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Cover Story: SMEs and gig economy to bear the brunt of MCO

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IT is a difficult situation currently for businesses and employees everywhere, but it is particularly challenging for small and medium enterprises (SMEs) and those in the gig economy.

While most of these smaller businesses and self-employed individuals would agree that the Movement Control Order (MCO) is necessary to stem the spread of Covid-19 in the country, they cannot help but be concerned should it be extended beyond two weeks.

“For two weeks, we should be okay. Currently, our team is working from home on ongoing projects. We are only a 20-man company, so meeting our staff salaries at the end of the month is not an issue. But, if the MCO is extended for a longer period of time, then I would start to be a little bit more worried,” says an owner of an engineering outfit that works on a project basis.

SMEs represent 98.5% of companies in Malaysia. In its 2018 annual report, Bank Negara Malaysia said there were about one million such establishments in the country.

In terms of contribution to the economy, SMEs accounted for 38.3% of Malaysia’s gross domestic product (GDP) in 2018, or in value terms, over RM500 billion.

A large portion of the SMEs, or 62%, are in the services sector. Any worsening of the Covid-19 situation and extension of the MCO would have a severe impact on them, and the economy.

Dr Yeah Kim Leng of Sunway University Business School says the majority of businesses in the retail, restaurant and food and beverage (F&B) sectors, as well as travel and tourism-related players, are SMEs.

“While SMEs are touted to be agile and adaptable to the changing economic and business environment, they will be affected by a downturn whether it is short or prolonged,” says Yeah, a professor of economics.

SME Association of Malaysia president Datuk Micheal Kang believes that if the MCO is prolonged beyond a certain period and little or no help is given to the sector, there could be over one million job losses in the SME industry alone.

Last Thursday, the government announced measures to help SMEs. It will provide financial assistance — in the form of loan facilities and rescheduling and restructuring of payments — to help these businesses maintain their operations, continue to employ workers and encourage domestic investments.

Banks have also announced relief measures to support affected customers.

A former bank CEO highlights that the many of the local banks hardly service the micro SMEs, except for development banks. In recent times, micro SMEs have turned to peer-to-peer lending platforms to raise funds. 

“Looking at the statistics from crowdfunding platforms offering loans to micro SMEs,  9% are already three months delinquent to date, before the Covid-19 effect. And those that are delinquent less than three months are 12%, and they will turn into non-performing loans (NPL) with this MCO. With an extended MCO, more performing portfolio non-delinquent accounts will start to go into delinquency. This will show up as NPLs in the third or fourth quarter of the year,” he says. 

Italy is an example of how the spread of Covid-19 has gone from bad to worse. The Italian prime minister recently announced that the lockdown of the country would have to be extended beyond April 3 as the death toll spiked. Italy has been on lockdown since March 9.

Economists are expecting the Italian economy to contract by 0.4% this year.

While the fear of an extended MCO is real, small businesses are hoping that the government can lend more support. One of their main grouses — which is being hotly debated — is that they are not allowed to put their employees on unpaid leave during this period.

Kang says there is still a lot of confusion among businesses as to what the MCO means for businesses.

“The guidelines aren’t clear and the message hasn’t been passed down well. So, businesses use their own interpretation and this has caused a lot of confusion. The MCO is not a holiday, businesses are still ongoing, they can work from home. They are also working out how to operate their business during this time,” he says.

While many small businesses are struggling to figure things out, some seem to be well prepared. Larry Leong (not his real name) and his family operate optometrist outlets in the Klang Valley. They have been in business for over three decades. He emphasised the importance of having good cash flow at all times.

“We have gone through at least four cycles of tough times. I’ve learnt that the best way to prepare for any slowdown in business activities is to have good cash flow. That means prudence in buying products and ensuring that repayments are manageable,” he says.

Another segment of the economy that are vulnerable to the MCO are those in the gig economy. According to World Bank Data, 25.3% of the Malaysian workforce, or about four million people, were freelancers in 2018, and this number is expected to grow.

The nature of their work and irregular income puts them at greater risk in tough economic times.

Irene Lim (not her real name), a freelance ballet teacher and Pilates instructor, says she will depend on her savings, as she will have no income, with dance studios and gyms closed during the MCO.

If the order is extended, however, she would have to resort to drastic measures such as selling her car.

She says a reduction in tax rates this year would be really helpful to freelancers like her who are in the same predicament.

Lim has resorted to offering free online ballet classes to her students to maintain her relationship with them.

SME Association’s Kang is concerned that the MCO may be extended, similar to what Italy is facing.

“In fact, I foresee we could be in a worse situation than that because people don’t seem to understand how serious this is.

“This year has so far been worse than last year in terms of business. Now, we will need to see how well Malaysia controls this pandemic and, if we manage to do it, the second quarter should be better,” he says.
 

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Labor Groups, San Francisco Push Bogus Taxpayer-Funded Survey to Support Anti-Gig Law

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A liberal advocacy group’s own researchers raised red flags about a taxpayer-funded study used to justify a union campaign against the California gig economy.

The San Francisco Local Agency Formation Commission helped fund a survey conducted by Jobs with Justice, a left-wing advocacy group largely funded by labor powerhouse Service Employees International Union (SEIU). The survey reported that 71 percent of gig workers in the San Francisco area work more than 30 hours a week and receive “poverty level” wages. According to the group’s website, Jobs with Justice planned to use the survey to “make policy recommendations and support organizing” among gig workers. The survey’s summary page emphasizes the need to enforce anti-gig labor laws.

Left-wing labor group Gig Workers Rising has used the survey to rally in support of California Assembly Bill 5, a controversial law limiting companies’ ability to classify workers as independent contractors. The group called the study “the most comprehensive survey of actual work done” in the gig economy. Internal communications obtained by the Washington Free Beacon, however, reveal that the survey was pitched to potential financial backers as “not representative,” and an academic researcher involved in the study voiced concerns regarding Jobs with Justice’s recruitment tactics.

While the study initially called for 1,200 survey respondents, Jobs with Justice narrowed the scope following the spread of coronavirus, pivoting to an online survey focusing on the pandemic that aimed to reach just 500 respondents.

“The goal behind an online survey of 500 workers, while not representative, would be to turn around data quickly … in order to inform current policy discussions,” an internal description of the updated survey obtained by the Free Beacon said. It went on to reach just 219 respondents.

Pacific Research Institute senior fellow Wayne Winegarden criticized the study’s methodology, calling the survey’s results “meaningless.”

“The survey is not representative of the intended population with the original goal of 500 responses,” Winegarden told the Free Beacon. “The study did not reach this amount, having only 219 responses. So, in no uncertain terms do these results represent the view of gig workers.”

The study also downplayed Jobs with Justice’s involvement in an attempt to bolster its academic appeal. While the published survey lists UC Santa Cruz professor Chris Benner as the project’s lead, Jobs with Justice executive director Kung Feng is described as “leading” the project in internal emails obtained by the Free Beacon. The emails also show that the online survey was written by the group’s research director, Erin Johansson. Benner merely “edited the wording in a few questions,” according to the internal communications.

Benner, who did not return request for comment, also raised concerns regarding Jobs with Justice’s incentive plan to provide a gift card to all survey respondents.

“One, I’m not sure where the budget for that comes from, and two, with an online survey, it leaves open lots of opportunities for people to game it,” Benner wrote in a March 17 email to Johansson.

Following the academic’s objection, Gig Workers Rising continued to advertise the survey in an April tweet by saying respondents would “get a $10 gift card.” A Jobs with Justice invoice for the study listed $45,181 in “survey costs,” including “incentives and app payments.” While the published study lists the gig economy companies each of the survey’s 219 respondents work for, internal data obtained by the Free Beacon shows that 91 of the respondents did not report their company, suggesting some may have been non-gig workers who completed the survey for the incentive.

The invoice was sent to San Francisco Local Agency Formation Commission executive officer Bryan Goebel, who solicited funding for the study on Jobs with Justice’s behalf, internal emails show. Reached for comment, Goebel said the coronavirus-related study “was never intended to be” representative and that $50,000 in taxpayer funds were used only for the “initial pilot survey” launched prior to coronavirus. The final study combined the results of both the pilot survey and coronavirus-related survey, a methodological red flag, according to Winegarden.

“In the midst of the survey being in the field, they stopped the survey, reworked it to account for the coronavirus, and then continued with the survey,” Winegarden told the Free Beacon. “These results from before and after cannot be compared to one another.”

Goebel also told the Free Beacon that Benner “was indeed the overall lead” on the study, adding that Jobs with Justice simply “led the outreach.” He did not address the fact that the coronavirus-related survey was drafted by Jobs with Justice.

Charlyce Bozzello, a spokeswoman for labor watchdog the Center for Union Facts, said activist front groups often misuse research to advance their ideological goals.

“For years, unions have used flawed ‘research’ to support their organizing campaigns, so it’s no surprise to see Jobs with Justice involved in this project,” she told the Free Beacon. “What is surprising is that the city of San Francisco and UC Santa Cruz would lend their names to this charade.”

Other gig economy studies dispute Jobs with Justice’s findings. A Cornell University study published Monday found that 96 percent of Uber and Lyft drivers in Seattle drove less than 40 hours a week. It further found that 92 percent made more than Seattle’s minimum wage of $16.39, with the media driver earning $23.25 per hour after deducting expenses.

Jobs with Justice and Gig Workers Rising did not respond to requests for comment.

Collin AndersonCollin Anderson is a staff writer for the Washington Free Beacon. He graduated from the University of Missouri, where he studied politics. He is originally from St. Louis and now lives in Arlington, VA. His email address is anderson@freebeacon.com.



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Why the Uber driver case has the potential to alter Canada’s gig economy forever

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Article content continued

Heller was a driver for UberEats who argued that he was an employee, not an independent contractor. That meant Uber owed him overtime, vacation, holiday pay, as well as other entitlements.

The Supreme Court didn’t answer the question of whether Heller and other Uber drivers were employees or not, so in that respect the real issue lies ahead. But it did remove an important roadblock, paving the way for a potentially $400 million lawsuit.

Tucked away in the contractor agreement that every Uber driver must sign before they can start working is an arbitration clause.

The clause required drivers to bring any problems to arbitration in Amsterdam, the Netherlands, and not to an Ontario court. The arbitration in Amsterdam would cost around $14,000 in administrative fees up front, as well as the cost of transport and legal representation in the Netherlands. Something no Uber driver could even possibly afford. Take Heller himself, who earns around $400 to $600 a week for 40 or more hours of work.

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Gig Economy Ballot Measure Fails Workers, Labor Groups Say (1)

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Daily Labor Report®

July 7, 2020, 8:45 PM

A California ballot measure supported by ride-hailing and delivery companies would lower workers’ wages and limit the power of legislators to institute new labor protections, according to a new report from two labor advocacy groups.

Proposition 22, known as the “Protect App-Based Drivers and Services Act,” will appear before California voters in November and is backed by $110 million from Uber, Lyft, Postmates, Instacart and Doordash. The companies say their workers want to preserve their status as independent contractors, while the National Employment Law Project and the Partnership for Working Families counter that the proposition would roll back existing protections under a state law giving certain gig workers…

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