September 11, 2024
JAKARTA – The gig economy has trapped a significant chunk of Indonesia’s young workforce in jobs that make it harder for them to move up and achieve optimal welfare, with repercussions for national human capital development.
Experts are raising concern that the flexibility advertised by gig platforms has turned out to be an illusion for many workers now stuck in precarious, low-wage employment, threatening the nation’s ambitions to become a developed country by 2045.
“[The quality of human capital] is declining, and it’s a trap for developing countries like us,” Silvi Asna, a lecturer at the University of Brawijaya’s School of Economics and Business, told The Jakarta Post on Monday.
“Worse, we might see more people refusing to work in this country, opting instead to work abroad for better pay,” she added.
The gig economy provides easy access to temporary jobs or moonlighting opportunities.
However, the informal nature of gig work, Silvi said, had left many workers vulnerable, with little government support or protection from the gig platforms they rely on for income.
“On the one hand, these gig platforms are innovative, but they have turned their ‘partners’ into workers,” she argued. “These platforms capitalize on people as their innovation, but the workers are left with no real autonomy.”
Workers like makeup artists, photographers, cleaning service employees and ride-hailing drivers have turned to the gig economy given its low entry barriers.
However, Silvi explained that, while some workers could move up and earn better wages, others, particularly on-demand drivers, remained tightly controlled by the companies operating the tech platforms.
“There are some successful gig workers who can work for six months and take time off for the next six, but many are forced to work long hours just to make ends meet,” she said.
The platform operators typically refer to the gig workers as their “partners”, but voluminous research shows they are often far less independent than the companies claim.
A 2023 study by the Institute for Demographic and Poverty Studies (IDEAS) found that 90 percent of suspensions were imposed unilaterally by gig platform companies without prior consultation with drivers. Additionally, two-thirds of respondents reported not being consulted or informed about changes to bonuses or fares.
“If they were truly partners, the relationship would be two-sided, but what we see on the ground is that, if a driver is late, it’s the driver who is penalized, not the company,” Silvi said.
Yusuf Wibisono, the director of Jakarta-based think tank Next Policy, said on-demand driving had initially been a staple option for unemployed recent graduates, housewives or even retirees, but the fact that many low-skilled urban workers were now pursuing it as a permanent job “is worrying”.
The country’s unemployment rate is 4.5 percent, according to Statistics Indonesia (BPS) data published earlier this year, but underemployment at 8.5 percent is almost twice as high, leaving around 20 million people in desperate need of dependable work.
With Indonesians across the archipelago owning 135 million motorcycles, ride-hailing services have become a popular occupation, especially for high school graduates with limited job prospects.
Research by IDEAS found that most on-demand drivers were aged 21-40 and that 66.7 percent had only completed high school.
“This lack of education leaves them with little bargaining power in the labor market, locking them into job insecurity with low pay,” Yusuf told the Post on Thursday.
While being an on-demand driver is now an economic choice for the urban poor as a way to survive, this dynamic left drivers vulnerable to exploitation, with long hours and low pay becoming the norm.
Government regulations cap platform commissions at 15 percent, but drivers still face deductions as high as 40 percent, according to Yusuf.
“This is bad news for a country aiming to become a developed nation by 2045,” Yusuf said.
Experts acknowledge that the gig economy can provide a stopgap for the unemployed young but lacks long-term opportunities for training and upskilling, which are vital to achieving higher incomes or transitioning to formal-sector jobs.
“Formalizing [the work arrangements] is a form of scaling up, to give [the workers] better protection and make their work contribute to the GDP.” Silvi said.
Without government action, national inequality could worsen, with gig workers becoming increasingly impoverished.
The oversupply of labor in the gig economy only gave companies the upper hand, she continued, leaving workers to vie with one another for a limited number of jobs, leading to low pay and fierce competition.
“Why should a luxury car driver who works out of boredom get the same opportunity as a driver on an old motorbike?”
Center of Economic and Law Studies (Celios) digital economy director Nailul Huda said a dual strategy was necessary, given that formalizing gig work could provide more stability but might eliminate the sector’s role as a buffer for those transitioning into formal employment.
“The government should focus on empowering workers and preparing them to shift into the formal economy,” he added, for example through capacity-building programs for gig workers while protecting the platforms that create these job opportunities.