How can regulators keep up with the rapid development of the Indonesian gig economy?

Posted on 31.01.2023
Motorist in Jakarta
(PC: Tody Kuswardioko)

Authors: Nur Huda, Centre for Innovation Policy and Governance (CIPG), Adriansyah Dhani Darmawan, CIPG, Maria Catherine, CIPG, and Richard Heeks, University of Manchester

The Fourth Industrial Revolution has brought about extraordinarily fast technological and social changes. One of Indonesia’s most significant changes is the development of the gig economy, as indicated by the increasing number of both digital labour platforms and workers. Digital platforms and digital platform workers have become an inseparable part of urban life in Jakarta and other cities in Indonesia. Ride-share drivers lining up in queues, dropping off passengers around town, or just waiting for their next gig is a common sight on every corner of the city.  

Starting with transportation in 2014, Indonesia’s gig economy has expanded rapidly into various service industries such as food and grocery delivery, cleaning, and even health and education. There are estimated to be more than 4 million people working as online drivers in Indonesia, and more than 54% of them identify gig work as their main source of income. The issue of gig workers in Indonesia has become a multi-sector problem affecting millions of lives. 

Despite the growth of the digital economy, with one digital platform constituting 1.6% of Indonesia’s GDP, the situation in which gig workers find themselves is moving in the opposite direction. The average income of online drivers has steadily decreased over the years. The number of gig workers’ strikes are also increasing, especially in the last three years. These strikes are mainly driven by tariffs that directly affect their income. In 2020, drivers mainly protested the return of the old incentive scheme while in 2021, drivers largely demanded decent fares and lower platform commission charge.  

Online drivers also face many challenges related to workers’ rights, primarily because they are regarded as “partners” of the platform instead of the platform’s employees. For example, they don’t have the right to minimum wages, social protection, regular paid holidays, decent working hours, or job security. Following the recent fuel price spike, a survey from the Ministry of Transportation has shown that the new tariff regulation to mitigate the effect of the spike has not effectively improved drivers’ income.  

The development of platform services has further complicated the issue of gig work in Indonesia from the policymaker’s standpoint. The issue no longer falls under the jurisdiction of just one government agency or ministry; there are at least three key ministries that are directly related to the issue of online platforms and drivers in Indonesia: the Ministry of Transportation, the Ministry of Workforce, and the Ministry of Communication and Informatics.  

The Ministry of Transportation has been very efficient, albeit reactive, in its policymaking efforts. After the introduction of online taxi and motorcycle services around 2014, there were many issues and cases of driver detainment as the services were deemed unregulated, and therefore illegal. Before the current regulation (Regulation of the Minister of Transportation Number PM.118/2018 and PM.12 of 2019), the Ministry of Transportation had established many regulations, including four changes between 2016 and2 017. They also established the online driver tariffs regulation (Minister of Transportation Decree Number KP.667/2022) that regulates the upper limit, lower limit, and maximum platform fee. However, this tariff regulation only applies to online motorcycle taxis and not online car taxis or delivery services.  

On the other hand, neither the Ministry of Workforce nor the Ministry of Communication and Informatics has established new regulations related to gig workers in Indonesia. Law 13/2003 on Employment Relations remains the main reference for worker/labourer-employer relationships based on a work agreement. Law 20/2008 on Partnership Relations similarly remains the main reference for partnership agreements, even though it was originally meant for business partnerships involving Micro, Small, and Medium Enterprises and Large Enterprises. The newly established ministerial decree on the Universal Postal Service Tariff (No. 222/2022) also failed to provide much help because it does not specify a tariff for couriers working under a partnership/gig work model. 

It is clear that the current regulatory framework on gig workers in Indonesia needs to be improved as it is insufficient in securing decent working conditions. As stated in the Indonesian Constitution, every citizen has the right to work and to a decent living for humanity (article 27 paragraph 2). Regardless of their employment status, government policy should be able to ensure that all workers can make enough money without resorting to excessive work, and that they are provided with the necessary safety and health insurance at no additional cost.  

As policymakers struggle to establish the necessary regulatory framework to support gig workers, collaborative efforts between stakeholders are necessary to tackle the issue. Collaboration between the three key ministries and stakeholders outside the government— especially digital platforms and worker associations—is crucial in drafting effective policy. However, it is important to note that the policymaking process in Indonesia can be very costly both in terms of time and resources. Therefore, it is essential to first cultivate greater public awareness of the grievous conditions in which digital platform workers are made to work. Public awareness and support will put real and immediate pressure on both the government and the platforms as they draft more fair, updated, and constitutional policies.