COVID-19 has put the resilience of Indonesian gig economy workers to the test. In a new survey, some speak of selling their belongings and burning through savings. Others say they can only afford one or two meals a day – and no meat. To help protect roughly 40 million Indonesian gig workers from financial shocks in the future, it’s time for a new generation of financial technology companies to step up and meet their needs.
Our insights come from talking to nearly 600 gig economy workers during June and July this year in collaboration with Sampingan, a domestic platform for gig workers, and 60 Decibels, a global research firm. The report – The Digital Hustle: Gig Worker Financial Lives Under Pressure, Indonesian Spotlight – reveals the impact of COVID-19 on the gig workers who are on the front line of Indonesia’s digital economy, serving its 176 million mobile subscribers.
Digital platforms created new income-generating opportunities for millions of Indonesians, but their incomes have suffered a dramatic setback because of COVID-19. In March, just before Indonesia began implementing large-scale social restrictions, more than 40 percent of gig workers earned more than Rp 3 million (US$206) per month. By June and July, the proportion of gig workers earning more than Rp 3 million was down to 5 percent and more than half had monthly earnings of below Rp 1 million.
Our report shows that livelihoods for workers who interact with their customers in person were impacted particularly severely. Seventy-one percent of home health providers, such as those offering massage services, 65 percent of ridesharing drivers and 55 percent of delivery drivers lost income, while online sellers and other household workers such as housecleaners were less affected. The report also shows that gig economy workers are seeking and taking on new, on-demand jobs.
The survey suggested that the pandemic has turned out to be a bigger economic crisis than health crisis from the perspective of most gig workers. While 74 percent of respondents in our survey were very concerned about COVID-19, 52 percent said they worried primarily about its impact on their livelihoods – but only 14 percent said they were mainly worried about their health
The pandemic has exposed vulnerabilities in many societies and our survey findings illustrate how close to the edge Indonesian gig workers are living. Nearly 60 percent of respondents said that, if they lost their primary source of income, they could not cover household expenses for a month without borrowing money.
These workers have adopted a range of painful and costly approaches to cope with the sudden drop in their incomes. Among the two thirds who had reduced their consumption, 37 percent were spending less on food. Another 66 percent were using up their savings, 44 percent had borrowed money and 43 percent had sold or pawned an asset. However, gig workers are also determined to improve their fortunes: 61 percent of respondents said they had discovered new or additional work through digital platforms such as online reselling or on-demand tasks. Nearly 40 percent plan to seek new work in the coming months.
The drop in their income, although significant, is to be expected during the worst of the pandemic, and incomes will rise again as economic activity regains momentum. However, the survey showed that few gig workers had been able to build a financial cushion for themselves during better times and that many were ill-equipped to face sudden economic shocks.
As we move toward an increasingly digital world, the importance of gig workers cannot be overemphasized. This workforce has demonstrated its entrepreneurial drive during this crisis and is looking to its future beyond the pandemic. Indeed, saving for the future is gig workers’ number one goal, with 81 percent very concerned about their ability to save for old age.
Another top concern is the risk of not being able to work in the future due to ill health, an accident or damage to their phone. Most gig workers juggle multiple jobs through different digital platforms to optimize their earnings. Just as technology connected these workers with new income streams, it also has the potential to serve their unmet financial needs and improve their financial security.
Imagine having a single mobile app that could aggregate all of a worker’s earnings derived from different sources, nudge workers to regularly put aside small amounts of money into a digital account for future use, and provide them small ticket credit to purchase supplies, fill up fuel tanks or learn new skills when needed.
Workers are more anxious about short-term cash needs than longer-term financing. Sixty-three percent of the respondents in our survey were very concerned about having sufficient cash to do their job, versus only 32 percent who were concerned about access to asset financing. Smartphones are the lifeline for gig workers. Insurtech firms like Qoala in Indonesia offer device protection insurance with a 100 percent replacement facility through a quick online process. Singapore-based ride-hailing company Grab offers income protection to drivers in case of accidents or critical illnesses.
Gig workers are critical to supporting the growth of the digital economy in Indonesia. But it’s important to focus on the sustainability of their livelihoods and their financial resilience, as well as on their productivity and efficiency.
Technology makes possible better ways for gig workers to manage risk and access liquidity when they need it. That is the challenge for entrepreneurs and investors like us – and one that we are determined to meet.