NAVIGATING CHINA’S GIG ECONOMY: STRIKING A BALANCE BETWEEN FLEXIBILITY AND WORKER PROTECTION

Is the rise of the gig economy a revolution or a gamble for China's workforce? This rapid surge of short-term, flexible work arrangements is reshaping the country’s labour dynamics. Yet, this transformation poses a daunting challenge: How can China foster the gig economy's growth while safeguarding worker protections? 

Rise of the Gig Economy in China

The evolution of the gig economy first began in the 1980’s as a result of Deng Xiaoping’s economic reforms, encouraging self-employment and rural entrepreneurship. Momentum surged in the early 2000s alongside a mass migration to urban centres and layoffs in state-owned enterprises. Later on, capital constraints in the 2010s fueled this trend, fostering flexibility for businesses and workers amidst economic shifts.

State policies have contributed significantly to sustenance of the gig economy. Premier Li Keqiang's "Internet Plus" strategy, introduced in 2015, aimed to harness the internet's potential to spur innovation and entrepreneurship, providing a significant boost to the digital economy. This strategy further gained momentum through a collaborative effort between the World Bank and Alibaba Group in 2016, focusing on leveraging digital technologies, especially e-commerce, to drive rural growth and employment. The rapid expansion of e-commerce not only contributed to poverty alleviation, lifting 13.8 million rural residents out of poverty between 2013 and 2018, but also spurred demand for gig work services. 

Another key reason behind the growth of the gig economy is the fact that China has a massive workforce, with some looking for flexible work options or additional income. China's rapid digitalization offers employment opportunities through platforms like Didi (ride hailing) and Meituan (food delivery). Typically, location-based platform workers are young, male, and low-skilled, while web-based workers tend to be well-educated. However, both groups seek higher income through platform work. 

By 2020, the gig economy had surged to a value of 3.4 trillion yuan. Notably, the food delivery sector emerged as a major driver of this growth, doubling in size to 1.5 trillion yuan ($208 billion) by 2023. Today, over 200 million Chinese workers find themselves in gig roles, constituting about 25 percent of the country's workforce. This growth isn't just a temporary trend; it reflects a fundamental shift in how people work and engage with the economy. This growth trajectory is projected to continue, with the gig economy expected to encompass 40% of total employment by 2025, further cementing its status as a cornerstone of China's economic landscape.

Unveiling the Realities of Gig Work

The surge in the gig economy, propelled by necessity amid a weak labour market, has led to lower wages and increased financial insecurity. With over 10 million graduates entering the workforce each year, many are forced to turn to gig work to make ends meet. However, this reliance on gig jobs adds to the existing problem of youth unemployment.  Furthermore, the gig economy's very nature creates vulnerability for workers. Classified as independent contractors, they lack the social safety nets of traditional employment. This means no health insurance, unemployment insurance, or retirement savings – essential benefits that provide financial security. Moreover, China's rigid welfare system, coupled with the informal operations of third-party labour companies, creates additional hurdles for gig workers, particularly migrants without formal residency status. 

Beyond the structural challenges mentioned earlier, gig workers grapple with the intense pressure exerted by algorithm-driven platforms. Food delivery riders and ride-share drivers face relentless demands to meet strict delivery targets and maintain high customer ratings. This pursuit of efficiency often translates into reckless driving and safety violations, as seen in the alarming rise of delivery-related accidents in Shanghai in 2020. These accidents have predominantly involved dominant food delivery platforms, Ele.me and Meituan Dianping. Despite their efforts, gig workers earn meagre wages comparable to factory work, showcasing the need for skill upgrading to navigate job insecurity and evolving market demands.

However, expanding the scope beyond China, the gig economy's global impact reveals a broader narrative of transformation and upheaval in the labour market. In the United States, for instance, gig workers surged from 14% to 35% of the workforce between 2014 and 2020, contributing over $1 trillion annually to the economy. Full-time gig workers comprised 24% of the workforce in 19 countries by 2021, reflecting a widespread trend. India also saw a tenfold spike in gig worker demand, tripling participation from 2021 to 2022. Companies worldwide, facing stagnant earnings, turn to gig workers to cut labour expenses, offering flexibility while avoiding fixed costs linked to permanent staff. However, this trend can oversaturate the labour market, leading to wage stagnation and disrupting traditional payroll structures, impacting worker benefits and social safety nets, potentially destabilising the economy and causing financial insecurity if not addressed.

Balancing Worker Rights and Economic Stability 

The rapid expansion of the gig economy highlights both the need for labour protection reforms and the vulnerabilities in the current legal framework. Rooted in a centrally planned economy, Chinese labour laws, primarily governed by the Labour Law of 1994 and the Labour Contract Law of 2007, were designed for a different economic landscape. Despite shifts towards a market economy, remnants of the planned system persist, limiting financial support and social protection to traditional work units. China's revised Workplace Safety Law in 2014, imposed harsher penalties for workplace accidents. However, it does not address regulations specific to the gig economy. Labour protests among gig workers have surged dramatically, with food delivery drivers staging 102 protests in 2018-2019, compared to just 19 in 2017-18, according to the China Labour Bulletin. These protests, likely underreported, signal growing discontent and dissatisfaction among gig workers. 

Amid increasing labour disputes, there is a pressing need for clear guidelines and legislative changes to protect platform workers. Recent legal rulings in other countries, such as the UK's decision to classify Uber drivers as employees, set a precedent that could inspire similar changes in China. Regulatory efforts are underway to enhance protections for gig workers, including social security, insurance, and vocational training, as indicated by the State Council. Local governments are advocating for labour contracts and collective consultations for platform workers. In 2021, China's evolving employment policy introduced specific regulations for the gig economy, emphasising fair employment practices and collaboration among government bodies, trade unions, and the judiciary. Authorities issued guidelines to protect food delivery workers, ensuring minimum wages, relaxed delivery deadlines, and participation in social insurance programs, while promoting safety with smart kiosks and helmets. However, effective enforcement of these regulations remains a significant challenge, necessitating continued vigilance and oversight.

While reclassifying gig workers, the new ‘precarious proletariat’, as employees holds promise in ensuring basic labour rights and benefits, this shift presents significant challenges to China's already strained social security programs. Issues such as the misuse of funds exacerbate the situation. For example, in 2020, only 217 million of the 462 million urban workers had unemployment insurance, with funds often diverted towards job training or creation projects instead of direct payouts.  Additionally, the increasing cost of elderly care adds pressure to the pension system. With an ageing population projected to surge to 402 million by 2040, the demand for pensions and medical services is expected to rise, further straining social security resources.  

Extending labour protections should be part of a broader overhaul of the social security system. This requires establishing a system where benefits like health care are portable, ensuring continuity regardless of job type. Without tackling these structural issues and ensuring fiscal sustainability, reforms risk leaving gig workers vulnerable to exploitation and straining the economy. Sustainable growth necessitates fair pay, basic protections, and portable benefits, prioritising workers over platforms. Despite offering flexibility to many, the gig economy must ensure fair treatment and comprehensive support systems for its workers to truly prosper.