Don’t kill the gig economy

 

Before politicians start interfering in the gig economy they need to understand it.

The gig economy is not just 1.2 million e-hailers and delivery riders or 300 people angry with one company.

Gig-workers include lawyers, accountants, medical practitioners, IT experts, content developers, plumbers, builders and electricians – in fact almost any type of work that does not require factory infrastructure.

Of almost 17 million Malaysians in the workforce perhaps six million are in gig economy type work, around the same number as in private formal contracts.

There is a basic truth and three basic fallacies in the current debate on the gig economy.

The basic truth is the consensus that gig economy workers should be protected in law to get good incomes, good terms and conditions and access to social protection such as healthcare and pensions.

The first fallacy is that the only way to do this is to turn their work into pseudo-formal employment contracts.

People choose gig economy work freely because it is often better than formal work in terms of salary, benefits and flexibility. It is not a second-class option.

It offers good opportunities to raise their income either in addition to formal work or instead of formal work.

The second fallacy is to assume that formal work provides good incomes, good terms and conditions and access to social protection. If this was true everyone in formal work would have a good salary and a good pension but millions do not.

Half of Malaysians in formal private sector jobs earn RM2,600 or less according to the statistics department. Many gig economy workers, especially freelance professionals, earn more than this.

Young people choose gig economy work over higher education because the salaries are better.

Graduate starting salaries are only around RM1,600 which is barely the minimum wage. Some graduates such as lawyers are often not paid at all until they pass the qualifying exams.

The third fallacy is to assume that interference will make life better without much cost.

Interference in the gig economy is a constraint on trade which restricts the freedom of choice of gig economy workers, customers and the platforms that provide these choices.

Formalisation will harm this market by making life more difficult for everyone. It will raise costs which will be passed on to consumers and reduce demand and income opportunities in the market.

Fixing the job market is a priority to ensure fair wages, benefits and terms and conditions of employment for everyone.

Instead of ad-hoc interference, employment law must be reformed to empower employees to push for higher wages and benefits as well as better terms and conditions.

Flexible working arrangements, working from home and social protection will help to improve the job market.

They remove dependency of workers on their employers, giving them more control and freedom.

They also save money for employers which increases investment and job opportunities.

For gig economy workers initiatives such as social health benefits under MySalam, pension options such as i-Saraan from EPF or the Rahmah P-hailing digital package help gig economy workers to get benefits and social protection without depending on employers.

These need to be tested and evaluated but they are a good start.

Wider structural reforms can also help raise disposable incomes without ad-hoc interference.

An e-payments tax can raise enough to abolish income tax for everyone other than the richest, replace SST and reduce prices to consumers.

Spare revenue can be redistributed as social protection through the Padu system. A Malaysian super fund can provide a non-contributory pension for all Malaysians.

So higher disposable incomes, better social protection and lower taxes can be provided to everyone through structural reforms not through ad-hoc interference in the gig-economy. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.