Gig-economy and knowledge society:: Avoiding the Middle-Income Trap

Abstract

With the advancement of digital technology and amid the Pandemic of Covid-19, the way people work is changing. Industry structures and business models are being disrupted by innovation in new products and services, changing cost structures, and lower barriers to entry. Many people work as freelancers, self-employed, or also known as gig workers. In such a gig economy, people have more control over the way they work, yet they receive unstable income, no benefit, decreasing job security, and stalled careers if they do not improve their skills. Surviving in the gig economy also requires competency in specific skills which can get very competitive. For skilled workers, the gig economy will provide a benefit compared to the unskilled workers. People need to update their skills and knowledge when it becomes obsolete. However, the educational and social systems in Indonesia do not sufficiently prepare for the gig economy. The objective of teaching and learning is still based on how the student will work as a paid worker after they graduate. Repeated works will be replaced by the machine, therefore, critical thinking, liberal art education, long-life learning, and worldwide networking among educational institutions are among policies that can be implemented to maximize the benefit of technological advancement through education. Using Principal Component Analyses (PCA) for dimensionality reduction, this research indicates that Indonesia has high discrimination against minorities, high corruption, lack of freedom of the press. These factors may hamper the transformation into the knowledge society since opportunities will not be distributed evenly. Results from the PCA also show that Foreign Direct Investment (FDI), budget on research, logistics performance, number of students studying abroad, and collaborative research are not the main factors for development in Indonesia. Therefore, Indonesia needs to reform its education systems to be well suited for the knowledge society, provides long-life learning for the gig workers, and integrate into the Global Value Chain (GVC) to avoid the middle-income trap.