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COVID-19 Highlights Need for Stronger Safety Nets for Gig Workers

As countries around the world impose restrictions to mitigate the spread of COVID-19 (coronavirus), platforms and their workers have not escaped the effects of lockdowns and changing consumer behaviors. Although the impact of the pandemic has varied from market to market and across different types of platforms, the crisis has highlighted the volatile nature of platform work and the need for platforms to provide stronger social safety nets to their workers.

The COVID-19 pandemic has put pressure on platforms — some far more than others. While platforms that provide on-demand delivery of goods and services, such as online shopping and logistics, have seen demand surge, others like ride-hailing and home services platforms have seen their activity levels plummet. A recent study by i2i shows that transaction volumes have increased 14 percent on online shopping platforms and 10 percent on logistics platforms in Kenya, South Africa, Ghana and Nigeria since February. Over the same period of time, volumes have dropped 17 percent on ride-hailing apps. CGAP research found that platform work in the personal services space (haircuts, massages, manicure, etc.) has fallen by as much as 90 percent in Kenya.

Shallet Matua
Shallet Mutua is an e-hailing driver in Kenya. Her income has plummeted during the COVID-19 crisis. “I’m online and there is no request,” she said. Photo: Josephine Kibe

Hard-hit platforms are responding in a number of ways that affect their workers.

First, many are pivoting away from their pre-COVID business models into goods and services like food and grocery delivery, for which demand has held steady or grown — creating new job opportunities in the process. It has been relatively seamless for platforms that offer both ride-hailing and delivery services to make such transitions.

Some of these platforms have decided to focus on offering more services to the public sector, leveraging their infrastructure to deliver COVID-19 tests, providing rides and housing for health care workers or bringing food to those in need. Jumia is a good example. The largest e-commerce operator in Africa has been working with African governments to distribute health care supplies over its last-mile delivery network.

Second, many platforms have taken measures to assist workers — many of whom have suffered a partial or total loss of income. In Kenya, CGAP researchers met Shallet Mutua, a ride-hailing driver. Her income had dropped to almost nothing. “I’m online and there is no request,” she said.

Most measures platforms are taking to help workers like Shallet fall into the following categories:

  • Financial assistance. Platforms like Fiverr, Swiggy and 99 Taxi offer financial assistance for drivers who get sick or who have to quarantine. Some platforms, such as Sweepsouth in South Africa, have established relief funds to help their drivers, sometimes pooling contributions from the company and its customers.
     
  • Sick leave. Platforms like Delhivery in India and Lyft in the United States have started offering sick pay for workers, although this seems to be a temporary measure rather than a permanent benefit.
     
  • Provision of cleaning supplies and protective equipment. Many platforms are offering masks, hand sanitizers, thermometers and gloves to their workers.
     
  • Temporary suspension of fees and payments. Some ride-hailing platforms that rent or lease vehicles to drivers, such as Ola, Go-Jek and Grab, have temporarily suspended payments. Others like UberEats have waived onboarding fees for new workers. Others, like Postmates, Meituan and Grubhub, have waived their commission fees on transactions.
     
  • Health insurance. Health insurance is offered by only a handful of platforms, some of which already had insurance programs on their platform (e.g., Grab, Zomato and Uber) and others that introduced an insurance plan specifically in response to COVID-19 (Ola, Didi and Sendy). Rather than comprehensive health insurance, many platforms offer only financial assistance to cover COVID-19-related medical expenses incurred by workers.
     
  • Pathways to other work opportunities. Some platforms have trained workers to switch from low-demand activities to high-demand activities, for example, training drivers to deliver groceries or takeout orders.
Learn more about platform business models and their synergies with financial services in Platform Business Models: Financial Services for Poor People in the Digital Economy (CGAP 2020).

Research conducted by the World Economic Forum shows that many workers are not satisfied with the benefits provided by their platforms. Accessing and claiming the new benefits has been one cause of dissatisfaction for workers. For example, the U.K. food delivery platform Deliveroo required workers applying for financial assistance to show proof that they had contracted the virus or had been asked to self-isolate, despite the difficulty of obtaining such documentation. The Fairwork Foundation has documented some of this in its recent report.

It is unclear whether these benefits will continue, evolve or disappear in the coming months and years. Workers will require support through the economic recovery process; however, there is a limit to how much support platforms can offer, especially when it comes to small local platforms with limited access to capital. There is a need for the public and private sectors more broadly to think about solutions for independent workers.

Financial services offered by platforms could play a significant role in meeting workers’ needs during and after the crisis. CGAP recently published a slide deck that documents the synergies between platforms and financial services, and our interviews with platforms and gig workers in Kenya highlighted demand among workers for financial services. To meet workers’ immediate needs, platforms can offer workers loans that have flexible repayment schedules that reflect the volatility of platform-based income. Since platforms have access to workers’ earnings, it would be easy for them to verify income levels and monitor progress during and after the crisis. In the longer term, more platforms should look into offering insurance and savings products. The COVID-19 pandemic has underscored the relevance of these safety nets.

Resources

Slide Deck

Platform Business Models

Most “unicorn” companies are platforms. But what exactly are platforms? What are the main business models? Are to what extent are they relevant to financial inclusion for low-income customers? Explore the answers in this slide deck.

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