Regulating platform-based work in developing countries: how to balance job opportunities and workers’ protection?
Eliana Carranza, Senior Economist
Matteo Morgandi, Young Professional
Sara De Lorenzo, Knowledge Learning Associate, World Bank
Jonathan Stöterau, Economist and Impact Evaluation Specialist in the Jobs Group
Digital platforms are transforming labor markets on a global scale and reshaping the dynamic nature of work. From ride-hailing to freelancing platforms, the gig economy has witnessed remarkable growth: according to data from the World Bank, online gig work now constitutes an estimated 4.4 to 12.5 percent of the global workforce; and it is expected to expand further over the coming years.
Despite this undeniable growth, platform-based work still poses numerous challenges to policymakers, including regulating the legal status and working conditions of workers. The initial wave of regulatory attempts, empirical research, and debates primarily focused on platform jobs in high-income countries. However, several low-and middle-income countries are now catching-up on this debate and showing interest in regulating platform work.
Regulating platform-based work in developing countries
The labor market and economic conditions in which platform jobs thrive in developing countries differ significantly from those in high-income countries in several aspects: Developing countries face higher informality rates, larger information gaps, limited wage job opportunities in the offline economy, and instances where the legal minimum wage is not consistently paid.
All such factors call for balancing, in a context-sensitive way, the policy goal of enhancing the quality and security of platform-based jobs, with the objective of expanding employment opportunities.
To explore these issues, the World Bank’s Labor Global Solutions Group recently organized a two-day interdisciplinary workshop bringing together academics from the fields of economics, sociology, and law, along with labor representatives, policymakers, and the International Labor Organization. Presentations and discussions centered around three driving questions: How can regulations be designed to maximize the benefits of digital labor platforms while ensuring some level of safety and protection of workers? What are the priorities expressed by workers in developing countries for regulations? Which emerging lessons can be adapted to the unique context of developing countries?
- Digital platforms provide new opportunities, but so far, few protections
Digital platforms can provide workers with advantages like flexibility, autonomy, and new income opportunities by tapping into additional labor demand, both locally and globally. However, important concerns remain regarding the impact of existing service delivery and work arrangements on job quality. Many platform-based jobs lack employment protection, and most firms do not (want to) establish an employment relationship with their workers.
Like jobs in the informal economy, platform-based workers face uncertain income streams, lack of savings schemes to protect them from short- or long-term contingencies and no job security, along with new challenges resulting from an opaque algorithmic allocation of jobs. Additionally, platforms typically do not contribute to social insurance schemes, and workers rarely do so voluntarily. At the same time, platforms often regulate how workers should operate, serve customers, and be paid, effectively acting like employers. Lastly, platform workers do not always automatically enjoy the right of collective bargaining by statute, although worker organizations are emerging in many countries.
- Differences between web- and location-based platforms are key to design adequate regulatory approaches
The nature of worker-platform relations differs significantly between web-based platforms (e.g., Fiverr, Upwork, Amazon Mechanical Turk) and location-based platforms (e.g., Uber, Deliveroo). Regulatory approaches for digital labor platforms must account for this heterogeneity. For instance, to extend access to, and contribution towards, social protection, different systems may be suitable based on the nature of the job conducted via the platform.
- Regulations need to account for the context in which they operate
Regulations for platform-based work need to consider the specific labor market characteristics and institutional settings of each country. Factors such as the level of labor market informality, existing labor laws, and the bargaining power of different stakeholders can influence the effectiveness of regulatory interventions. In countries with elevated informality levels, regulation should aim at protecting workers’ rights without excessively burdening informal businesses or damaging job creation. Instruments and processes that support collective bargaining are crucial because they facilitate identification of rules and changes to business processes that do not overly impact revenues and employment.
- More data is needed to inform adequate regulatory approaches in developing countries
Obtaining better data and analysis on the characteristics and needs of platform workers is necessary to inform adequate regulatory approaches, especially in developing countries. Economic theory and evidence can aid policymakers in gradually improving workers’ rights in ways that do not undermine employment. For instance, increasing regulation and taxation of work can affect the price of providing services, impacting consumer demand—unless this also raises labor productivity. Well-designed research can help understand what benefits and protections workers may value the most and be willing to cost share with employers, thus reducing adverse impacts.
New resources can help guide policy makers
The interagency Solutions 4 Youth Employment, with Namita Datta and Rong Chenas lead co-authors, recently launched the new report “Working Without Borders: The Promise and Peril of Online Gig Work.” The report describes the rise and nature of web-based platform jobs from the perspective of developing countries, and what policies could further support opportunities for young people.
A recent study by Harry Moroz, Ignacio Apella, and Gonzalo Zunino—“Regulating Nonstandard Forms of Employment in Uruguay: Insights from International Experience and Options for the Future”—analyzes the main challenges for labor regulation in Uruguay in view of the potential expansion of more flexible nonstandard employment in general and the gig economy in particular.
A new policy brief series will address the economic rationale for regulating platform work, overviewing ad-hoc regulations of platform jobs around the world, taking stock of the evidence on the impact of platform regulation on employment, and discussing how the regulation of platform work could coordinate and inform overall labor market policy.
It is important to continue supporting discussions and initiatives aimed at exploring context-specific regulations, fostering collaboration among stakeholders, and promoting global coordination. The World Bank’s Social Protection and Jobs global practice is committed to promoting inclusive growth and poverty reduction through social protection systems and policies that enhance job opportunities worldwide.
To learn more about the workshop and people contributing to this work, you can access the agenda, speakers and moderators’ profile and more relevant information on this topic here.
The workshop and blog post were collaboratively developed by the Labor GSG team (Social Protection and Jobs Global Practice), with notable contributions from the following individuals: Matteo Morgandi, Eliana Carranza, Federica Saliola, Namita Datta, Dagmara Maj-Swistak, Jonathan Stöterau, Maho Hatayama, Harry Moroz, Agnes Nderakindo Mganga and Sara de Lorenzo.