The Brave New World of Middle-Class ‘Gigs’ in India

It seems clear that India has a couple of painful years ahead of it as it grapples with AI reducing the demand for labour in sectors which lie at the heart of middle-class income generation e.g., Financial Services, IT Services, Media and Manufacturing. However, it is also evident that technology is creating new jobs in India most notably in the gig economy (in which 8 mn Indians work). Since many of new pockets of job creation are novel in nature e.g., YouTubers, coders on the dark web, bot trainers, data cleaners, etc, it is difficult for us to fully comprehend the scale of job creation taking place in India. Given the largely unfettered play of free market forces in the heart of the Indian economy (away from sectors where the Government messes around), we believe it is more likely than not that technology will help rather than hinder India’s march to prosperity.

“In the story of AI and humans, if we get the dance between artificial intelligence and human society right, it would unquestionably be the single greatest achievement in human history.’ – Kai-Fu Lee, Chen Qiufan et al in ‘AI 2041: Ten Visions for Our Future’ (2021)

The “substitution” of workers with machines

The downturn in urban consumption and the challenges facing India’s middle class has received plenty of attention over the past year. In our 24^th November 2024 blog, Why is the Indian Middle-Class Suffering? , we noted that one of the drivers of this downturn has been the automation in offices & factories of clerical, secretarial and managerial roles requiring routine and/or repetitive work. More generally, labour economists have commented that this replacement of workers with machines is a widespread phenomenon in the developed economies. Daniel Susskind writes in his book ‘A World Without Work: Technology, Automation and How We Should Respond’ (2020):

“The traditionally plump midriffs of many economies, which have provided middle-class people with well-paid jobs in the past, are disappearing. In many countries, as a share of overall employment there are now more high-paid professionals and managers – as well as more low-paid care workers and cleaners, teaching and healthcare assistants, caretakers and gardeners, waiters and hairdressers. But there are fewer middling-pay secretaries and administrative clerks, production workers and salespeople.”

However, automation anxiety is not new. Concerns regarding the replacement of human beings by the latest machines have been omnipresent since the Luddites began vandalising James Hargreaves’ spinning jenny and John Kay’s flying shuttle in the 1730s in northern England. And yet in spite of the fact that the Luddites’ concerns were justified – mechanical looms did replace skilled weavers in England – the West has moved forward for several centuries with the middle class being a key beneficiary of that progress. So, why is it that middle classes in the West flourished in spite of wave after wave of mechanisation & automation in the workplace?

The “complementarity” between humans and machines

“When patterns are broken, new worlds emerge.” —Tuli Kupferberg

Whilst the substitution of workers with machines is well understood (see the lower left quadrant in exhibit 1), historically what has been even more powerful in the Western context is the “complementary” effects between technology and labour. Complementary effects are harder to identify than substitution effects partly because, chronologically, they come AFTER substitution effects have already kicked in and partly because they involve novel use cases which are hard to envisage when the first wave of tech disruption plays in. For example, when electricity was discovered in the late 19^th century, it was obvious that candle makers would lose their jobs to electric lights. What was not obvious was that within a generation electricity would dramatically increase workplace productivity, GDP growth and therefore employment. What nobody could have predicted in the late nineteenth century was that electricity – via the gramophone – would increase both the demand for musicians and their career earnings.

To be precise, the complementary force works in FOUR different ways.

1. Technology creates new jobs where none existed previously – For example, the rise of smartphones and low-cost broadband has been central to the creation of the gig economy. And whilst some might say that the rise of ride share is simply a “substitution” of a traditional taxi driver with a Ola/Uber, it is relatively clear that many segments of the gig economy e.g. hairdressers, therapists, plumbers, electricians, domestic helpers, etc have resulted in the creation of net new jobs (rather than simply substituting a conventional profession with its gig economy counterpart).
2. Technology increases labour productivity, their earning and spending capacity, & newer job opportunities – As Daniel Susskind says in ‘A World Without Work (2020): “Perhaps the most obvious way that the complementing force helps human beings is that new technologies, even if they displace some workers, often make other workers more productive at their tasks….Take a taxi driver who uses a sat-nav system to follow unfamiliar roads, an architect who uses computer-assisted design software to craft more complex buildings, or an accountant who uses tax computation software to handle harder, more intractable calculations. All are likely to become better at their tasks as a result….”
3. Technology lowers cost of production and therefore, boosts demand and creates jobs – In ‘A World Without Work: Technology, Automation and How We Should Respond’ (2020), Daniel Susskind uses the example of a lawyer to explain how this dynamic works: “ Think of a lawyer who is displaced from the task of looking through stacks of papers by an automated document review system, a piece of software that can scan legal material far more swiftly – and, in many cases, more precisely, too. The same lawyer can now turn her attention to other tasks involved in providing legal advice, perhaps meeting face-to-face with her clients or applying her problem-solving skills to a particularly tricky legal conundrum. In all these cases, if productivity increases are passed on to customers via lower prices or better-quality services, then the demand for whatever goods and services are being provided is likely to rise, and the demand for human workers along with it.”
4. Technology fosters growth and prosperity by improving overall efficiency: Improved efficiency generates prosperity and demand for goods and services which in turn creates jobs (albeit in sectors very different from the ones where jobs are being lost). This is perhaps the most powerful impact of technology, and it is the one which is hardest to detect in the short run. We refer again to Mr Susskind’s away-winning book:

“…if we think again of the economy as a pie, technological progress has made the pie far bigger. As previously noted, over the last few hundred years, economic output has soared. The UK, for instance, has seen its economy grow 113-fold from 1700 to 2000. And that is nothing compared to other countries that were less-developed at the start of this period: over the same three hundred years, the Japanese economy grew 171-fold…and the US economy a whopping 15,241-fold. Intuitively, growth like this is likely to have helped workers. As an economy grows, and people become more prosperous with healthier incomes to spend, the opportunities for work are likely to improve. Yes, some tasks might be automated and lost to machines. But as the economy expands, and demand for goods and services rises along with it, demand will also increase for all the tasks that are needed to produce them.”  – Daniel Susskind in ‘A World Without Work: Technology, Automation and How We Should Respond’ (2020).

Is India benefiting from the “complementary” effects of technology?

Whilst – as noted in our 24^th November 2024 Why is the Indian Middle-Class Suffering? blog – jobs are being lost in financial services, IT services, media and manufacturing courtesy the widespread use of robotisation and automation in these sectors, it is all but certain that jobs are being created elsewhere in the Indian economy. So, where are those jobs being created?
New job creation in India

“We’re making this analogy that AI is the new electricity. Electricity transformed industries: agriculture, transportation, communication, manufacturing.” – Andrew Ng, former head of Google Brain, current Amazon board member

As with electricity, so with the latest wave of technology, new job creation is all but certain. The more interesting question is in which parts of the Indian economy will these jobs be created in.

Things that are already happening at scale:

2. YouTubers & influencers: A staggering  80mn+ Indians are making videos on YouTube. The top 1% of them – around 200K YouTubers – earn on average Rs. 12 lakh per annum. However, research conducted by Kalaari Capital shows that this average figure is misleading because the most successful YouTubers in India earn much more than Rs 12 lakhs per annum: “Less than 1 per cent of professional creators (those with over 1 million followers) have the potential to earn between $2500-65K (Rs. 53 lakh) per month.” (Source: https://telecom.economictimes.indiatimes.com/news/8cr-creators-in-india-but-1-5-lakh-able-to-earn-most-make-just-rs-16k-a-month/94768398)

3. Data cleaning, bot training and tech R&D in Indian GCCs: As highlighted in Chapter 8 of our bestselling book, ‘Behold the Leviathan: the Unusual Rise of Modern India’, regardless of what happens to employment in the Indian IT Services sector, GCCs (Global Capability Centres) are booming in India with 2 new GCCs opening each week adding to the stock of 1700 GCCs already open in India. GCCs employ ~2 mn people in India and much of the work being done in the GCCs is directly related to the latest wave of technological change.

Conclusion: Complementary effects are likely to create newer, unimaginable job opportunities

“Just as the mobile Internet led to roles like the Uber driver, the coming of AI will create jobs we cannot even conceive of yet.” – Kai-Fu Lee & Chen Qiufan in ‘AI 2041: Ten Visions for Our Future’ (2024)

Whilst it seems clear that India has a couple of painful years ahead of it as it grapples with technology reducing the demand for labour in sectors which lie at the heart of middle-class income generation e.g. Financial Services, IT Services, Media and Manufacturing, it is also evident that technology is creating new jobs in India. More specifically, the tech powered gig economy already employs around 8mn people and is predicted to employ twice as many people within five years.

As R. Jagannathan says in his book ‘The Jobs Crisis in India’ (2018) – “Unlike the advanced nations, where automation is killings jobs, but an older and aging population is unable to upskill, in India our population is young and teachable. They are also quick adapters to technology, as we have seen with the mobile penetration we have achieved and in the massive expansion in smartphones as data tariffs were slashed throughout late 2016 and 2017 after the entry of Reliance Jio…”

In fact, Kai-Fu Lee & Chen Qiufan’s celebrated book ‘AI 2041: Ten Visions for Our Future ’, the authors have in chapter 8 pictorially shown which areas are likely to be susceptible to AI automation (see exhibit 1) and have explained that “Jobs that are asocial and routine, such as telemarketers or insurance adjusters, are likely to be taken over in their entirety… These are the three capabilities where I see AI falling short, and that AI will likely still struggle to master even in 2041: Creativity,…Empathy,…and Dexterity….”

However, since these new pockets of job creation in contemporary India are novel in nature e.g. YouTubers, coders on the dark web, gig economy workers, bot trainers, etc, it is difficult for us to fully comprehend the scale of the job creation taking place in India. In fact, even in America, between 2005-15, 94% of the growth in jobs was in the ‘alternative’ category as per research conducted by the eminent economists Lawrence Katz & Alan Krueger (source: Katz, L. F., & Krueger, A. B. (2019). Understanding trends in alternative work arrangements in the United States.  RSF: The Russell Sage Foundation Journal of the Social Sciences, 5(5), 132-146).

Given the more or less unfettered play of free market forces in the heart of the Indian economy (away from sectors where the Government messes around), it is more likely than not that job creation in India too will now increasingly arise from use cases and professions that we can’t fully comprehend as yet. Technology will continue aiding rather than hindering, ‘the unusual rise of modern India’.

Saurabh Mukherjea works for Marcellus Investment Managers (www.marcellus.in). Amazon forms part of Marcellus’ Global Compounders Portfolio, a strategy offered by GIFT City branch of Marcellus Investment Managers Private Limited. Hence, we as Marcellus, our immediate relatives and our clients may have interest and stakes in the mentioned stock. The stock mentioned are for educational purposes only and not recommendatory.”