Unemployment conundrum

Wednesday, 17 January 2018 00:00 - - {{hitsCtrl.values.hits}}

Droughts can have unexpected consequences for labour. After experiencing the worst drought in 40 years, Sri Lanka’s unemployment fell to 4.2% in the third quarter of 2017 from 4.5% a year earlier, largely due to a shift from low productivity agriculture to industry and services.

The survey by Sri Lanka’s statistics office showed that in absolute numbers unemployed persons were estimated at 358,350 in the third quarter, down from 389,594 in the third quarter of 2016. This was largely due to a sharp increase in the share and absolute number of non-farm jobs.

In agriculture, where productivity is low partly due to protectionism, workers fell to 1.983 million in the third quarter of 2017 from a year earlier. The share of employment in farming fell from 27.1% to 24.3%. This was mostly because men employed in agriculture drifted into construction and other jobs to send money home. However, this trend is unlikely to continue as these job seekers will return home once the weather returns to normal, reversing the productivity gain.

Industrial workers rose to 2.37 million in the third quarter of 2017 from 2.144 million a year earlier with the share of employment rising to 29.1% from 26.8%. Workers in services rose to 3.807 million from 3.686 million, with the share of employment rising to 46.6% from 46.1% a year earlier, showing absorption of new workers.

But for this trend to continue more progressive labour laws have to be introduced by the Government. Sri Lankans, especially older workers, are usually unenthusiastic about learning a skill to move up the labour value chain into trained work. This is further hampered when 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. There is also 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 Working in trades such as tailoring does not tick the aspirational box even though it may pay well and changing this outdated legislation so that trades also have access to the same perks and salary scales of professionals is an important first step to shifting their social acceptance.

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.

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.