Growth disparities

The share contributed to national GDP by Sri Lanka’s provinces provide interesting reading. The latest data released by the Central Bank shows a continuation of the trend of the Western Province declining its percentage with only 37.2% in 2017. Central, North Western, Southern and Sabaragamuwa Provinces round up the top five. Yet the real story is in services.

Despite the impression that services are the highest in the Western Province, it is only at 57%, with both North Central (62.8%) and Southern (60.1%) seeing a steady growth in services. The contribution of services to provincial GDP has become so important that eight provinces have seen them pass 50% with only Uva lagging behind at 37.8%. Even in all key agriculture provinces, services account for more than double what unproductive agriculture provides, showing the benefit of promoting services.

Understandably, agriculture remains significant everywhere except the Western Province (2.1%) and is deeply linked to both industries and services. But the shift to services could provide the much-needed answer to entrenched inequality in the provinces where investment providing white collar jobs is a significant bottleneck to encouraging labour to join the private sector. 

Agriculture, which still employs about 27% of Sri Lanka’s workforce, even though it contributes to only about 7% of the country’s GDP, needs reform to improve living standards of rural people. It is therefore a key political battleground during elections but the dynamics of these regions are sometimes overlooked.          

In the case of Sri Lanka, given the aging population and higher education dynamics, people of working age have shown decreasing interest in manufacturing jobs and are clearly moving to services.

The first Labour Demand Survey (LDS) conducted by the Census and Statistics Department (CSD) earlier this year showed nearly half a million vacancies in the private sector. A large portion of these jobs were found to be in the routine and non-routine manual jobs, but most of Sri Lanka’s jobseekers prefer white-collar or professional jobs. This situation has given rise to a sectoral mismatch between labour demand and supply. 

The LDS found that of 497,302 vacancies in the first half of 2017, the highest job availability was for sewing machine operators, security guards, and shop assistants. These vacancies showed a demand for middle- and low-skilled jobs involving manual tasks that are perceived as unattractive by the general public as they usually combine long hours with limited salaries. Competing sectors, such as tourism and IT, offer more competitive wages, better working conditions, and social recognition.

Workers in Sri Lanka are also increasingly focused on career progress and non-financial rewards. Unfortunately, only 7.2% of private sector vacancies are in high-skilled occupations, according to LDS data. This is compounded by a shortage of critical soft skills such as English and IT knowledge that hamper recruitments to high-skilled jobs. This desire for aspirational services sector jobs could also be a driver for demand of public sector jobs.

Policies clearly need to look at automation for low-skilled, labour-intensive work in factories with the possibility of migration for these kinds of jobs allowing labour to move up the value chain. A third need is to provide soft skills training so seekers of high-skilled jobs can, in fact, secure them. Lastly, Sri Lanka needs to concentrate much more on R&D to drive innovation-based job creation.