Swayed by the gig economy

A CONVERSATION with a Grab driver a few days ago was instructive.

It was a late night pick up for the journey home and I asked the female driver about her working hours.

“I usually start at 11am and finish at 11pm, six days a week,” she told me, adding that she has kept this punishing schedule for the last seven years.

Adeline (not her real name) then confided that her average monthly take home pay was RM6,000-RM7,000 nett, after deducting all her expenses.

Her take home pay was somewhat surprising, and she claimed that her parents supported her career choice even though there was a stigma attached to it.

Adeline is one of an estimated four million people in Malaysia or about 26% of the workforce employed in the gig economy. This is almost double the global average.

For many, the gig economy offers an opportunity to earn extra income with flexibility and autonomy. These gig economy workers do not want to be tied down by a rigid employment system.

Even the inducement of annual leave, medical benefits, Social Security Organisation (PERKESO), the Employees Provident Fund (EPF) and fixed salaries are not enough to sway this vast number of the labour force from moving to permanent employment.

And why should they when the country’s minimum wage (RM1,700 as of Feb 1, 2025) is still well short of a living wage. Economists estimate that to survive in the Klang Valley (the figures are lower in other parts of the country), one would need a minimum living wage of RM2,700.

And even this figure, based on a Bank Negara Malaysia study in 2018, should be adjusted for inflation.

It is no surprise then that younger Malaysians who are entering the workforce, including graduates, find the gig economy with its flexibility and higher salaries, much more attractive. In fact, the number of retirees who are also involved in the gig economy is steadily increasing.

Delivery riders, couriers and e-hailing drivers earn an average of RM3,500-RM4,000. And if they are diligent, can take home monthly earnings of up to RM7,000.

But while the gig economy has helped young people as well as small businesses, it presents a conundrum to the government. Many of these workers do not have rainy day protection.

Accidents involving these types of workers are on the rise and what happens if you are incapacitated for a period? You would then have zero earnings. Many of them do not have enough savings to last three months.

At the height of the pandemic, the government introduced RM50mil matching grants for gig platforms that encourage their workers to save more and contribute to PERKESO and EPF. But this has not really gained traction.

This emphasis on the gig economy has ensured an over-reliance on foreign workers to fill minimum wage vacancies. This is a huge concern because estimates put these foreign workers’ outward remittance at around RM40bil annually. Bank Negara data indicates that this outflow is seeing sharp rise since 2010.

The government needs to take proactive steps to curtail the outflow of ringgit, but to do so would mean sharply reducing the reliance on foreign labour. The obvious answer is to pay Malaysians more so that the jobs that these foreign workers filled up are taken over by locals.

These include positions in the plantation, F&B, construction, and security sectors.

An example of this would be security guards. They are everywhere now – malls, offices, and private residences – and invariably are foreigners. Many of them have a poor command of Bahasa Malaysia and have difficulty communicating.

Why not utilise locals who are co-opted as Polis Bantuan or Police Reserves instead? Pay them better salaries and benefits. The stigma of being a “lowly” security guard will diminish over time as this sector becomes a viable employment opportunity.

In Budget 2025 it was announced that following the pilot programme for the Progressive Wage Policy (DGP) in June, it will be fully implemented next year, with a budget of RM200mil benefiting 50,000 workers.

This DGP, a Human Resources Ministry initiative, seems like a step in the right direction, but employers, especially in the manufacturing sector, have been given scant information about its implementation.

What we do know is that the DGP will act as a new measure to reform the labour market, aiming to raise wages in line with productivity and experience. Upskilling training programmes will be conducted to ensure wage rates increase in accordance with workers’ skills and performance and the ministry will also publish starting salary guidelines for all employment sectors.

Hopefully, these starting salaries will be attractive enough to offer alternative employment for gig workers. But the initial sum allocated for this – RM200mil – is not a big amount if we take the base living wage – RM2,700, as a starting point.