The impact of platforms and platform economy in restructuring jobs and socio-economic spheres has been witnessed in recent times, especially during the pandemic.
What does Platform Economy mean?
- Platform and Platform Economy: Platforms are algorithm-enabled “cyberplaces” where elements like people or machinery can act or transact. Platform economy is the use of online platforms, which decreases the transaction costs of labour outsourcing and temporary access to goods and services.
- Platform Workers: According to the OECD, “platform workers are individuals who use an app or a website to match themselves with customers, to provide a service in return for money.
- India recently passed landmark legislation, The Code on Social Security, 2020, which recognises this form of work, where “organisations or individuals use online platforms to access other organisations or individuals to solve specific problems or services in exchange for payment”.
- Difference between Gig and Platform workers: While a gig worker is one who works outside the traditional employer-employee relationship, a platform worker is a gig worker who earns an income by associating with a digital platform fulfilling on-demand services for clients.
How is Platform business model different from the traditional business model?
- Flow of Business: In traditional business model the flow of process from production to distribution, marketing and finally reaching to the customer is linear in nature and shows the one-way process. The platform business model is two-way directions from the platform to the whole platform ecosystem. The focus shifts to collaborations with intermediaries and the exchanges of value between producers and consumers on the platform.
- Value Creation: Traditional firms organize their internal resources for value creation by improving an entire chain of product activities. The platforms seek to maximize the overall value of a growing ecosystem by feedback-driven and iterative process.
- Assets: In the traditional model, the resource-based view of competition includes tangible assets like infrastructure, mines and intangible assets like patents, rights etc. However, in the platform business model, the assets are hard to copy as they mostly include the community and the resources which members of platform own and contribute. So, for platform businesses the network of producers and consumers act as a chief asset.
Factors that have led to the rise of Platform Economy
- Emergence of Entrepreneurial Economy: The fourth industrial revolution (4IR) characterised by entrepreneurship, moving further towards a job market of self-starters, has set the stage for a paradigmatic transition in jobs. The expanse of change includes the percolation of cheaper smartphone tech, mobile telephony and accuracy of location services, demand for better urban services, alongside a demand for meaningful jobs.
- Aspirations, Jobs, and India’s Demographic Dividend: The introduction of the platform model to semiskilled jobs such as driving, cleaning, food delivery etc. is bringing visibility to a large mass of people engaged in such urban labour. Changing job roles riding on the back of the platforms also provides for on-demand services, effectively changing the meaning of the job itself. Platform workers tend to be better educated and of a younger age mirroring the larger trends in Indian Economy of 400 million millennials.
- Platform Affords Flexibility: Platform work serves multiple needs - a first-time job, a stopgap job, or even, a longer-term engagement based on skills quickly gained either through training or doing.
The opportunity of transformation that Platform Economy offers
- Radical Reimagination: Platform work allows for a radical reimagination of the workplace, nature of work, type of work and reporting patterns. It allows us to tap into the vast pool of unorganised labour (i.e. independent workers) in India to allocate work based on demand and generate services that are trackable, and importantly, taxable.
- Just Jobs: Platform work assures a steady stream of jobs to the worker, as well as quality of service to the customer. This creates networks of trust within the system which function as stronger accountability measures. Therefore, platform work provides dignified, measurable, meaningful work, which are “just jobs”.
- Social and Digital Financial Inclusion: Inclusivity is designed-in on the platforms to minimise any uneven impact on communities that they operate in. For instance, a Zomato delivery partner in Rajasthan who lives with a locomotor disability has been hailed as a master of hustle. Platform workers also exhibit financial and dgital proficiency through uptake of saving instruments, signalling a huge shift in the way people access work, income and the online world.
- Skilling and Training: Platforms equip workers with transferable skills. This allows a taxi driver to operate as a delivery person, for instance, facilitating horizontal mobility across jobs. Similarly, transferable skills allow for ‘vertical mobility’ of workers thereby expanding their earning opportunities. Platform-led skilling therefore creates a digital footprint of accountability thus far lacking in skilling programmes.
Some Challenges in success of Platform Economy
- Employment Related Benefits: The shift from conventional business model to the platform business model may powerfully modify the dissemination of income and wealth in whole society. The platform business can also generate scattered work schedules as well as increases the levels of part-time work deprived of the employment-related benefits that earlier categorized in full-time work.
- Monopoly Market: The problem of emergence of Monopoly market is quite probable. Many platforms prove to be 'winnertake- all models' where only one or at max two platforms survive.
- Revision of Laws: Due to the change in the working of the current market structure, the policies and rules need to be revised. There is list of policy domains like taxation rules, competition policy, intellectual property rules and service provision requirements which needs to be taken care of in the era of platform economy
After the industrial revolution, one of the major breakthroughs in the global macro-economic environment is platform economy. By recognising platforms, India has begun reconciling two seemingly antagonistic phenomena – the supply of labour and the simultaneous pervasion of technology. The platform economy leverages both demography and technology to promote financial and social inclusion in India’s cities and hinterlands. Platforms, ergo, are here to stay and will play a critical role in defining India’s growth story.
What is Platform Economy? Analyse the potential of Platform economy to transform the current economic structure.
Primary Source: https://olawebcdn.com/ola-institute/OMI_Platform_Economy_Report.pdf