Salary problems

Jobs are often seen as a tangible representations of economic growth. But as countries seek to develop, it is necessary to have well-paying jobs. In this, Sri Lanka has struggled, with many workers still preferring public sector employment and the latest Central Bank Annual Report indicates why the pandemic may make this desire worse.  

The pandemic impacted salaries in dualistic ways last year, with real wages of formal private sector workers showing a reduction of 4.2% but in contrast nominal wages of public sector workers increased 9.2% and real wages 2.9% in 2020. 

Overall, nominal wages of informal private sector employees, as measured by the annual average change in the informal private sector wage rate index (2012=100), increased by 3.3% in 2020 compared to 2019. Meanwhile, real wages of employees in the informal private sector decreased, by 2.7% in 2020 compared to 2019. 

The situation was worse for workers whose salaries are dependent of Wages Boards with only a 0.2% increase last year. These include plantation and other trade category workers who often have to wait many years before their requests for salary increases are implemented. 

The pandemic has made jobs scarcer and as a consequence salaries have also taken a nosedive. It is typical to see employers demanding applicants work six days of the week for a salary as low as Rs. 35,000. Many others are willing to work for pay just above the basic wage. With many people having depleted their savings the reliance on wages has become more acute.

Sri Lankans typically also save less due to a complex combination of low salaries, high cost of living, aspirational attitudes and rupee volatility. The pandemic has reinforced employment as a source of security. In such an environment it will be even harder for the Government to resist calls to expand the public sector. But the case to continue reforming it definitely stands. 

But graduates who seek private sector employment also do not have an easy time. There is also a large number of informal workers in the private sector as well and they struggle with the few social safety nets available to them.   

Many employers say today’s university graduates don’t quite measure up. In survey after survey, they rate young applicants as deficient in such key workplace skills as written and oral communication, critical thinking and analytical reasoning. As the job market gradually improves, businesses say they aren’t finding enough savvy graduates who can start contributing from day one on the job. This has created a difficult labour provision gap in Sri Lanka where labour is hampered from freely moving up the value chain. 

Other countries have addressed similar situations by reforming their education sector and establishing policies that address their labour market in a holistic manner. Some introduce flexible retirement benefits that can be shifted from the public sector to the private sector to encourage movement away from the public sector. 

The pandemic could be an opportunity to meaningfully effect change to give labour its true value. This means empowering workers and enabling them to make decisions that best suit their lives. It would also benefit the Government and the public who could use tax revenue to fund education, healthcare and housing rather than on public sector salaries.