OPINION : Gig Economy and its inter-dependant in causality by Performance Return of Pension Fund

These days in our country, the rising of distruptive tech by a groups of entrepreneurs on tech startups, is parts that running the economic competitiveness in our domestic workforces. They provided a new ways of economic means around job markets that leveraged between being a worker and be-your-own bosses, a term as whole within the economic environment dubbed as a "Gig Economy".

But what is Gig Economy? Coined as "Uberisation" of work by Forbes, the statement for such wording is "...a free market system where the transactions are task-based and the workers work independently without being bound to long-term contracts with any company."

By statistic from figures by Employee Provident Fund's (EPF) of 2017, the cencus stated that gig economy now comprised around 31% of growth in term of working forces in Malaysia, and the figures could be even higher in the next few years or decade to come if the trends of supporting the emerging trends of digital economies going to be the primary agendas in the country.

With such figures, that's mean there is more non-contractual freelancers that serve the market of economic growth in Malaysia. But as for such, what driven the movement others than the incentive of jobs to be filled by those digital tech companies that offered such opportunities at first places? There is many, and one of the most important aspect is being in flexi-time working environment. The flexibility that offered by such apps that marketed the gig economy, like Grab, and Foodpanda, or LalaMove (the most prominent final-miles delivery tech companies here in Malaysia) allowed the users to accept or decline the jobs offered from public channels whenever they like, anywhere, any times.

Such flexibility allowed them to filled up their time slots to do others jobs around their schedules. Such productivity allowed them to be, or indirectly, being enroute to the entrepreneurial pathway. All of that seemed to be a good indicator as parts of increasing domestic growth in term of micronomics' competitiveness and fulfillment of the jobs market.

But, the reality can be masked within the gig economy itself. Especially in broader consequences of the worker's future around such job market. And not all gig economy is created equal.

In term of worker security, such as basic payment, and contribution to their pension fund, its really a give and takes opportunity, because there is NONE of that. It would be good for someone that already tied to their full-time working position and regarded their working time in behalf of gig economy as a second or extra income, but not for those that solely depend upon it as their only job.

This situation is understandable as shrinking job markets making it hard for any full-time working position to be offered locally, or simply the temptation of working with freedom that is outbound from hectic organization cultures is being too hard to be shaken of.

While the gig economy now is broad and specialized than its ever before, the upper levels of such within the games likes coder, designer, or anything that has to do with the technicality that required a mere specialization that only those that know their subject can have an advantages of being able to quote their services and offering, rather than the lower levels of gig economy. Sure, both of them do find themselves upon exploitation by the free markets and so on, but it always the lower one going to take ups the worst out of it.

Now, the biggest gig economy by the market economy is the lower levels group, which is catered around delivery, or final-miles solution. This revolved around taxiing and hailing people, and delivery-related such as despatcher, be in around food catering, and delivery of goods, everyday, anywhere.

That lower category or group of gig economy is happened to be the most competitive compared to the upper levels category, due to the fact that anyone can do it, and the requirement to enter such work or jobs is pretty much a simple affair and didnt required any special types of skillsets in order to excel on it. The fact that unlimited earning based on jobs done also masked some of the harsh or brutal reality out of it. Some of the safety concern that always a major issues on this types of gig economy worker are:


  -  They have nothing to offer which means low bargaining power. Anyone with a vehicle  and license can do the job.

-Under the mask of hustling and unlimited earning, this type of work encourages burn out.

-Marketplaces are determined by consumer demand.

-Payment terms, commissions and bonuses will keep on changing.

-The term as freelancing or subcontractor also mean that there is no basic or EPF contribution to be made in behalf of the worker that worked for those companies, as they are not a full-time worker or officialy a worker at first place by industrial term.

For some, they have less to care as they opted to go for "Freedom To Work" vs the "Full-Time Employment". But without any means for them to be forced on contributing to the worker's fund or Pension Fund as it normally known in working sector (Here it was known as EPF) so this groups of working class are at the risk of not being prepared financially when it come to the future saving. More so, with a large percentages of job markets are being dominated by this groups of workers, it also might indirectly affect the capabilities of EPF to provide a steady, or better performances of its dividend to all of the contributed members, which is a workers from working sector that is forced by law to contribute to their funds under Retirement Scheme.

 This also is something that a workforces which is a backbones to the success of the companies that pushing the growth of the gig economy itself, never able to enjoy.

According to the study made by the Department of Statistics Malaysia (DOSM) and Khazanah Research Institute in 2017, 66% of freelancers didn’t have a retirement plan, 33% didn’t have a personal financial plan and 55% has less than 3 months financial buffer. If this doesnt seems to put you up into the intra-relation conclusion, these are majority of groups that never able to contribute to the EPF's pool of funds, which is crucial for it to provide a good amount of returns, is determine by the available retained earning out of the contribution made by a groups of workers that invested in it. Now, imagined how such potential is losses due to the inability, or by regulation, to securitize these emerging trends of gig economy itself.

Now, consider there is a scenario like these: The economic domestically is slowing down, some of the working groups expected a greater return in their retirement plan soon. There also a potential listed stocks of companies at the global exchanges that is worth to be investing as part of diversifying the portfolios to enhance the annual return which would be a good news to the EPF members. But what if, the story of this one suggested that EPF investment arm by their available pool of fund after a retained earnings is unable to get the largest chunks of those stocks, or any others of "Gold, A-class, Senior Offering" of investable instruments at first places do the largest percentages of its citizen did not contribute to the EPF or government endorsed Retirement scheme?

Feel sad to see the expected return performances, year-by-year basis, right? Thats how economy work. The relationship between EPF and its contributors by working class like all of us is the most important way to allowed it to perform on its major portfolios investment.

If there is less contribution to sustain its own pool of funds, the pieces of return under those porfolios is also shrinking, due to its inability to sustain more of the block of stocks that required to earning more dividend from the invested companies itself. This trickle-down effect later on reaching us the stakeholders, the investor of the scheme, to ripped a less-and-less return afterward.

All of that can only meant a big dissatisfaction toward government and its inability to raising up the percentage returns upon the sets of benchmark that is targeted upon. Sure, the global economy playing parts of the annual return from the invested portfolios, but the pool of fund is always the first of importance since its the capital that allowed such investment to be able to run at first places.

To top it up by the missed opportunity, those big percentages of ever-increasing working forces at our domestic job markets, would make as a big mark-ups to cover the losses of the pool of fund total amount, by absorbing them into parts of contribution when the contribution rates is cut in the days of economy is slowing down.  Such move would be almost guaranteed to be made whenever domestic economy is slowing down, as contribution rate would always cut the total amount of any receivable "real salary" which mean less money to be had in those rainy days situation, if the amount is high in percentages. By included those group in the gig economy, they would be part of "buffer" to ensure the EPF would always be ready by its vast amount of fund to finances their next porfolios purchases of valuable stocks and shares, all over the globe.

This is why the regulation for workers in behalf of gig economy in this country should be taken under serious concern from the government. Not just around increasing its growth to be part of an economic-driven, but also to ensure that the emerging sector of gig economy doesnt be the part of national biggest loser's in term of making the underperforming retirement or pension funds as a reality. The profound effect might be understated but far more than just an ability of one nation to give back to their hardworking citizen when retirement time is around the corner, it also a backbone of one country's assets under management (AUM) in term of government officials reserves, and accounting books. This performances certainly parts of what makes a country to stand strong in the eyes of investor from all over the world, when it come to the assessment of it "Book Values".

LINK/REFERENCES :


https://themalaysianreserve.com/2020/02/07/epf-contribution-rate-cut-tax-rebates-can-cushion-virus-impact/

https://www.theedgemarkets.com/article/epf-will-reach-rm1-trillion-soon-reaching-next-trillion-may-be-harder
https://www.kwsp.gov.my/documents/20126/203853/Investment+Statistics+Q2+2019.pdf/ddda4617-e897-294f-b819-d0ce61e0741d?t=1568188028273

https://mypf.my/investing/retire/epf-historical/