The number of Malaysians working in the gig economy reached an all-time high of three million in 2023, sparking concerns that there will be a shortage of skilled workers in the long term if the trend continues.

The record numbers, representing more than 17% of the country’s workforce, are a marked 25% rise from the 2.4 million self-employed workers recorded in 2021, according to Maybank Investment Bank Research.

The increase is worrying as it comes during a period of low unemployment when Malaysians should be able to find secure jobs with benefits.

Even more worrying, figures from the Department of Statistics showed that close to 98% of delivery riders in 2022 were aged 30 and below, with about 40% of them secondary school graduates.

In 2021, more than 60% of informal workers in the non-agriculture sector were those with secondary school qualifications.

Socio-Economic Research Centre executive director Lee Heng Guie said industries may struggle to find skilled workers in the long run if young people forgo higher education to work in informal, unregistered businesses that do not cough up money to train workers.

“The country needs to have more skilled workers if it wants to move forward in high-tech industries such as artificial intelligence. Unregistered businesses that bring in less investments coupled with the growing number of low-skilled workers in the country will eventually weaken the country’s economic growth,” he told The Straits Times.

According to Maybank Investment Bank Research, self-employed workers are essentially daily income workers such as freelancers, hawkers, petty traders, food stall operators and sole proprietors.

The growth in informal jobs stood at 6.5% in 2023, which surpassed total employment growth at 2.4% last year, said Maybank Investment Bank Research.

This was even though the country’s unemployment rate stood at 3.4% in 2023, the lowest since the pandemic, according to the Department of Statistics. The data indicated that these Malaysians chose to be self-employed despite a stronger job market.

Workers cited a lack of opportunities, stagnant wages and inflexible working arrangements in conventional nine-to-five jobs as reasons they chose the gig economy.

In May 2023, a survey by a private university found that 49% of SPM school-leavers did not plan on furthering their studies while 26% of them said they planned to become private-hire drivers or delivery riders.

A study by the Department of Statistics conducted from March to December 2022 showed that close to 12% of p-hailing workers – a term used in Malaysia to describe those who deliver food, drinks and parcels using motorcycles – were degree holders.

UOB Group’s senior economist Julia Goh expects the higher economic growth in 2024 to drive the informal jobs sector to grow between 4% and 5% mainly in the services industry. This will lure more Malaysians to switch to gig roles, she said.

“Many millennials prefer to be their own boss. Based on the evolving nature of the labour market, informal workers will continue to rise (in number) due to low wages in traditional jobs and preference for flexible hours,” she told ST.

Some turn to gig work to supplement their income and cope with rising costs of living.

The trend has continued even though economic indicators are improving. In 2023, Malaysia’s inflation rate was 2.5%, compared to 3.3% in 2022.

Meanwhile, skilled professionals are choosing to work on a freelance basis, trading job security for flexible hours.

As more Malaysians opt for self-employment, concerns over their retirement savings prompted the Employees Provident Fund, Malaysia’s retirement fund, to introduce the Saraan incentive scheme or i-Saraan in 2018. Self-employed workers would need to register for the scheme to get assistance, including government incentives and death benefits. Workers can contribute voluntarily to their retirement accounts and the government’s contribution was increased to RM500 (S$141) a year under Budget 2024.

Human Resources Minister Steven Sim told ST that his ministry is undertaking a study to revise the Employment Act to provide more protection for informal workers.

“We are focusing on finding ways to formalise the informal sector for the benefit and protection of workers,” said Sim. He declined to comment further as it is being studied to assess feasibility.

“This can also involve recognising the skills and experience gained in the informal sector through certification programmes,” said Sim. – The Strait Times


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