How Long Can Chinese Sharing Economy Platforms Like Didi Still Benefit From “Disguised Unemployment”?

On October, 8th, four first-tier cities (Beijing, Shanghai, Guangzhou and Shenzhen) released their draft regulations for online ride-sharing platforms in respective cities. Drivers with no local hukou will be restricted from working as part-time driver for Didi anymore. Besides the latest regulation, what other challenges are this group of people facing? What led them to join sharing economy platforms? What transformations are online ride-sharing and crowdsourcing delivery platforms undergoing? What will their future look like?

You might have been very accustomed to using online car-hailing platforms to get off work, sending roses to your girlfriend’s office within two hours through “crowdsourcing deliverymen”, having deliverymen sending your takeaway at midnight, etc. But have you ever wondered where did this rising group of people who work day and night streets to streets come from? Are they working part-time as deliverymen? Do they need to work from nine to five like most people do? Where did they come from, as if “out of thin air”? Where are they heading for?

It is this group of people who make it more convenient for people’s life, from clothing, food to transportation. It is this group of people who lay a solid foundation for the burgeoning Chinese sharing economy.

However, the reason why they can quickly form a team of tens of millions of drivers and deliverymen might be that they used to be in a state of disguised unemployment in the past.

This June, a report from London economics consulting firm Fathom Consulting suggest that the actual unemployment rate might be three times higher than the official estimates, and that there’s a certain degree of “disguised unemployment” in China. According to official data from Chinese government, the unemployment rate in China remains around 5 per cent in recent years, no matter how good or bad the economy is.

Although survey methods have improved a great deal, laid-off workers from SOEs and surplus labor from countryside, a typical group of people in China who are in the state of disguised unemployment, are still not included in the survey. (We shall not take into consideration of fresh college graduates temporarily.)

In the wave of “de-capacity” this year, many people who are in the stage of “disguised unemployment” surfaced. Surplus labor who constantly travel between cities and countryside and don’t have the city hukou yet, stay outside of the standard labor market, whether actively or passively. In the US, such group of people belongs to the gig economy.

Gig economy is like one type of sharing economy, but more accurately it’s about sharing labor. After the financial crisis in 2008, American economy suffered from a long period of malaise. While the number of stable job opportunities and the expected salary both went down, American freelance culture continued to thrive and lots of temporary job opportunities emerged, which ushered in an era of sharing economy and sharing economy players such as Uber seized the opportunity and rose rapidly.

The scale of the peolpe who are in the stage of “disguised unemployment” is much larger than that in the US, which laid a solid foundation for Chinese sharing economy players such as Didi, Dada Express, Renren Express, as well as many online takeaway food booking platforms.

While Didi has over 10 million registered drivers in China, Uber only has 3 million registered around the world. While the number of registered deliverymen has reached over 10 million in China and deliverymen can be seen in the streets almost every where in first-tier cities such as Beijing, Shanghai, Shenzhen and Guangzhou, Silicon Valley new star Postmates, which just raised $100 million in the latest round of financing, only had 10,000 deliverymen, even FedEX and UPS only have 1 million deliverymen in total.

By the end of May, Didi has already created over 3.8 million job opportunities in the 17 “de-capacity” provinces and has already become the largest stablizer in this wave of labor transfer and upgrading. In 2015, while 52 per cent of drivers on Uber work part-time, 72.8 per cent of drivers on Didi work for less than 14 hours per week, which demonstrates Didi’s huge potential as a stablizer.

Didi once announced that these part-time drivers can leave the “stablizer” and go to accept other job opportunities once new job opportunities occur when the economic upgrading has completed. However, many American economists have pointed out that gig economy might have become the “new normal” in the US job market. This may also be true here in China.

Since there are few official surveys about the component of labor gig economy and the reason why most people turn to gig economy, I will have to reply on my personal experience and conversation with Didi drivers and all kinds of deliverymen.

For example, I have met two Didi drivers who chose to become a Didi driver in Beijing because their business (one real estate, the other restaurant) failed in their countryside or city. However, they still plan to go back and conduct their original business once the economy turns well again.

Sharing economy platforms such as Didi and Dada give people a sense of freedom and being their own boss, because they don’t need to work from nine to five, and they can still go back and conduct their original business once the economy turns well again. Many girls who have expected to open their own Taobao or WeChat Shop have to turn to door-to-door manicure O2O platforms. Even plumbers and decorators, who used to be seen everywhere on the streets in China, have already been integrated to online decoration O2O platforms.

However, they might gradually find that they have to work for longer period of time and enjoy less freedom. While their part-time odds job will gradually turn into full-time job, their salary standard is fluent, and they don’t have any social and labor security protection.

After Didi merged with UberChina, Didi gradually changed its charging standards, raised the threshold for subsidy, encouraged part-time drivers to work overtime. Since the percentage of part-time drivers on Didi is 20 per cent higher than that on Uber, there’s still huge room for Didi.

As Didi gives up paying drivers based on the number and distance of their orders, it has transformed from an information sharing platform between drivers and passengers into transportation and commuting service company. Drivers’ salary will no longer be affected by passengers and directly decided by Didi itself.

In Fast Company’s pretty sensational article The Gig Economy Won’t Last Because It’s Being Sued To Death, the author pointed out that workers’ community could pursue class actions against gig economy platforms such as Uber and Lyft, which would certainly undermine their development a great deal. To avoid labor conflict, Lyft and Uber have been actively developing unmanned driving technology. In China, however, Didi and Dada don’t need to worry much about such conflict, since the cost is too high for such class action and labor law is still not complete enough.

According to a report (The Story Behind 100,000 Always-Ready Deliverymen) released this September, less than 30 per cent of over 100,000 deliverymen in Shanghai could sign labor contracts with express company. Besides, most deliverymen who signed labor contracts with express companies work in large-scale transit centers, not in the more widespread express outlets. This is true for standardized Chinese express companies, let alone other small-scale express companies.

China went beyond the age of urbanization and professionalization and directly into the eve before the “automation revolution”, when internet platforms are solely determined by algorithm and labor force becomes standardized. Yet, these platforms fail to provide proper labor contract and social security for their “employees”.

However, nobody’s social security can be delayed permanently, and no driver will drive for Didi for a lifetime. There will be a time when stablizers will no longer be able to stablize the labor market. At that time, those who are already inside the stablizer will either be driven out of the stablizer or work from dawn to dusk, just like Xiangzi, the protagonist in Chinese contemporary writer Lao She’s novel Rickshaw Boy.

As to Didi, for sure, the percentage of full-time drivers will gradually grow, and the stablizer will become too crowded one day. As to crowdsourcing delivery platforms, they will have to give up maintaining tens of millions of part-time deliverymen if they really want to replace express companies. To improve efficiency and professionalism, they will also gradually nurture full-time deliverymen.

In this sense, unmanned driving and unmanned delivery will be more like The Sword of Damocles hanging over the sharing economy. After the sword swings at last, how will the 20 million people, who are in a state of “disguised unemployment”, with no social security and elevation of skills, find another job? Maybe only time can tell.

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[The article is published and edited with authorization from the author @Zhang Yuan, please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.

(Chinese Version)

Originally published at on October 9, 2016.