Inclusive policies

As Sri Lanka moves towards 2019, economic and political goals are starting to converge, partly because of elections in the New Year. Economic imperatives rise to the surface when elections come around, largely because the measure of political competency is often measured by economic gains. When people feel their wallets are constrained, the reaction is often political.

This is why, during election years, politicians are tempted to slash taxes and give out subsidies or other benefits for the masses. It is especially effective given the income dynamics of Sri Lanka, where inequality remains significant. However, thinking of Sri Lanka’s marginalized in purely rural and urban terms is also misleading. 

Sri Lanka’s richest 20% enjoy more than half the total household income of the country, while the poorest 20% get only 5%. The situation of the poorest 10% of the households is worse, with the share of household income being just 1.8% or less. Furthermore, income gaps between different regions is even wider than the income inequality at the national level.

As observed, in the Colombo District the ‘richest group’ enjoy 72.9% of the district’s total household income. More than 41% of the households in this district are in the ‘richest group’, with a monthly income of Rs. 81,372 or more. The other districts with a high share of household income enjoyed by the ‘richest group’ are Gampaha (53.3%), Kalutara (54.5%), Polonnaruwa (51.6%) and Puttalam (50.2%). 

While these numbers are concerning in themselves, the fact that the “richest” group is defined as earning Rs. 81,372 also seems nominal, given the cost of living. Many people would argue that Rs. 81,000 is insufficient for a family of four to live on, even though they are categorized as being in the “richest” category. 

The highest percentage of households falling into the ‘poorest group’, with a monthly household income of less than Rs. 36,500, is in the Mullaitivu District (71.6%), followed by Kilinochchi (66.6%), and Batticaloa (65.2%). On the other hand, only 16% of households in the Colombo District fall into the ‘poorest group’. But in absolute terms, Colombo has more than five times the number of households in the ‘poorest group’, compared to the corresponding number in Mullaitivu. This shows that looking at the problem from a purely rural and urban perspective is unhelpful, and policies need to target people across the country. 

Government hand-outs, while expected and attractive, nonetheless do little to mitigate income disparity in the long term. If elections made a substantive change, then income disparity would not have remained unchanged over four decades. The new Cabinet has already said they want to implement people-centric policies, but these generally require much political will, and political parties rarely dare to embark on them during an election year. If they are serious, then policies need to be aimed at a range of reforms, including better subsidy targeting, higher allocations where necessary, agriculture reform, land reform, and focus on providing services-related employment opportunities. 

Sri Lanka’s income inequality is also closely linked to education and skills gaps, as well as the changing aspirations of the people. The latter is perhaps the hardest to change about people who prefer to get a government job, rather than take the long and difficult path to genuinely reduce income inequality.