TFF ThinkTank｜China's Growing “Gig Economy”: Opportunities and Challenges

The Forbidden Flourish

November 23rd, 2024 09:00 China

The gig economy, also known as the temporary worker economy, is a modern term derived from the current economic situation and refers to a labor market typified by short-term, flexible employment agreements where companies hire independent contractors through digital platforms.

In China, more than 200 million people are employed in the gig economy, a number that is steadily rising each year, and represents 25% of the country's total workforce, a significant part of China's service sector. The gig economy has attracted a large number of workers because of its flexibility, autonomy, low barriers to entry, and the ability of individuals to organize their own working hours. While the rapid expansion of the gig economy has attracted widespread attention, attention has focused primarily on its growth and the convenience it provides to consumers, often overlooking the deteriorating working conditions faced by temporary workers. Despite the sector's growth, industries such as food delivery and taxi cabs continue to face difficulties. Whether they are delivering food for companies like McDonald's or providing ride-hailing services, temporary laborers often face challenges such as inadequate pay and dangerous working conditions.

However, these difficulties are exacerbated by a lack of labor laws and inadequate worker rights. The growing number of challenges to the personal safety and job security of temporary workers suggests that reforms are essential to address these escalating problems.

Food delivery is one of the most attractive gig economy jobs for those seeking low barriers to entry and high levels of autonomy. According to the Organization for Research on China and Asia, the number of food delivery workers in China will reach between 7 and 10 million by 2023, serving 545 million online customers, which would be nearly half of the country's population.

However, as the gig economy labor force continues to grow, several major concerns about the workers have risen. One is the inexperience of delivery workers Data from the Chinese Academy of Social Sciences (CASS) shows that about 15-20% of delivery workers are between the ages of 18-24. They are often high school or college graduates who do not understand the traffic laws they learned in school, leading them to unknowingly or intentionally disobey traffic laws. For example, they may run red lights or go into the wrong lane to avoid delivery delays, which can result in a demerit penalty.

This extra cost can put a financial burden on delivery workers. Most food delivery workers earn only ¥4,000-8,000 ($550 - 1000) per month, which is just enough to meet their basic needs in small cities. However, such an income makes them vulnerable when unexpected expenses arise. While many workers initially perceive these jobs as flexible, the reality is quite different. In order to earn an average monthly income of ¥8,000, they must work about 10 hours a day. This demanding schedule makes it difficult for them to achieve the desired level of autonomy.

Additionally, the food delivery industry is notoriously cold and unforgiving, which, combined with long hours due to inexperience, tardiness or low ratings on delivery platforms can lead to reduced pay. Some food delivery workers say this has led to their final pay dropping to less than ¥10 per order. As a result, many workers' livelihoods are in jeopardy. Temporary bans or blacklists from websites may jeopardize their livelihoods altogether.

Apart from food delivery services, ride app provides the second largest part-time industry in China. The China Academy of Information and Communication Technology (CAICT) estimates that by 2023, there will be 6.6 million registered drivers in the online ride app industry, a significant increase from 2.9 million in 2020. Since the end of COVID-19, the industry has grown at a staggering rate, with 1.2 million people joining the industry each year. As with food delivery, many drivers are attracted to the industry's low barriers - a driver's license and a car, even a rented one. Most ride app drivers in China have even switched to electric vehicles to reduce fuel costs, increase profits and promote sustainability. In response to the surge in the number of drivers and to improve the working conditions of existing workers, Shanghai has implemented regulations that require ride app cars to be registered locally and driven by residents.

The working conditions of ride app drivers are not much better than those of food delivery workers. Many drivers are forced to sleep in their cars to maximize income and minimize expenses. This often leads to customers complaining about the odor and clutter in their cars. However, if customers have lower ratings, the platform's algorithm reduces the number of rides allocated to these drivers, which directly affects their income. As a result, this creates a precarious work environment where drivers have little control over their job security. The constant pressure to meet customer demand and the lack of traditional worker benefits forces drivers to take desperate measures to make ends meet.

Ride app drivers may engage in worrisome behaviors such as driving without a license, disregarding traffic laws, and intentionally lengthening routes to inflate fares. These behaviors are often driven by the competitive nature of the gig economy, where drivers feel pressured to maximize their earnings under strict conditions. In China, for example, a study by Ling Liuyi et al. (2020), an associate professor at the School of Management of the China University of Science and Technology, found that a significant proportion of ride app drivers do not have proper licenses due to poor enforcement by taxi platforms. In addition, the same study highlighted that some drivers admitted to making deliberate detours to inflate their charges, especially when serving unfamiliar passengers.

The expansion of China's gig economy poses challenges for workers. Some of the regulatory approaches used to manage the gig economy could also provide lessons for improving tertiary services-related efforts. The tertiary sector should promote a sustainable gig economy and improve its working conditions, such as worker safety, income insecurity and job insecurity. With China's rapidly changing economic landscape, the focus must shift to building a gig economy that benefits all participants. As such, the gig economy can support future growth in the service sector as China continues to develop.

Writer: Kimi

Website Editor: Harry