A proposed increase in fares for ride-hailing drivers in Indonesia has been opposed by various parties. This has led to the normalisation of unsustainably low earnings for such drivers.
On 4 August 2022, the Indonesian Ministry of Transportation announced an increase in fares for ride-hailing drivers. It was rejected by various parties, so the implementation of the increase in pay for platform drivers continues to be delayed. They reasoned that the increase in fares which were paid for by platform drivers would cause inflation, harm consumers, and make it difficult for drivers to get orders.
The practice of lowballing platform drivers has increasingly been carried out during the Covid-19 pandemic. Platform companies operating in Indonesia, such as Gojek, Grab and Maxim, can do so because most platform drivers in Indonesia are currently classified as independent contractors and not salaried employees. This means that platform companies are not obliged to pay drivers according to the minimum wage.
Given that there is no minimum wage or income guarantee, platform drivers are dependent on fares and the number of orders from consumers. There are two forms of regulation regarding the fares or payments received by drivers. First, ride-hailing services (passenger trips) are regulated by the Ministry of Transportation. The ministry determines the fares based on the minimum payment that the driver must receive per kilometre (km) and the basic fares for trips up to 4km.
Second, the delivery of food or goods (courier delivery) is regulated by the Ministry of Communication and Information Technology. In contrast to ride-hailing services, in food or goods delivery, the determination of payment for drivers by the Ministry of Communication and Information is left to the market mechanism. This rule is set with the consideration that perfect competition will lead to fares that are beneficial to drivers, companies, and consumers.
In practice, the two forms of regulation do not provide a decent rate for platform drivers. As a result, even though the drivers work more than 11 hours a day, their net income is still below the minimum wage in DKI Jakarta of 4.4 million rupiah (US$295) in 2021. During the pandemic, even when order demand was higher, their income fell by 67 per cent.
In the food and goods delivery services industry, platform companies compete to lower fares for drivers to provide lower prices to consumers. Fares for platform drivers in this service are only paid based on the delivery distance, which is between 1,500-2,000 rupiah per km. Meanwhile, for ride-hailing services, fares are reduced to the lowest limit set by the government. The preset minimum fares for platform drivers on ride-hailing also tend to be very low because it is only calculated based on the distance per km, which is 1,800-2,250 rupiah per km.
Responding to protests by platform drivers, the Ministry of Transportation has finally raised fares for ride-hailing services. Through the Minister of Transportation Regulation Number 564/2022, the fare per km is increased (only in Greater Jakarta) from 2,250 to 2,600 per km. Meanwhile, the fares per km in other areas did not increase; the basic rate now applies to rides up to 5km, rather than 4 km.
Although the increase was small, some parties, such as members of the House of Representatives, economists, and several driver organisations, rejected the increase. According to members of the House of Representatives, the increase in pay for platform drivers will make it difficult for people who are still affected by the Covid-19 pandemic.
The reality is that the increase in fares for drivers providing ride-hailing services will not lead to increases in costs for consumers – provided platform companies lower the charges levied on drivers.
To some economists, raising rates on ride-hailing services could trigger inflation, which would hinder residents’ mobility. The same message was conveyed by several platform driver organisations, namely Gaspol and Garda. They fear that consumers would no longer want to use ride-hailing services, thus affecting the income of drivers. One platform driver organisation, namely GoT, predicts that the fare increase will increase the price paid by consumers in Greater Jakarta by about 40 per cent, from 14,000 rupiah to around 19,000 rupiah (for trips up to 5 km). This would discourage consumers from using ride-hailing services.
The reality is that the increase in fares for drivers providing ride-hailing services will not lead to increases in prices paid by consumers – provided platform companies lower the charges levied on drivers. This is true, if charges levied on drivers are reduced from 20 per cent to 7 per cent and platform fees charged to consumers (which go entirely to the companies) are eliminated.
In the context of Greater Jakarta, before the fare increase, the cost to consumers on average was 14,000 rupiah for rides of 0-4 km. Platform drivers earned 9,600 rupiah in fares, and the platform company received 4,400 rupiah (a 20 per cent charge and platform fee of 2,000 rupiah). Under a proposed fare regime, a higher net-fare received by the driver (13,000 rupiah, for rides between 0-5 km) would not lead to higher prices to be paid by consumers. These prices will remain around 14,000 rupiah when the platform company levies a lower 7 per cent charge.
The truth is that parties that oppose higher fares for platform drivers fail to question platform companies seeking to maximise profits by imposing additional fees on consumers. The refusal to increase payments to platform drivers shows the normalisation of unsustainably low fares for drivers, whose rights to a decent living are being violated.
Arif Novianto is Junior Researcher at Institute of Governance and Public Affairs, Universitas Gadjah Mada.