The gig economy can be many things but within the realm of ridesharing, I see it primarily as a shock absorber in the labor market. That means ridesharing is a temporary fall back plan if you have trouble in the formal market or in between jobs.

Here is an example of ridesharing as a shock absorber: if someone lost an income through job loss, he or she would not suffer 100% immediately because he or she could go to ridesharing without much cost. This shock absorber can be a minor alternative to unemployment benefits, except it comes as no cost to the government.

Because of this, I prefer to have flexibility in the ridesharing sector. Regulations could reduce the flexibility and reduce the effectively of the ridesharing sector as a shock absorber.

Yet it is quite clear that there is a need for labor protection. Regulations do have a role, especially since there is an asymmetry of bargaining power between those driving and the owner of the platform, driving by technology. In the case of food delivery, which is also a part of the gig economy, Foodpanda has market power over its food delivery workers and that market power was only matched with its deliverers’ union-like organizing successes.

When it comes to ridesharing, it does seem current regulations are reducing such flexibility and hurting the role of the sector as a labor market shock absorber. This inflexibility is caused by the need to register with the government if a person wants to participate in the ridesharing economy by driving.

Grab certainly blamed the new ridesharing regulations for reduced number of drivers on the road. This seems to be backed by complaints made by passengers over longer waiting time and higher fares. I personally I have suffered longer waiting time and higher fares, compared to before the regulations came into place. Talking to former drivers have also convinced that there are those who chose to cease becoming participants in the ridesharing sector. These point towards greater barrier to entry and hence, reduced flexibility.

I think as a compromise between the need for regulations and flexibility, perhaps there should be a two-tiers regulation:

  • For those earning below a certain threshold per month over x months, they could be exempted (partially?) from registration.
  • For those surpassing that threshold, they should be covered by current regulations fully .

The threshold is there to differentiate those doing ridesharing as a part time job and those doing it full time (or simply heavy participate of the gig economy). The shock absorber factor is more relevant to the part-timers than to the full-timers.

Admittedly, this will make implementation more complex and open the grounds for some non-compliance. There will be grey areas but I think in making the gig economy as a shock absorber, we should be tolerant of such non-compliance within some margins.

Implementation issues aside, theoretically this should be improve the role of ridesharing as a shock absorber in the labor market. It allows part-timers to join the gig economy without much cost, and making ridesharing sector as a temporary fallback.

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