World Bank Urges Malaysia to Mandate Retirement Savings for Digital Platform Workers

In a world where the gig economy is not just an option but a necessity for many, the World Bank has cast a spotlight on Malaysia, urging the government to adopt a pioneering approach to safeguard its informal workers.

At the heart of this recommendation is a call for mandatory contributions to retirement savings for those earning through digital platforms. This suggestion comes at a critical juncture, as the gig economy's productivity in Malaysia soared to RM1.33 billion in the third quarter of 2023, underscoring the sector's burgeoning role in the national economy.

Addressing the Vulnerability of Informal Workers

During the launch of the report 'Informal Employment in Malaysia: Trends, Challenges and Opportunities for Reform', Yasuhiko Matsuda, the World Bank Country Manager for Malaysia, emphasized the precarious position of informal workers. Unlike their counterparts in formal employment, these workers often lack access to formal pensions or employment injury insurance, leaving them vulnerable in times of crisis.

Matsuda highlighted that with digital transactions, tracking earnings has become easier, presenting an opportunity to better protect these workers. The report also detailed the struggles faced by informal workers, such as the need to reduce food consumption or borrow money during financial hardships, a stark contrast to the safety nets available to formal workers.

Recommendations and Government Response

The World Bank's report not only identifies the challenges but also offers tangible solutions. It suggests the establishment of a convening body for stakeholders in informal employment, provision of skills training, and mandating work-related insurance for high-risk occupations through digital platforms.

In response, Zunika Mohamed, Economy deputy secretary-general, acknowledged the government's interest in these recommendations, especially with the 13th Malaysia Plan on the horizon. The government has already shown a commitment to improving the welfare of informal workers, as evidenced by the allocation of RM100 million in contribution matching grants for the Self-Employment Social Security Scheme and the increase in the matching contribution value for the voluntary i-Saraan program under the EPF, as reported by BERNAMA.

The Path Forward

As Malaysia looks to bolster the economic security of its informal workforce, the World Bank's recommendations could mark a significant turning point. By making retirement savings mandatory for digital platform workers, the government can ensure that the fruits of the gig economy are not just immediate but also contribute to the long-term well-being of its participants.

This move would not only address the current vulnerability of informal workers but also encourage skills enhancement and provide a safety net that has long been absent for this segment of the workforce. With the global digital economy expanding, Malaysia's response to this call for action could serve as a model for other nations grappling with similar challenges.