Liberalisation and jobs

As Sri Lanka gears up to improve exports and investment, launching a five-year National Export Strategy this week, the private sector has raised concerns about labour shortages and policies to tackle the issue.  

Hailing the new export strategy, Free Trade Zone Manufacturers’ Association (FTZMA), representing investors in Sri Lanka’s Katunayake export processing zone, has pointed out that about 5000 vacancies exist. Separate surveys conducted have shown that as many as 500,000 vacancies exist in sectors as varied as construction and security guards, but there are no takers. This makes the challenge of policymakers even more difficult as the issue is not just finding jobs but creating jobs that pay well enough to meet the aspirations of locals in order to encourage employment.     

Even though some industries such as construction are faced with labour shortages, pundits feel that there is sufficient labour in Sri Lanka. However, the challenge is moving labour out of unproductive segments, such as agriculture, and allow people to seep into gainful areas, such as industries and services. However, this cannot be done through draconian rules such as prohibiting people from becoming three-wheeler drivers or doing the job of their choice. There are deeply entrenched reasons as to why labour remains in unproductive areas, supported by subsidies in the agri-sector and perks such as a non-contributory pension in the public sector.

There are also practical reasons. Prospective job seekers who usually move to urban areas looking for work find that they can save very little from their salary once rent, food, utilities and transport are covered. One area in Sri Lanka that has a low productive labour force is farming which, despite contributing only about 7% of GDP, still holds about 28% of the workforce. During drought and other times of stress, members of farmer families travel to nearby towns to find jobs as construction workers and return once their home economic situation improves. There is little incentive, especially for women, to remain in centres of economic activity for a prolonged period of time.

Sri Lanka’s policymakers have the unenviable task of trying to bridge aspiration with existing economic realities. The brutal truth is that workers want well-paying, socially acceptable jobs. Some even prefer security and respect above cash, which is why public sector jobs are in high demand. Working in trades or industries does not tick the aspirational box even though it may pay well. 

The situation is worsened by the lack of a mechanism to match prospective employees with jobs and provide them with the required soft skills essential to work in the private sector.  The situation is not helped by a blue collar brain drain where technically skilled labour seeps out of the country for better paying jobs overseas. One option to encourage workers out of the public sector may be to offer transferable pensions that can be maintained outside of the public service, and provide equitable retirement benefits for employers in both sectors. 

Policies to tackle these issues demand long-term strategies that are inherently complicated. As technology improves, some of these jobs will disappear while most others will change. In a world where the value of labour is shifting rapidly, policymakers need to at least understand the complexity of the challenge they face and find the right mix that will suit Sri Lanka.