superior customer service. But founders should learn from the mistakes of others: tying access to health insurance to the number of hours worked, as Swiggy attempted with gamified insurance (where coverage depends entirely upon hitting various performance targets), is a counterproductive way to build loyalty.

Upskilling. Apna, a job-tech platform and one of India’s startup unicorns, recognized early on that simply connecting workers to jobs wasn’t enough, because workers wanted growth and a long-term career path. Learning from Apna’s example, companies should provide pathways for workers to upskill themselves. This platform tapped into the power of its own large community of workers and created opportunities for peer learning. This boosted engagement and had a network effect for the platform where workers would share tips on how to find jobs, improve their English and acquire other skills.

These are just a few examples of how gig platforms can live up to their full potential.

The global gig economy is not only here to stay, it is projected to balloon into a nearly $2 trillion business sector by 2031. It’s being driven by a worldwide job shortage, and workers’ increasing demands for flexibility. But there is no reason why the growth of this new, tech-enabled economy can’t be a good thing for both workers and businesses.

The brick-and-mortar economy may serve many people well, but far too many worldwide find themselves excluded from prosperity or treated unfairly on a daily basis. The new, digital gig economy doesn’t have to mirror these problems.

On-demand work can be a far better experience for workers than it is today, but only if the founders of gig platforms begin to address these workers’ aspirations. Founders should partner as needed to give workers tools to achieve both short- and long-term success.

Those that follow this path will grow their businesses into powerful, trustworthy, and successful brands. Those that do not will simply be offering a band-aid to hundreds of millions of workers around the world who need far more than that.

Read more stories by Rahil Rangwala.