Home / FT View/ Labour conundrums

Labour conundrums


Comments / {{hitsCtrl.values.hits}} Views / Thursday, 21 September 2017 00:00


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.    


Share This Article


COMMENTS

Today's Columnists

The SLFP’s crisis

Tuesday, 12 December 2017

The SLFP’s crisis is a crisis of ideological identity. It is also an existential crisis. The SLFP is divided into two tendencies, a Minority (‘Menshevik’) faction with 44 seats in Parliament, led by President Sirisena, not all of them elected,


Investments in listed securities and best practices to follow

Tuesday, 12 December 2017

Investment in financial instruments has never been easier than today. With the sphere of new technology, an investor is able to invest not only in his or her own jurisdiction but also in other countries’ financial markets. The capital market is an


Law, society, power and morality

Tuesday, 12 December 2017

On 28 November, I wrote a small op-ed which was received with mixed emotions, and hence I believe this follow-up will put the record straight. My sentiment throughout the article was that the state had the obligation to enact legislations which corre


Lloyd Yapa’s treatise on export competitiveness: A must reference book for SL economic policymakers

Monday, 11 December 2017

A pressing economic problem faced by the present Government, and any government that would come to power in the future, is the dwindling export earnings.


Columnists More