The Gig Economy in Developing Countries: A New Frontier in Economic Development?

What is gig economy?

Composed of people who work short-term appointments or as sole proprietors or independent contractors. 

Let's look at the short video to know more about gig economy.

People working in the gig economy can sign up for jobs on customer-facing platforms like ride-share apps or courier services, while others may be employed by a company on a freelance basis for a specific job.

Did You Know？

As of September 2024, Malaysia’s gig economy surpassed three million own-account workers, reflecting continued strong growth and increasing reliance on gig work as a viable income source.

Both the global and Malaysian workforces now comprise a sizable portion of the gig economy.  Gig workers accounted for 33% of the world's workforce as of 2023, contributing to an economy worth about USD 455 billion.  Approximately 4 million people, or 26% of Malaysia's 15.3 million workers, are engaged in the gig economy.  This group consists of freelancers, food delivery riders, e-hailing drivers, and other people doing platform-based or temporary contract labor.

Notably, Malaysia's gig economy expanded by 31% in 2017, surpassing the country's traditional labor growth.  In the Klang Valley alone, there were 13,000 Foodpanda and 10,000 GrabFood riders as of November 2019, underscoring the growth of jobs based on digital platforms.

In parallel, 3.45 million workers, or 21.8% of all employment in Malaysia in 2023, were employed in informal employment, which comprises jobs outside of the legal and regulatory systems.  This covers people who labor in households, the unorganized sector, and agriculture.  Even while informal and gig employment sometimes overlap, not all gig workers—especially those connected to official digital platforms—are categorized as informal employees.  However, both types of employment show a move away from full-time, traditional occupations, which emphasizes the need for new laws and rules to accommodate this changing workforce.

Pros of the Gig Economy 

Increased Employment Opportunities: 

The gig economy enables people, especially youth and women, to work remotely from home or anywhere, thus increasing job availability and reducing unemployment rates in developing countries, where full-time formal jobs are scarce.

Access to Global Markets: 

Gig platforms allow workers in developing countries to connect with international clients, expanding market reach beyond local limitations and fostering income generation 

Inclusion of Marginalized Groups: 

The gig economy has notably increased labor force participation among women and youth, groups traditionally underrepresented in formal employment sectors. For example, women's participation in the Middle East and North Africa labor force reached 21% in 2023, partly due to gig work opportunities 

Skill Development and Flexibility: 

Gig work offers young people chances to earn income while acquiring new digital skills and balancing work with education or other jobs. It also provides flexible work arrangements suitable for diverse needs

Cons/Challenge of Gig Economy 

Lack of labor Protections: 

Most gig workers in low-income countries operate outside labor regulations, lacking access to social insurance, benefits, and protections typical in formal employment

Wage Inequality: 

A significant gender wage gap persists, with women earning approximately 68% of men's wages on some platforms, reflecting broader inequalities

Reinforcement of Informality: 

Gig work often exists outside formal labor regulation, hindering efforts to strengthen institutional quality—an important variable in structuralist theory.

Theretical Lens

Labor Market Segmentation Theory
This theory posits that labor markets are divided into formal and informal sectors with different job qualities and protections. The gig economy largely operates in the informal segment in developing countries, offering flexible but precarious work without traditional labor protections. 

Lewis Dual Sector Model

The gig economy can be seen as a modern-day “subsistence sector,” absorbing surplus labor from agriculture or informal sectors. However, without capital investment or productivity gains, it may trap workers in low-income cycles.

Human Capital Theory:

Platforms like Upwork and Freelancer can enhance skill acquisition through project-based learning. Gig work enables skill acquisition (e.g., coding, digital marketing), enhancing long-term employability.

Dependency Theory:

Global gig platforms often extract value from workers in the Global South while profits flow to platform owners in the Global North, perpetuating unequal development.

Policy Recommendations for maximizing benefits and minimizing risks

Regulate and Formalize Gig Work: 

Developing labor regulations that recognize gig work and protect workers' rights without stifling flexibility is essential. This includes creating modern collective bargaining models adapted to dispersed gig workers

Expand Digital Infrastructure and Literacy: 

Governments should invest in affordable, widespread internet access and digital skills training to broaden participation and reduce the digital divide

Enhance Social Protection Coverage: 

Innovative social insurance schemes tailored for gig workers, including portable benefits and digital registration systems, can provide safety nets.

Innovative examples from developing world

India: The Labour Department has initiated a special campaign to register gig workers on the Ministry of Labour and Employment's e-Shram portal. This effort aims to formalise the gig economy by providing workers with social security coverage and health assistance

Kenya: The Ajira Digital Program trains youth for online work, promoting digital entrepreneurship and freelance income.

Philippines: The Department of Trade and Industry offers upskilling programs for online sellers and freelancers to transition to higher-value gigs.

In conclusion, the gig economy offers promising pathways for economic inclusion, poverty alleviation, and labor market flexibility in developing countries. However, realizing these benefits requires comprehensive policy frameworks that address social protection, digital access, labor rights, and gender equity to mitigate the inherent risks of gig work.

References 

Russu, C. (2024, February 8). The pros and cons of the gig economy in developing countries | Experts’ Opinions. DevelopmentAid. https://www.developmentaid.org/news-stream/post/174420/the-pros-and-cons-of-the-gig-economy-in-developing-countries 

Sharif, I., & Qiang, C. Z. (2024, March 16). The promise and peril of online gig work in developing countries. World Bank Blogs. https://blogs.worldbank.org/en/voices/promise-and-peril-online-gig-work-developing-countries 

World Bank Group. (2025, March 6). Demand for online gig work rapidly rising in developing countries. World Bank. https://www.worldbank.org/en/news/press-release/2023/09/07/demand-for-online-gig-work-rapidly-rising-in-developing-countries

Mail, M. (2024, December 29). Malaysia’s gig economy surpasses three million workers in 2024, spurring calls for better worker safeguards, protections. Malay Mail. https://www.malaymail.com/news/malaysia/2024/12/29/malaysias-gig-economy-surpasses-three-million-workers-in-2024-spurring-calls-for-better-worker-safeguards-protections/161415

World Bank. (2023b, September 8). Demand for online gig work rapidly rising in developing countries. DevelopmentAid. https://www.developmentaid.org/news-stream/post/167092/the-promise-and-peril-of-online-gig-work

Serafimovska, A. (2023, September 13). Online Gig Work’s Impact on Developing Economies. Impact Foundation. https://impactfoundation.mk/online-gig-works-impact-on-developing-economies/

PIKOM, JobStreet.com Sdn Bhd, SEONG, O. C., ASOCIO, & CHEN, B. (2023). ECONOMIC AND DIGITAL JOB MARKET OUTLOOK 2023. https://www.pikom.org.my/Reports-Job_Market/Economic_and_Digital_Job_Market_Outlook_2023.pdf

Mydigital. (n.d.). Mydigital. (n.d.). https://www.mydigital.gov.my/wpcontent/uploads/2024/06/GigWo rkerWhitepaper.pdf