Labour Market Disruption and Gig Economy

Abstract Youth inactivity remains an insistent global challenge, strengthened by uncertainty surrounding the rapid growth of digital and gig economies. As governments increasingly seek to regulate gig work, its implications for youth unemployment remain ambiguous. This study addresses this gap by examining the optimal level of labour regulation that enables the gig economy to effectively reduce youth unemployment across countries from diverse geographical regions. Using panel data from 79 countries covering the period 2017–2021, the study employs a Dynamic Panel Threshold Model (DPTM) to estimate the level of labour regulation at which the gig economy’s employment effects are maximized. The results reveal the existence of a non-linear connection between labour regulation and youth unemployment. Specifically, the gig economy contributes most effectively to reducing youth redundancy when labour regulation reaches a threshold of 53.5596 on a 100-point scale. Principles that are excessively stringent tend to constrain job creation and limit labour market entry for young people, thereby exacerbating unemployment. Conversely, overly lax regulatory environments increase the risk of worker exploitation, job insecurity, and deteriorating working conditions, which can also undermine sustainable youth employment. These findings underscore the importance of accepting a balanced regulatory approach. Policy recommendations include implementing moderate labour regulations that align key protections in the gig economy with those of traditional labour markets, strengthening cyber security and data protection frameworks, and promoting co-working spaces to mitigate social isolation among young gig workers. Furthermore, the study highlights the need for trans boundary labour regulations to protect gig workers operating across national borders. Overall, carefully calibrated labour guideline is essential to harness the gig economy’s potential as a viable tool for reducing youth unemployment.