Showing up assumptions

Productivity is an essential component of economic growth. Therefore, it is not surprising that much attention is usually focused on increasing productivity, especially since it is a critical part of making an economy more competitive. However, when productivity losses are assumed rather than backed up by research and data, the results can be a daunting loss of economic freedom. 

Last year, some segments of the Government proposed limiting licences to young three-wheeler drivers who wished to operate as taxis on the assumption that youth were embracing a job that was dismissed as having low productivity, even though low cost transport can be a boon to some segments of the economy, particularly in encouraging women to participate in the workforce. 

These self-styled pundits insisted that it was essential to regularise the industry and slap a 35-year threshold to force young people into industries and factory floors where companies were struggling to find cheap labour. Fortunately, sense prevailed and this proposal was not implemented, and recent research shows just how misguided such a policy would have been had it been allowed to be carried out. 

Research done by the Institute of Policy Studies (IPS) has shown that only 47% of the over million registered three-wheelers are in fact used for hiring, with most drivers being middle-aged. The data has also shown that for 12% of drivers the taxi service is a secondary occupation with many only taking it up after other opportunities have not worked out.

A high number of drivers, about 75%, had not passed the Ordinary Level exam and have few options other than to lease a three-wheeler. When comparing low-skilled incomes, a three-wheeler driver takes home a higher earning than many of his counterparts, making the sector more attractive. However, increasing taxes on basic vehicles like three-wheelers actually moves this option further away from the neediest segments of society. Higher taxes means that younger people cannot afford to purchase a three-wheeler with research showing that youth operating three-wheelers has also reduced from 2013 to 2016.   

Youth unemployment in Sri Lanka is high. Last year, it was estimated that 21.8% of males between 15 and 24 years was unemployed, and 6.9% between the ages of 25 to 29. In comparison, only 0.8% of those over 30 were unemployed. Sri Lanka’s youth normally enter the workforce later as completing degrees in local public universities tends to be a longer process than elsewhere in the world, but even taking this into consideration, youth unemployment has remained stubbornly higher than the 4.4% national unemployment rate. 

The researchers observe that on this basis, “it can be estimated that there are only around half a million tuk-tuk drivers providing a taxi service in the country – much less than commonly assumed”, and point out that they make up only about 6% of the national labour force with many of them engaging in two jobs. This research is a fantastic example of why policy decisions have to be research- and not assumption-driven. The issue of three-wheeler drivers was amplified to the extent that it was repeated even at major conferences in Colombo and entered into social discourse as a fact. 

Such exaggerations can limit the economic freedoms of the most vulnerable segments of society and cost an economy dearly. What stakeholders and the Government should be focused on is creating jobs that meet the aspirations of youth.