External Affairs

Sudden Rise in Indonesia’s Ride-Hailing Services Leaves Drivers in Uncertain Employment

Indonesia has attempted to ensure fair competition between ride hailing services and traditional transportation services.

Between them, Go-jek and Uber have at least 300,000 accounts registered as freelance drivers in Indonesia. Credit: Reuters/ Garry Lotulung

The Indonesian government recently revised its regulation of the fast-growing on-line ride hailing services that had disrupted the transportation business.

Ride-hailing apps that connect motorcycle riders and car drivers with passengers through their mobiles have provided cheaper and more convenient transport options for passengers. But traditional drivers have protested against the new competition.

Under the new regulation, the government can now set a price cap on these services. Vehicles also are now subjected to minimum engine capacity and road worthiness.

These amendments attempt to ensure fair competition between ride hailing services and traditional transportation services. However, they have yet to address the impact of the growing number of freelance online drivers on job instability and insecurity.

Creating work opportunity

Between them, Gojek and Uber have at least 300,000 accounts registered as freelance drivers in Indonesia.

This number is significant and will likely continue to grow. Indonesia has around 120.85 million workers, according to 2015 data.

Gojek and Grab started operating in Indonesia in 2011 and 2012 respectively. Gojek claims to have around 250,000. Uber entered Indonesia in 2014. In 2015 they announced that they plan to grow the numbers of drivers from 12,000 to 100,000 in 2017.

According to a study conducted in 2015 on Uber drivers in the US, drivers are attracted by the income opportunities and flexible working arrangements offered by online ride-hailing companies.

A 2015 study by the Malaysian-based Grab on their drivers in Indonesia highlighted Grab’s positive impacts on drivers. The drivers could pay for their children’s school fees and have enough savings to buy a house from their income. Additionally, drivers of GrabCar rate work flexibility as the main benefit of joining the service.

Unstable and insecure work

But the work is not without its drawbacks. Drivers engaging in the online ride-sharing services are classified as independent contractors or working partners, not employees. This means drivers and their families have to cope-with work-related risks themselves.

This classification frees companies from the obligation to meet drivers’ minimum wage, pay overtime, and provide medical, retirement, and unemployment benefits.

Drivers who rely on online taxi as their main source of income are more affected by income instability, than others who have other jobs.

Flexible working arrangements also expose drivers to other risks, as they are prone to working over time, often in unusual hours, to maximise incomes.

Informal sector

This insecurity and instability are similar to the experience of workers in the informal sector, such as market coolies, domestic workers, and regular ojek (motorcycle taxi) drivers.

Online taxi drivers also share the experience of formal sectors workers who are impacted by the process of casualisation, through arrangement like outsourcing and short-term contracting.

In many countries in Asia, insecure employment practices have long been the “standard” due to the pervasiveness of the informal sector and the failure of the formal sector to create more permanent jobs.

This work-related insecurity and instability are also part of a global trend of increased casualisation of labor.

The trend is connected to the expansion of neo-liberalism, a set of ideas and policies associated with economic liberalism, which favours free market competition.

These changes have promoted flexible labour policies, dismantled the welfare state where it existed, and reduced the access of the world’s poorest people to various social services.

Impact of work insecurity and instability

Research shows that work-related insecurity and instability affect workers physically, psychologically and morally.

Work insecurity and instability increase stress and lead to poor health. They also degrade relationships with family and community members.

Furthermore, workers who experience insecurity and instability are prone to fall for populist politicians who often use ethnic and religious rhetoric to draw support. Having inadequate means to voice their aspirations, they can easily be lured to listen to voices that contribute to divisions.

Improve workers protection

The government, companies, labour unions and other elements of civil society need to reconsider the meaning of work and labour relations in the IT-facilitated economy, and their impact on workers.

A set of strategies may be needed to unite drivers in ride-hailing service and establish a channel to voice their aspirations as workers. It needs to consider the flexible working arrangement in the IT-facilitated economy as different from conventional jobs.

It is also important to reconsider the classification of drivers as independent contractors. Drivers in the US, UK and Canada have launched lawsuits against Uber, arguing that they should be classified as employees rather than independent contractors. These lawsuits have resulted in mixed results. Some judges find that drivers with Uber are employees. But a private arbitrator in California rules that Uber drivers are contractors, not emploees.

Online ride-hailing services may have provided important income opportunity for drivers. But, the services create precarious employment for drivers, and that needs to be addressed.

Diatyka Widya Permata Yasih is a lecturer at Department of Sociology in the Universitas Indonesia.

This article was originally published in The Conversation.