An Expanding Gig Economy: We Have Little Choice But To Deal With The Growing Pains
By Woon Tai Hai May 5, 2023
- Low-income & low-skilled gig activities do not add real value to economy
- Pikom is confident that various gig issues will be overcome in due time
Like any new phenomenon, we have to take the good with the bad in the case of the gig economy.
On the one hand, it offers immediate solutions to businesses and contributes to the economy. On the other hand, it could have adverse consequences on talent development and future economic growth.
First, let’s be clear on what the gig economy is and who the gig workers are. Briefly, the gig economy revolves around service provision by independent gig workers who take on one-time or short-term tasks listed online on crowdsourced work platforms by enterprises.
In Malaysia, there is a common misperception that gig workers are exclusively food/parcel delivery riders and e-hailing drivers when in fact they include skilled and semi-skilled talent in sales, consultancy, brokerage, and the creative and digital industries, among others.
What’s good about this gig?
For enterprises, outsourcing jobs to gig workers on an as-when-needed basis saves cost of paying permanent wages and other worker benefits such as healthcare and training. Further, companies have the flexibility to scale their workforce (permanent, contract or contingent) according to demand.
In the case of gig workers, they can gain exposure and grow their skillsets by working on assorted projects for multiple companies. In addition, gig workers can choose what, where and when they work, earning or supplementing their incomes without the risk of retrenchments.
What’s bad about this gig?
As the gig economy in Malaysia is currently dominated by e-hailing and dispatch services, such low-income and low-skilled activities do not add real value to the economy.
Further, the appeal of becoming a gig worker for many school leavers is robbing the nation of much-needed talent development necessary to transform into a producing as opposed to consuming economy and escape the middle-income trap to achieve high-income status.
In the case of gig workers, they lack job security and critical benefits such as savings, retirement benefits, healthcare coverage, and access to training and education. They are also susceptible to exploitation given the absence of formal labour protection.
This gig is the future
While the growth of the gig economy had its first inflexion point following the Global Financial Crisis (GFC) in 2008, its second was the Covid-19 pandemic which drove retrenched workers and failed business owners to earn a living via contingent gigs.
Today, an estimated third of the world’s workforce are considered gig workers according to ADP Research Institute while the gig economy is worth almost half a trillion US dollars based on a report by Mastercard. According to some aggressive estimates, the gig workforce will surpass the employed by 2030.
On the home front, a quarter (3.9 million) of Malaysia’s 15.1 million workers* are categorised as gig workers. Many more are clamouring to join their ranks as a 2020 report by the Zurich Insurance Group and Oxford University noted that 38% of employed Malaysians are considering joining the gig economy.
The pull factors are obvious. Rising inflation is pushing people towards multiple income streams and this trend is supported by new digital-age enterprises that have easy access to freelance or independent workers.
The writing is already on the wall. The gig economy in Malaysia is poised to be the largest employment group within the next decade. The Government, industries and businesses have little choice but to prepare for this and resolve current issues concerning gig workers.
Paving the way for the future gig
Recognising this shift, the Government is already taking steps to protect gig workers. In the recent Budget 2023 announcement, Prime Minister Anwar Ibrahim disclosed that RM40 million will be set aside for the benefit of 30,000 gig workers.
Beyond Budget 2023, the Government has also introduced initiatives to stimulate the gig economy via the Global Online Workforce programme by the Malaysia Digital Economy Corporation (MDEC).
PIKOM acknowledges the economic and social shortcomings arising from the gig economy. Nevertheless, we are confident that these issues will be overcome in due time even as it becomes a vital component of the digital and national economies.
It is imperative that the Government considers the essential regulations aimed at protecting these workers to provide a safety net against the risks of exploitation. In addition, gig workers should be given access to skills improvement programmes in order to move them higher up the value chain. The key outcome of such a move would be to increase productivity in the economy.
Many countries including the US, Australia and much of western Europe have introduced new regulations requiring companies to among others; classify gig workers as employees, offer minimum wage, allow collective bargaining, provide social security coverage and open access to training.
It should be noted that the regulation of gig workers is still evolving. Different countries and regions will take differing approaches to regulating the gig economy. What is clear is that these regulations will evolve with the gig economy over time.
Woon Tai Hai is PIKOM Research Committee Chair.
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