School-leavers want flexibility, and gig work offers it. But how will that affect the economy?

Malaysia’s gig economy is on the rise, but there are questions over its long-term value to the wider economy.

One significant trend is the increasing inclination of school-leavers towards gig work, which, while offering immediate income, can divert them from vital talent development opportunities.

More than 48% of the 180,680 who completed their Sijil Pelajaran Malaysia (SPM) exams in 2021, an equivalent to the British O Level, opted to not pursue further education.

This trend is further supported by a UCSI Poll Research Centre study that found barely half (51%) of 1000 recent SPM graduates are considering tertiary education.

Notably, among those not pursuing further studies, 26% showed interest in the e-hailing sector, indicating a shift towards the gig economy and alternative career paths.

This shift is crucial, as it could impact Malaysia’s transition from a consumer-driven economy to a producer-driven one, necessary to escape the middle-income trap and achieve high-income status.

Gig workers in Malaysia must confront a lack of job security, absence of critical benefits such as savings, retirement plans, healthcare coverage, and limited access to training and education.

This precariousness is compounded by the risk of exploitation due to the lack of formal labour protection.

Despite these challenges, the gig economy’s appeal is undeniable.

According to World Bank data, more than 26% of the Malaysian workforce, or four million people, comprises freelancers, and this number is on the rise, driven by the lure of flexible working hours.

A recent study with 1118 working-age Malaysian respondents by Zurich-University of Oxford on the agile workforce found 38% of the respondents in Malaysia in full-time employment were looking to enter the gig economy in the next 12 months.

The COVID-19 pandemic has likely accelerated this trend, with even those in full-time employment considering a shift to gig work. The gig economy is particularly attractive to younger, tech-savvy generations like millennials and Gen Z.

The Malaysian government has responded to these evolving dynamics with RM40 million (US$8.5 million) set aside in the 2023 budget for 30,000 gig workers.

In addition, the Global Online Workforce program by the Malaysia Digital Economy Corporation aims to stimulate the gig economy by providing Malaysians with consistent, full-time digital income opportunities through crowdsourcing.

These efforts reflect a growing acknowledgement of the gig economy’s economic and social impact, emphasising worker protections and skill development to elevate their value in the economy.

For Malaysian companies, the rise of gig work necessitates a re-evaluation of human resource practices. Companies are now considering integrating gig workers more seamlessly into their business models.

This includes providing benefits traditionally reserved for full-time employees, such as Employees’ Provident Fund contributions (during part-time employment), access to training, and insurance coverage.

Such measures should not only attract better-quality gig workers, but align with the evolving nature of work where productivity and flexibility are paramount.

Gig economy shaking up the nature of work, and regulations

Malaysia’s Ministry of Human Resources is drafting policies specifically for gig economy workers, particularly in p-hailing and e-hailing services, as a precursor to more comprehensive legislation.

This move indicates a growing recognition of the need for legal frameworks that provide gig workers with income security and social protection.

As the global economy marches into 2024, still healing from the pandemic’s disruptions, one trend is reshaping the global labour market –the continued expansion of the gig economy.

Payoneer’s 2022 Global Freelancer Income Report highlights that this trend underscores freelancers’ pivotal role in sustaining businesses amid ongoing economic challenges.

The gig economy is at a crossroads in a world grappling with rising living costs and looming uncertainties, redefining work dynamics for individuals and companies worldwide.

Its growth is driven by supply and demand factors. Workers are drawn to its flexibility, potential for higher earnings, and the autonomy to choose work, reinforced by major platform service companies that create job opportunities and facilitate connections.

In the current economic climate, marked by job losses, it’s likely more workers will turn to gig work. Businesses increasingly hire independent workers for short-term projects to enhance flexibility and efficiency while minimising costs.

This shift towards digital platforms for professional services is partly driven by a culture of instant gratification, amplified by social media and the ubiquity of smartphones.

The pandemic has further fuelled the rise in gig work, expanding the pool of self-employed contractors. In many developing countries, self-employment accounts for nearly 50% of employment.

The continuing expansion of gig work could increase this share, especially as workers who have lost jobs enter the gig sector. In developed countries, gig work often supplements income. In developing economies, it’s often the primary source of income.

In developing economies, gig workers frequently subscribe to multiple platforms to access enough gigs to create an income, leading to work insecurity.

Challenges for the gig economy

Despite its promise, the gig economy faces challenges.

According to Payoneer’s 2023 Freelancer Report, rising living costs and job instability have led to more than 55% of freelancers worldwide taking on more work and 32% adding international clients.

Although 46% report a rise in demand, many still struggle to find enough work, highlighting the gig economy’s blend of opportunities and uncertainties.

In regions such as South and Southeast Asia, the gig economy predominantly employs young, unskilled labourers, often overlooking crucial long-term benefits such as health insurance and retirement plans. This disparity highlights the urgent need for regulatory frameworks that provide basic safety nets for these workers.

Self-motivation plays a crucial role in the gig economy. Due to its inherent flexibility, gig workers can take breaks at their discretion, a luxury not afforded in traditional job setups where responsibilities are more structured.

While this flexibility is advantageous, it can lead to erratic work schedules and income. To mitigate these issues, some companies are developing innovative reward mechanisms to incentivise more consistent and productive work from gig workers.

The gig economy is not immune to systemic issues such as the gender pay gap. According to Payoneer’s 2023 Freelancer Report, women freelancers, on average, earn US$22 per hour, slightly less than their male counterparts, who make US$24. Bridging this pay gap is essential for fostering a more equitable gig economy.

In addition, the International Labor Organisation’s World Employment and Social Outlook 2022 report sheds light on how accelerated technological change is exacerbating the digital divide.

Technological advancements have reshaped various sectors, leading to labour substitution, new jobs and a restructuring of labour markets. In some sectors, technology adoption saves labour, such as with robots in manufacturing.

The gig economy sees rising numbers relying on platforms for income. Those lacking access to technology and the necessary skills or facing biases in algorithms are at a significant disadvantage, a situation worsened by the pandemic, which is deepening the digital divide.

Those with access to technology and the ability to work from home have fared better than those in location-tethered professions. This trend widens the gap along vectors of skill level and enterprise size.

As companies seek skilled, flexible workers, and individuals pursue independence, the gig economy’s expansion seems inevitable. However, this growth must be balanced with efforts to ensure fair treatment and comprehensive protection for gig workers.

Addressing these challenges is crucial for the gig economy to evolve into a sustainable and equitable employment model.

This article is part of a special report on the Asian gig economy, produced in collaboration with the Asian Research Centre, University of Indonesia.

Originally published under Creative Commons by 360info™.