Getting the fight against poverty right

Household income and expenditure is perhaps the best and most transparent litmus test for an economy. Sri Lanka, caught between moderate real growth, low entrepreneurship, high inflation, complicated tariff systems and inconsistent policies, faces an extremely tough challenge in reducing poverty. However, one certainty is that poverty cannot be battled by reducing people’s economic freedom. 

Eight years after the war ended there is persistent poverty in the north and east while incomes remain far lower than in other parts of the country, the latest Household Income and Expenditure Survey (HIES) released last week shows. 

The median income in Sri Lanka is now Rs. 43,511. But in the estate sector, it is Rs. 29,134 – and this is much lower than the overall urban and rural sectors. But in the Mullaitivu, Kilinochchi and Batticaloa districts, it is even lower at Rs. 25,526, Rs. 27.050 and Rs. 28,297 respectively.

The HIES is produced by the Census and Statistics Department. Median household income, as distinct from average household income, is the amount which divides the household income distribution into two equal groups–half having income above that amount and the other half having income below that amount. On average, there are 1.8 income receivers per household in Sri Lanka.

This is more or less constant throughout the country. The median income receiver in Mullaitivu gets Rs. 12,864, which is almost half of what the national median income receiver gets at Rs. 23,260. The Jaffna District median income receiver earns Rs. 16,000, less than half of the Colombo District at Rs. 33,000.

Such low incomes are reflective of the high levels of poverty in the war-affected districts particularly Trincomalee, Batticaloa, Mullaitivu and Kilinochchi, with a double-digit poverty head count of 10%, 11.3%, 12.7% and 18.2%. In Kilinochchi, the poverty head count has almost increased by 43% from the 2012/2013 HIES survey when it was 12.7%.

It is interesting that this data comes in the backdrop of the Government taking, in some ways, the most serious step in limiting the economic freedoms of people. The key example of this is attempting to severely reduce the import of three-wheelers and increasing the driver age to 35 years. On the surface, proponents of this proposed policy argue that it will reduce road accidents and force youth to seek jobs in factories. But road accidents should and can be minimised through better law implementation and drivers above the age of 35 are not infallible. People should have the right to do whatever job they wish. Sri Lanka’s fleet of about 1.5 million tuk-tuks provide huge assistance to the rural economy and bridge a massive dearth in accessible transportation, especially for women. 

When an economy has affordable transport it benefits the entire economy. If companies want to attract more labour then it is their responsibility to provide attractive opportunities or diversify into areas higher up the value chain. Keeping people trapped in jobs they do not want is not the answer. 

Additionally, with few factories scattered across the island there is no guarantee that all youth will have work that suites them if these selfish and elitist policies come to pass. The public sector, which employs over 1.5 million people, could be reformed to provide extra labour but policymakers are wary of the potential political fallout from such a move.  

Sri Lankans are clearly moving towards ever higher aspirations and as such will want well-paying jobs. That is not a crime. The Government must ensure that its policies provide for these aspirations through investment and technology advancement rather than short-sighted protectionist policies.