This article first appeared in The Edge Malaysia Weekly on November 13, 2017 - November 19, 2017

PART-time jobs are nothing new. People have been supplementing their income by getting involved in direct selling of products, selling insurance products or giving tuition for decades.

These days, however, 24/7 mobile internet connectivity and social media platforms are providing even more avenues for earning an “extra” income.

Ahmad (not his real name), who has a nine-to-five job next to a mall, for instance, earns extra cash by offering to buy groceries or cakes for people living close to his home by signing up for part-time errands on an application like GoGet. He doubles as a part-time driver, thanks to ride-sharing applications like Grab and Uber. When he gets his keys to his apartment, Ahmad plans to put the extra room up for rent via Airbnb.

This is just one example of how more and more people are choosing to do several so-called gigs rather than rely on full-time employment with a sole employer.

This trend has been prevalent among the younger generation, who have also opted for other unusual ways of earning a living such as publishing vlogs (video blogs) on YouTube and being social media influencers and e-teachers.

South Korean Cha Kil-yong, for instance, reportedly made US$8 million in 2014 teaching mathematics online to college students. There are similar examples in China for English teachers.

In Malaysia, a person can also be an independent worker or seek additional employment through websites such as maideasy, Maukerja.my, HerPortal.co, Supahands.com and eRezeki.my.

These added avenues are a positive development for the country’s economy as they help utilise excess labour at a time when youth and graduate unemployment is under a spotlight, says Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid.

“Perhaps this could be a new way or a paradigm shift in our world view of labour markets where one should not be too fixated on permanent employment. As it is, companies are struggling due to a rise in the cost of doing business, strict regulatory compliance and intense competition in the marketplace. This has led employers to emphasise more on productivity,” he says.

“Therefore, opting for effective independent workers is an avenue for companies to deal with these challenges.”

Not just casual work

Sunway University Business School economics professor Dr Yeah Kim Leng notes that freelance work has spread beyond casual jobs and across a number of industries, particularly in the creative and cultural economy.

This trend, he says, has been driven by a combination of factors, including the perceived unattractiveness of the formal employment sector by the younger generation and the lack of high-paying jobs in the corporate sector.

“The rise of the gig economy has come at an appropriate time. It’s likely to grow, particularly given that the formal employment sector is perceived to be unattractive by the younger generation,” he says.

“As a response, graduates are looking at alternative work arrangements, which could fill their need for independence and to exercise their entrepreneurial abilities.”

Between October 2016 and last month, the international online gig economy grew 29%, according to Oxford Internet Institute’s Online Labour Index, which tracks the supply and demand of online freelance labour across countries and occupations in real time.

Jobs related to software development and technology were the biggest contributor to the growth in the index, followed by creative and multimedia work, and clerical and data entry work.

In Malaysia, Khazanah Research Institute points out that there has been a steady increase in the number of self-employed people in urban areas since 2010.

Since 1995, self-employed people have accounted for up to 12% of urban employment, but this has since increased to almost 16% last year, equivalent to 1.7 million people and an increase of more than 760,000 since 2010.

By age groups, the largest increase came from the younger generation (those aged below 35).

Compared with 2010, the number of self-employed who are below 35 more than doubled while those aged between 25 and 29, more than tripled. The change in the number of non-self-employed in the workforce was less evident compared with that of the self-employed.

Pitfalls and trust issues

While some people may be able to establish a long-term career out of freelancing, Yeah is of the opinion that most in the gig economy may not be able to escape the low or middle-income trap.

“There’s no income stability, and the unpredictable nature of freelancing makes job security a key concern. But I think it will be interesting. The individuals themselves will have to map out their future in their work,” he says.

“They will need to enhance their skills and capabilities and grow their customer base. It’s actually similar to running a business.”

A recent survey by INTI International University and Colleges found that 68% of respondents — comprising 300 freelancers from around Malaysia — chose freelancing as their first choice of work despite the availability of full-time jobs.

The respondents cited the flexibility of choosing projects, diversity of work experience and control over working hours as the top reasons for their choice to go into freelancing.

The rise in the number of self-employed people has not gone unnoticed. The Employees Provident Fund (EPF) notes that the informal sector has been growing at a faster rate than the formal employment sector.

Like it or not, the growing gig economy is a fact and is here to stay, says EPF deputy CEO (strategy) Tunku Alizakri Raja Muhammad Alias.

A decline in trust in the formal system could be one factor driving this move towards the informal sector, he says, pointing to findings of the 2017 Edelman Trust Barometer.

According to the study published in February, 52% of Malaysians believe that the current overall system has failed them and offers little hope for the future. Only 12% believe the current system is working.

Malaysia has also slipped into distrust for the first time as the trust index for the nation fell to 48 points this year from 51 points in 2016, in line with the general trend of distrust seen in other countries around the world.

“In my opinion, there is a lack of trust among Malaysians in the formal establishment — in both the government and the corporates — which could partly be driving the growth of the informal sector and the gig economy.

“[A number of] Malaysians may feel that some things are not going great in the country, which has incentivised us to find solutions. This can be seen in the start-ups, which have come up with great solutions just by working among themselves. But this is just my hypothesis,” says Alizakri.

Financial insecurity

The freedom that comes with being an independent worker, however, has a downside: uncertain income. Not having a full-time employer also means losing out on the employer’s contribution to one’s pension or EPF savings. In other words, there is a heavier burden on the individual to save for his own retirement — which is why the existing defined-contribution system needs to be tweaked (see accompanying story).

Incidentally, financial insecurity is one worrying finding from INTI’s recent survey. Some 66% respondents did not have a retirement plan, 33% did not have a personal financial plan and 56% had less than three months of financial cushion, versus the recommended six-month financial buffer.

In 2010, the government introduced the 1Malaysia Retirement Savings Scheme (SP1M) to cater for the growing number of Malaysians without a fixed monthly income but desire a fund to safely grow their savings for retirement. Individuals may voluntarily contribute a minimum of RM50 to their SP1M account up to a maximum of RM60,000 a year.

While the number of participants in the scheme has been growing slowly over the past few years to some 90,000, Alizakri says this is still not satisfactory.

Under Budget 2018, the government proposes to increase its contribution to SP1M to 15%, up to a maximum of RM250 per person per year starting 2018 — a move to support efforts to boost the take-up rate of the scheme.

“Clearly, everyone knows the issue of low retirement savings by Malaysians. But, why is this so? Is this due to a lack of understanding of the importance of saving for old age? Is it a lack of financial literacy? Or is the rising cost of living making it hard to save?” asks Alizakri.

“This issue needs to be addressed as the gig economy continues to grow.”

Taxing matters

A higher burden on independent workers to take care of one’s own retirement and healthcare insurance also points to the greater need for social security nets and higher utilisation of public healthcare services.

The increased public expenditure burden may also be compounded by the under-reporting of taxes by those not in the old-school definition of formal employment.

The government is well aware of this and is working on improving tax collection in the new economy.

“I do believe the Ministry of Finance is looking at ways to generate tax revenue to be at least on a par with regular employment. It is working on this area but nothing has come out yet,” says Khazanah Research Institute director of research Allen Ng.

In the meantime, consumption-based taxes like the Goods and Services Tax (GST) play an important part in capturing tax revenue from the gig economy.

“This is why GST is important. It’s a tax based on consumption, so no matter how you are employed, the more you consume, the more you will have to pay,” he says, noting that GST is becoming an important revenue source for the government.

Being an independent worker also means an increased burden of ensuring one’s skills are up to date to continue getting gigs. Point to ponder: Major ride-sharing companies like Uber, Grab and China’s Didi Chuxing have money in autonomous driving research. Independent workers too should make sure they have back-up employment (and savings) plans.

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