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Labour conundrums


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It the battle to improve trade, labour intensive sectors are increasingly lobbying the Government to liberalise migration, so that Sri Lanka can import workers from neighbouring countries including India, Bangladesh and Nepal. But this issue needs to be tackled with extreme care. 

Several sectors such as apparel, construction, shipbuilding and plantations are among those hardest hit by the labour shortage and seek liberalization, according to National Policies and Economic Affairs Deputy Minister Dr. Harsha de Silva. But the situation is more complicated in Sri Lanka because as a developing country it also has a serious brain drain problem, which policymakers also need to tackle. 

Proponents of a closed labour market argue that priority should be given to stop brain drain as they are primarily professionals and would attract IT and other high-end service oriented industries to Sri Lanka. Stopping people from leaving is easier than getting new people. Allowing low-skilled migrant labour into the country is a challenge because while profits from them are private the socio-economic fallout would be public and would have to be borne by the State. 

Countries such as Malaysia that have long had open migration policies have found that not only does an influx of low skilled workers create social problems they also hamper labour moving up the value chain to create better employment opportunities. Indeed the Malaysian Central Bank has pointed out that some foreign investors eyes Malaysia simply because it is able to establish labour intensive industry there more easily than other destinations. This does not necessarily promote growth. 

Even if these concerns are set aside labour liberalization comes with a raft of reforms that would be politically difficult to implement. Policy makers should be aware that deregulation alone is unlikely to produce quick recovery in growth and employment. Most labour market liberalisation is initially contractionary. Easing the dismissal of staff and giving employers more freedom to impose hours, practices and pay are likely to make workers feel insecure and cut back consumer spending. Demand for labour needs to compensate, especially in a country where labour rights are highly prized. 

Several companies have already tackled the labour challenge by setting up their own training centers or linking with existing vocational and technical training institutions.  The success they have experienced makes a case for how deeply the local labour force needs to have their skills upgraded, particularly in semi-urban and rural areas. Stronger matching of training to jobs as well as upgrading the social acceptance and standards of employment would also address labour shortages. It would also encourage sectors to move up the value chain and adapt greater technological advances. Simply put some sectors will need to rethink their business, as has happened elsewhere in the world. 

Selective opening of the labour market may be possible but the Government would need a research and fact based set of policies to go about doing this. Sri Lanka’s unique mix of developing and developed country challenges along with high levels of debt means that there are no easy answers but it is necessary to make a start.    


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