Platform Economy: The Future of Work in the Digital Age

Introduction

The last decade has witnessed a remarkable rise in the platform economy, which is reshaping the work and economy today. The term “platform economy” refers generally to economic and social activities whose practice is facilitated by online platforms. Such platforms provide digital spaces that facilitate exchanges between consumers and producers of services, usually through web applications or sites. They work as digital bridges connecting individuals or companies seeking certain services to professionals qualified to provide them.

The platform economy fosters the creation of temporary work relationships, offering both workers and employers a wider range of choices and greater flexibility. Platforms provide easier access for both parties: professionals can find diverse job opportunities to apply for, while employers can find multiple providers for the services they need, allowing them to compare and choose the most suitable option. Additionally, platforms offer various safeguards to ensure fair treatment and protect the rights of all parties involved.

The Platform economy is growing rapidly. Platforms companies represent intense competition for traditional ones working in the same field. Studies have shown that platform companies achieve, on average, double the operational profits and growth rates compared to big companies in the same field. According to a report from 2016, platform economy attracted at the time more than 22.4 million consumers of goods and services with an annual expenditure of 57.6 billion dollars. Since then, the platform economy has transformed from a new disruptive wave in the world of economy to one of the essential foundations of world economic growth today. During the period from 2018 to 2023 gig economy has grown with an annual rate of 17% to reach a gross deals value of 455 billion dollars.

This paper seeks to discuss different issues related to the platform economy with a focus on the Egyptian context. It starts by clarifying different terms used interchangeably to refer to the platform economy and other related fields. Then, the paper discusses how the platform economy works and its profits model. The paper also discusses the platform economy in the Egyptian context, covering the most prominent players in this field, the factors behind the growth of the platform economy in Egypt, and finally the most important concerns and challenges related to the platform economy in the Egyptian context.

This paper aims to examine various issues related to the platform economy, with a particular focus on the Egyptian context. It begins by clarifying the different terms often used interchangeably to refer to the platform economy and related concepts. The paper then delves into the mechanics of the platform economy, including its business models and profit generation strategies. Subsequently, it shifts its focus to the platform economy in Egypt, highlighting key players in the market, analyzing the factors driving its growth, and finally, addressing the most significant concerns and challenges associated with the platform economy in the Egyptian context.

What is Platform Economy?

Platform Economy and Close Concepts

In the modern market, terms like “platform economy,” “gig economy,” and “freelancing,” are usually used interchangeably. Each of these terms, however, has its own definition and place within a larger Eco-system.

• Platform Economy is an online system that facilitates the exchange of goods, services, and information. These platforms act as middlemen between buyers and sellers, consumers and producers, and business owners and workers, using advanced technologies to simplify interactions. This reduces transaction costs and enhances efficiency.
• Gig Economy provides flexible, short-term work opportunities, usually known as gigs. In this model, individuals work on a single task at a time, which is different from the traditional patterns of long-term or permanent jobs.
• Freelancing is a self-employment work pattern in which individuals offer their skills and services to clients independently as per a job or a contract. Freelancers are responsible for managing their commercial or private businesses, including taxes and their own healthcare.

The relationship between the platform economy, gig economy, and freelancing is complex and intertwined. Platform economy works as an enabling factor for gig economy as it create digital spaces allowing access to gigs and easily manage them. These platform might be specialized focusing on specific services like transportation, or goods or food delivery, or they might provide a large number of work opportunities in different varied fields like writing, translation, programming, and design. Within this framework, gig work is a form of freelancing economy.

How Platform Economy Works

Platforms allow professional and skilled workers to build portfolios exhibiting their experiences, skills and previous client assessment along with samples of their work. On the other hand, business owners or those seeking services can explore these portfolios,  and publish details of required services, including skills, budget and timeline. Professional can offer to do one or more of the task a business owner published, while business owners can reach out to professional to offer them tasks to do.

Platforms facilitate the processes of negotiation, deal making, and agreement to conditions, in and orderly and safe manner. They offer tools for project management, and tracking progress. Once the required tasks were agreed upon and the project is started, platforms over mechanisms for continuous communication, and file and documents exchange, with the provision of a safe payment system that usually include credit accounts that guarantee all parties’ rights. When the project is completed successfully, the platforms releases the payment from the credit account to the freelancer after deducting the agreed upon commission.

Profit Model

The profit model of platforms may vary from one to the other. Most of them however depend on several strategies to make profits, among these are:

• Commissions: Platforms acquire a percentage of freelancers’ profits that usually ranges between 5% and 40% of the project’s value.
• Job posting fees: Business owners pay fees for posting projects’ details and accessing a wide base of qualified freelancers.
• Special services: Platforms offer optional service like advanced search for freelancers, promoting their portfolios, and advanced communication tools for additional fees. These services provide freelancers with competitive advantage and raise their chances for getting projects.
• Ads: Ads are considered a common source of revenue for platforms, as they benefit from their high traffic to attract advertising companies.

Platform Economy in Egypt

Key Players

Platform economy had spread in Egypt, propelled by a mix of domestic innovations and international experience. Below are some examples of how some key players contributed to this ecosystem, the role of freelancers in these platforms, and the platforms’ function of connecting consumers to products and services:

• Amazon: Since Amazon acquired Souq(dot)com in 2017, it has gained an additional advantage represented by the backbone of Amazon’s technologies and logistic services. The platform connects consumers to a wide range of products and local and international sellers with a large base of clients. Freelancers contribute to Amazon mainly through logistic services and delivery.
• Jumia offers a wide range of products, including electronics, garments, and groceries. It works as a market connecting local sellers to consumers, facilitating deals, and providing logistical support like storage and delivery. Freelancers usually play a crucial role in the Jumia ecosystem, especially in customer services and delivery.
• Uber has revolutionized urban transportation in Egypt by connecting freelance drivers to passengers through a smartphone app. This model provides flexibility and income opportunities for drivers while offering passengers a suitable means of transportation as an alternative to traditional taxis. Uber’s platform uses advanced algorithms to manage trip fares, enhance courses, and guarantee smooth coordination between drivers and their clients.
• Swvl works to reinforce collective transportation by offering a service for booking buses through a smartphone app that connects passengers to private buses. This offers a more reliable and comfortable transportation alternative. Swvl hires freelance drivers and uses technology to direct buses in a manner that reduces traffic jams and waiting times.
• Talabat: Considered a pioneer food delivery service, Talabat connects consumers to a wide variety of food choices. It partners with local restaurants and depends on freelancers for delivery.
• Mrsool allows consumers to request anything from any store within their town. It connects delivery freelancers to consumers who need special delivery services. This platform is especially preferred for items that are not usually available online, and it provides a high degree of specialization in shopping and delivery experiences.
• The Menus: This platform specializes in offering detailed restaurant menus and facilitating food delivery. The Menus app enables consumers to explore different restaurants and order from them. Freelancers play a crucial role in The Menus’ operations, especially in creating content, customer services, and logistic delivery services.

Main Drives for Platform Economy Growth in Egypt

Technological Advancement

The growth of the platform economy in Egypt is greatly propelled by technological advancement, as the wide spread of the Internet and smartphones plays a significant role. The number of Internet users in Egypt today is estimated to be around 82 million users.

Throughout the last decade, the expansion of wideband networks and mobile phones’ infrastructure led to increasing access to the Internet as it made connecting to the Internet easier and less costly for a larger portion of the population. The number of active mobile phones subscriptions in Egypt, in the beginning of this year, has reached to around 110.5 million subscription. This increase in connectivity was complemented by wide availability of low price smartphones, which became the main tool for accessing the Internet all over the country. The number of those who used their phones to browse the Internet has reached around 68.5 million users. Accordingly, a variety of demographic groups ranging from young people in urban areas to adults in the countryside have become more connected than ever before.

Despite technological advancement played a positive role in accelerating the growth of platform economy in Egypt, there are negative aspects and tangible challenges that require criticism and scrutiny. First, the increasing dependence on technology in Egypt raises serious concerns regarding cybersecurity, and data privacy, especially as the issue of the executive provision of the Egyptian Data Protection Law continues to be delayed. This delay doesn’t only contribute to increasing dangers for consumers, it also hampers gaining trust in digital services and slows down Egypt’s transformation to a more effective digital economy.

The growth of digital economy in Egypt, while offering many opportunities, it is not inclusive enough to ensure the distribution of benefits equally among different groups and localities. This imbalance shows up clearly in the digital gap between urban and rural areas, as digital work opportunities and e-commerce are more visible in large cities like Cairo and Alexandria compared to rural areas that suffer from a low quality technological infrastructure.

Additionally, there are great discrepancy in education quality and access to technology learning among different social classes. Individuals of higher classes can access better education resources and the most advanced technologies, while individuals of lower classes, especially in poor and marginalized area, have great difficulties accessing the same resources.

Income cap is also obvious in digital markets, as individuals with high income have more potentials of investing in digital business. On the contrary, individuals with less income may not have basic devices like computers, or reliable connection to the Internet, which deprives them from many opportunities in digital economy.

Economic Factors

Platform economy in Egypt plays a dual role; on the first hand, it reinforces economic activity through using labor and resources, but on the other hand, it creates new challenges concerning labor rights. The population, especially under high unemployment rates, face difficulties represented by job instability, and weak social insurance. Much of the work available through these platforms is temporary and lacks basic guarantees like health insurance and pensions, which increases their economic risks.

For instance, applications like Uber allow individuals to use their personal vehicles to provide transportation services, and workers in services field can use applications like Talabat, or Marsol, to offer delivery services. These activities show how business owners can use their resources to create revenue. They, however, show a radical change in the form of traditional work, and hence the need for a better regulation to protect labor rights and provide workers with social protection.

Platform economy has contributed considerably to dealing with some of the economic challenges faced by Egypt, providing new work opportunities, and helping to lower unemployment among the population, who mostly find in it an alternative to already filled traditional sectors. Still, platform economy effects should be considered carefully. While it can be a bridge to orderly employment and offer experience, skills, and funds, there are still negative aspects that should be considered like absence of job stability, and social protection. Additionally, the absence of a clear legislative regulation may lead to labor exploitation, which required the Egyptian government and other concerned parties to intervene to provide a legal framework that protect workers and reinforce their rights.

Social and Cultural Transformations

The great social and cultural transformations witnessed by Egypt lately were largely affected by the global turn to digitization. This transformation appears obviously in consumers behavior as they came to favor comfort, efficiency, and on-demand services, which led into replacing traditional means for accessing goods and services with digital solutions that offer speed, use simplicity, and level of specialization unavailable before.

For instance, in shopping, many Egyptians have moved from traditional shopping in stores to using e-commerce platforms like Jomia and Amazon, where they can easily browse through many products and compare prices in minutes then order products to be delivered at their doors. This kind of services saves customer’s time and decreases the need for moving among different stores. The size of e-commerce in Egypt has reached more than 9 billion dollars this year. It is expected to double up within the next 5 years.

In the banks and financial services sector, a considerable turn was witnessed toward online banking services and the use of mobile phones apps. Many Egyptian banks today provide their clients with the possibility of performing most financial transactions including transferring money, paying bills, and account inquiries through their electronic applications, which cancels the need for visiting their branches repeatedly.

In healthcare field, we’ve witnessed an increasing use of platforms offering medical consultation services remotely, like Vesita that enable patients to book visits to doctors, and perform consultations online. This saves patients’ time and effort needed to go to clinics and hospitals, especially for those living in remote areas or patients who has movement issues.

This growth in services depending on platforms doesn’t only reflect the change of consumers’ preferences, it also indicates a wider social and cultural acceptance of electronic solutions. With the rise of digital awareness among the population, trust in and dependence on digital platform increase for getting basic and complex tasks done.

Issues of Platform Economy

Monopoly and Market Control

With the evolution of platform economy, which is characterized by being flexible and non-centralized, the traditional structures of collective work are subject to new unprecedented challenges. Digital platforms are characterized as a medium that dominates economic activity. They acquire a portion of the value created by labor, while avoiding the mess arising from direct relations between workers and work owners, in addition to the costs of managing labor traditionally.

These platforms play a central role in shaping modern economies structures. They use algorithms to manipulate consumption behaviors, fix prices, and distribute work, making them the guardians of the digital market. This great concentration of economic power in the hands of a few tech giants constitute a form of monopoly, which mostly hides behind masks of innovation and technological advancement.

Despite the fact that consumers benefit from comfort and service offered by these platforms, they find themselves in a difficult situation because of lack of competition, which allow the platforms to set service conditions and privacy policies that benefit the company on the expense of the consumer.

The reality of monopoly is obvious in platforms like Amazon, which is not only a market for sellers, but works also as a supplier, which makes it compete with the seller it hosts. The algorithmic control of Amazon determining the exhibited goods and their prices greatly and equally affect both independent sellers and consumers.

In the field of personal transportation, companies like Uber redefined taxis services where drivers work as independent contractors and fined themselves under the fare algorithms control and policy changes which are applied without their participation. The promise of flexible working hours and competitive wages continues to be just a promise, while drivers face increasing challenges related to operational costs and declining real wages.

Lack of Stability of Digital Labor

In the Egyptian economy, which is witnessing a continuous growth of gig and freelance work, instability of labor is not just an issue but a basic characteristic of this type of economy. Workers involved in these businesses live in an environment filled with unknowns as their income is not ensured, their employment status is continuously ambivalent, and they lack the protection and basic guarantees that workers enjoy in traditional sectors, like health insurance, paid vacations, and retirement contributions.

Under platform economy, workers in independent jobs are categorized as independent contractors, which is a strategy that increases the vulnerability of their employment status. Through depriving them from the officially employed status, the platforms avoid their responsibility to provide advantages and protection. This categorization is a legal maneuver the deprives workers from their basic rights and makes them more vulnerable to exploitation.

Freelancers are also pictured as small entrepreneurs, responsible for their own success or failure. This misleading narrative ignore the power imbalance between workers and platforms, as the workers find themselves forced into competing in a digital market ruled by algorithmic and vague policies, which jeopardizes any chances of fair competition.

Platform economy raises essential questions about the nature and value of work in Egypt. The platforms, working as a middle-man, take a percentage of each deal and benefit from workers efforts without contributing to their well being. The worker’s labor is exploited, and even his private property, such as using their car for transporting passenger, or their house for temporary rent, to make profits for the platform while transferring a minimum portion of revenue to the workers.

Unions and Collective Negotiation

The gig economy seems to be skillfully designed to prevent collective work and to discourage traditional mechanisms that brought workers together historically to demand their rights. The dispersed and isolated nature of freelancing led to big obstacles for unions and collective negotiations, creating an environment where its difficult to achieve workers solidarity.

The decentralized nature of freelancing means that workers often work in isolation, without a physical common space, or regular personal interactions with their peers. This dispersion, weakens the feeling of social and rights aspects and common cause that is considered the foundation of collective work. Accordingly, traditional tactics for unions organization, which depend on these factors, become less effective and unpractical in many cases.

Categorizing freelancers as independent contractors further complicates the potential of joining trade unions. Considered to be contractors, they are seen as individual commercial entities and not as employees, which legally excludes them from traditional work relations and job protection measures, and this effectively deprives them from the right to participate in collective negotiations.

Additionally, the temporary nature of platforms work, where many individuals are involved in it as a secondary source of income on temporary basis, leads into a high rate of employees cycling. This fluidity makes it difficult to establish the long term commitment required for sustainable collective work, and building trust and networks that support solidarity and defend economic and social rights.

Platforms usually use their algorithmic control as a tool of cracking on any effort for collective negotiation. They can change service conditions unilaterally, modify algorithms, or suspend work without notification, which establishes a climate of fear and instability, and prevent workers from taking collective measures.

Freelancers and workers in platform economy, usually face challenges concerning their legal categorization. They are not categorized under traditional definitions of labor set by unions laws. Egypt’s laws, like in other countries, are not adapted to the nature of evolution of work forms, hence, freelancers can’t form union or work organizations for the following reasons:

• Egyptian laws largely depend on the presence of an official and continuous work relation as a foundation for union’s organization, which is different from the work nature of those workers which is characterized by flexibility, independence, temporariness, or contingency.
• The need for gathering at least 50 workers of the same professional field to form a professional union committee on the city or governorate level constitutes a challenge in the freelancing environment, where irregular and relatively isolated work makes communication and coordination among workers difficult, The absence of a work place increases the complications of organization.
• Egyptian trade unions laws require a union to be attached to an establishment or a specific industry, which contradicts the nature of freelancing that is not attached to a specific establishments or changes all the time. This puts freelancers in a weak position as they can’t benefit from union protection or representation in social and economic issues.

Social Insurance

The wide spread of gig jobs and independent contracting led to a reshaping of labor market. Freelancers and platform economy workers represent today a large percentage of workforce. However, these workers lack the advantages of traditional work like insurance, social protection and healthcare coverage. The absence of these basic safety nets doesn’t only threatens workers’ financial security and health, it also has wider social and economic effects.

In Egypt, traditional work relations usually offer a number of advantages including health insurance, work injuries compensation, and social insurance, which together provide a safety ner that protects employees from financial shocks related to health and retirement issues. These advantages are not optional but necessary for the stability and well being of the workforce.

On the contrary, freelancers find themselves in a dire situation, they often work with non-standard work contracts. In many cases with no contracts at all. These informal, or semi-formal work arrangements, exclude them from protection advantages enjoyed by their peers who are formally employed.

The roots of this problem lies in legacy legal and regulatory frameworks, that didn’t adapt to the changes caused by the emergence of the gig economy and the increasing spread of independent contractual work. These frameworks were designed in an era where standard work relation –characterized by long term contracts and clear relations between the business owner and the worker– were the norm. However, the labor market today is characterized by a variety of work arrangements, freelancing, independent work, and platforms dependent work, which don’t fit well with traditional legal categories.

The effects of this discrepancy are deep. Without having health insurance, freelancers face big health threats and become responsible for all the medical expenses they incur, which might be financially devastating, especially in cases of severe sickness or injury. Absence of social insurance subscriptions means that retirement compensations are not accumulated, which contributes to the lack of financial security on the long run.

Many freelancers face legal challenges for not being subject to social insurance and pensions law provisions, as they are not included in the four categories determined by the law which are:

• Working for others.
• Business owner and their likes.
• Abroad Egyptian workers.
• Informal labor.

Each category has specific conditions for being included under it. Those whom the conditions don’t apply to stay out of the umbrella of social insurance. Freelancers/independent workers suffer due to these categories of not belonging to any of them for lack of regular work relation that ties them to the business owner which is different from the nature of freelancing that is characterized by flexibility and short term tasks.

Although there are some exception for some groups like workers in construction, fishing and other sectors, freelancers stay out of these exceptions. To consider someone to be a business owner thus included under social insurance umbrella, the law require their activity to be regulated by special laws, or requires and administrative licensing, which doesn’t apply to most freelancers.

For the rest of the informal labor category, which include some activities like street merchants and craftsmen, it is required that they don’t hire workers and not to practice their work in a fixed location. Although some of these conditions apply to freelancers, the National Social Insurance Authority, usually refuses to include them under this category, which raises the need for a legislative revision to provide larger protection to this category of workers.

Conclusion

This paper has sought to provide a comprehensive overview of platform economy with a special focus on its future in Egypt. While it briefly discussed the basic concept of this economy, it dedicated most of its pages to discussing both the factors of platform economy growth in Egypt, and the issues and challenge related to it in the Egyptian context.

Platform economy grows in wide leaps. It conquers more work field every day. And, as a successful business management model it can be expected that many businesses will reshape their management methods and the way they perform different tasks so that they can gain the most that this model may offer. This means that more job opportunities in the future will only be available through platforms. Which will lead into increasing benefits of their advantages, but on the other hand, will lead into an expansion of it negative impact discussed by this paper.

Platform economy is actually an extension of a general trend in global economy toward lowering business owners responsibilities to those who labor for generating profits. This is done through displacing more of this labor to different patterns of temporary employment, through which business owners avoid legal commitments toward permanent labor. In the bigger picture thus means that more of those who get their incomes through selling their labor power are pushed outside the different protections and guarantees provided by labor laws. This means that more of the total surplus value generated by productive activities goes to business owners while less goes to those who sell their labor power in a way or another, which helps widening the income gap with all its harmful social effects.

In the Egyptian context, the fast growth of platform economy contribution to the Egyptian economy as a whole requires clear policies for dealing with this economy to maximize its contribution to the economic growth in general, while working on minimizing its harms and providing sufficient protection for the economic and social rights of those who depend on it as a source of work and income.