Policies for job growth

The new President and Cabinet have many challenges before them as they work to establish a caretaker administration till Parliamentary Polls next year. One of the key challenges they will face will be increasing the number of jobs that meet the aspirations of the Sri Lankan public. 

A new report released by the International Labour Organisation (ILO) said that more than two-thirds of total employment in under-developed and developing countries are provided by small economic units, which means policymakers must treat these units as a central part of economic and social development strategies. 

Such an approach is a must for low- and middle income countries where the majority is employed in small economic units. In addition, three of the United Nations Sustainable Development Goals (SDGs) depend on employment opportunities — eradicate poverty (SDG 1), full and productive employment and decent work for all (SDG 8), and reduce inequality (SDG 10). 

The ILO used data from 99 countries to conclude that there is a negative correlation between countries’ level of per capita GDP and employment share of the self-employed and micro and small enterprises. This means that countries in lowest income level groups have almost 100% self-employment. 

Self-employment is the highest in South Asia (66%), followed by Sub-Saharan Africa (50%), and the Middle East and North Africa (44%), the report found. Around 85% of workers in India are self-employed or do casual work, and 73% of non-agricultural workers in Bangladesh were self-employed, according to the report. Sri Lanka has similar dynamics where 24% of the workforce is employed in low productivity agriculture with a large portion of that being in the informal sector. This has led to labour challenges in more productive segments such as industries and services. 

But, the developed world is different. Europe and Central Asia have the largest share of agricultural employment in the formal sector, which is more than 30%. In East Asia and the Pacific, it is more than 20%, highlighted the report. In Sub-Saharan Africa and South Asia, self-employment alone accounts for more than half of the total agriculture employment. 

The report also underlines an inversely proportional relationship between countries’ economies and the nature of employment opportunities. The share of the self-employed in low income countries is almost five times the share in high income countries, it added. Similarly, the employment share of micro-enterprises is much higher in low- and lower-middle income countries than in upper-middle and high income countries.

But, the employment in small enterprises (10-49 employees) is more in high income countries, it added. Employment share of small enterprises is just 3% in low income countries, while it goes up to 25% in high income countries. The employment share of medium-sized and large enterprises increases with rising country income level. 

This trend can be seen in Sri Lanka where more than 85% of companies are categorised as small and medium enterprises (SMEs). This has also created the challenge of understanding how to grow more SMEs, particularly in the services sector that provides better-paying jobs. Sri Lankan workers clearly prefer jobs with social security and permanency as seen in the eternal attraction to public sector employment. This puts policymakers into a new quandary of how to create jobs that pay better but also provide social safety nets such as pensions. The dignity of work is where the world is evolving and Sri Lanka will have to find ways to keep in step if it wishes to see genuine economic growth.