New data shows not only are wages very low in Malaysia but formal employment is also low.
Only around 6.45 million Malaysians earn wages from formal private sector jobs. This is less than 40% of the labour force. The balance are self-employed, unpaid family workers and foreigners and expatriates with contracts that are mostly unenforceable anyway.
The informal “gig economy” workforce is becoming the mainstay of the labour market with huge implications for the government target to raise incomes and improve social protection.
The gig-economy is not just e-hailing or delivery riders but includes many high-skilled and professional jobs such as practitioners in private medicine paid per patient, lawyers paid per client, tutors and academics paid per class, accountants paid per audit.
In the technology sector, website designers, content developers, app creators, coders and programming experts are now mostly gig-economy workers paid per job.
More than a million micro-enterprises with fewer than five people often have business models based on the gig-economy where they are paid per job by multiple clients. These make up 78% of all companies in Malaysia.
Gig-economy work is pushed by similar factors around the world, including technology and sharing economy platforms where people sell their services.
In Malaysia low salaries and bad terms and conditions under restrictive contracts are extra factors pushing people into gig-economy work where life is often better and incomes often higher.
Pitfalls include difficulties finding clients, irregular income and no formal welfare protection.
On the other hand, the benefits of flexibility, freedom and choice for gig-workers as well as extra income opportunities often in excess of normal salaries are turning the gig-economy into a mainstay of the labour market.
We estimate that 4.45 million people are already in this type of work which is around 26.5% of the workforce.
This does not include many professionals or those with two jobs where the gig-economy is a top-up to their main work.
When we understand the gig-economy in these terms we can see that it is very large and for many people it can become their main source of income.
Over time, with work-from-home (WFH) and flexible working arrangements (FWA) as well as changing work-life preferences, the gig-economy will be the main form of income for most people and we are already close to that now.
Policymakers do not appear to enjoy this prospect and are rushing into laws and regulations to enforce employment rights.
By definition you do not have employment rights as a gig-economy worker because you are not an employee, so policy is often mistakenly directed at turning gig-work into formal employment.
Of course gig-workers need pensions, health insurance and other social protection but this should be delivered in a different way, not through regulations that turn gig-economy jobs into quasi-formal jobs.
The danger is that if there are too many regulations it will kill the massive opportunities of the gig-economy and be a regressive step.
Gig-economy workers can expect an expanding market, and with more customers and clients, more people will move positively into the gig-economy.
Even employers should hire gig-economy workers as freelancers and support staff. They should also introduce WFH, FWAs and shorter working weeks to allow their employees to take on gig-economy work.
If employees were given a four-day week for example they could use the extra days to top-up their income and they would push less for pay rises from their primary employer.
The reality of the gig-economy is a big challenge for policy in the next two to three years. More flexibility and less regulation, with tax cuts on secondary jobs in Budget 2024 will encourage people to embrace gig-economy work.
By Professor Geoffrey Williams, Provost for Research and Innovation, Malaysia University of Science and Technology
