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Daily FT-Colombo University MBA Alumni Association forum shares key insights from public-private sector experts
Labour Minister John Seneviratne
By Shehana Dain
‘Key Reforms in Labour & Human Capital to Unleash Sri Lanka›s Potential’ was the focus of the first technical session of the Daily FT-Colombo University MBA Alumni Association organised full day forum titled ‘Reforms: The Way Forward’ last week.
Emphasising the importance of the initiatives, keynote speaker Labour Minister John Seneviratne outlined the importance of organisations concentrating on how to increase productivity as the industry faces a twofold effect from an ageing population and a shrinking workforce.
Stressing on the rapidly-declining fertility rates, he said that it not only lowers the relative share of young individuals but also has a negative effect on growth in terms of productivity on macro and micro levels.
“If productivity declines with age, a decline in quality adjusted labour supply could result. It is critically connected with productivity changes over the life cycle, especially in the older stages of working life.”
Sharing his thoughts on how to fix the issue in the long run, the Minister said: “Challenges of the ageing population to be faced at enterprise level are associated with number of factors such as productivity, recruitment policies, training and retirement policies. Therefore improving productivity of the labour force through increased investment in human capital and technology emerges as a leading policy alternative to the possible negative impact of population ageing on economic growth and social development. This could be applied not only at the macro level but also at the enterprise level as well.”
Pondering another grim outcome of the ageing population, Seneviratne highlighted that it would mean more social protection.
Sri Lanka to date has not relied on any formal social insurance mechanisms for social protection. Where benefits are available, they are provided either through public funds – that is taxation – or through employer mandates.
“Addressing these gaps which are widened by the ageing population, an adoption of the new methods of provision such as insurance schemes and contributory schemes are essential,” he added.
Reforms in education for a productive work force
Elaborating on youth unemployment in Sri Lanka Seneviratne noted that the main reason behind the concern is the gap between education systems and the world of work – a problem that has remained unchanged even after 44 years.
Citing economical findings, the Minister said that certain economists argue that the root cause is the skill deficiency in Sri Lanka while others say it’s due to over-education in some areas and under-education in other areas. However, he believes that the skills gap significantly exists in relation to soft skills such as communication, self-motivation, leadership and dedication.
“Therefore my personal opinion is that the reform is required in education and training in order to include soft skills module, at least in the areas of higher education, vocational and technical education and training. Another point that I would like to highlight is that our human resource development policy has not been driven by the economic policy. Hence reforms are required to initiate it. In this endeavour the support of the private sector is important,” he said.
Seneviratne added: “Our country has experienced major structural changes in the past decades, which present it with substantial challenges. Following the transfer of power to elected governments in the 1930s, we invested heavily in several initiatives focusing on social development. Investments made on education and health care are classic examples in this regard. However, the fact that our country is facing numerous challenges has to be accepted.”
“We invested substantial resources on education in order to provide free education for all. This had a significant positive impact on socio-economic development. That is why Sri Lanka is considered a country with an educated workforce though youth educated unemployment in our country is about 16%. This is even higher among educated female youth.”
“Female labour force participation has been stagnating for decades at a rate of around 34%. The high education level and low fertility rates among females is kind of a puzzle. Famous economist Dudley Sears, who visited Sri Lanka in 1972 in order to write a report to the International Labour Organisation on youth unemployment, said that the reason for high youth unemployment in Sri Lanka was the gap between education systems and the world of work. Almost 44 years have passed since then but the problem remains unchanged.”
“Some economists argue that youth unemployment exists because of a skills mismatch, youth waiting for white colour jobs, slow economic growth etc. Others, for example Martin Rama from the World Bank has argued that there was no skills mismatch in Sri Lanka, except over-education in some areas and under-education in some other areas.”
“However the reality is that organisations are facing the problem of skill deficiency. This is common for both public as well as private organisations. I think a skill gap significantly exists in relation to soft skills such as communication, English language, team work, self-motivation leadership, managerial skills, commitment, dedication etc.”
“Therefore, my personal opinion is that the reform is required in the education and training system in order to include soft skills modules at least in the areas of higher education, vocational and technical education and training.”
“Another point that I would like to highlight is that our human resource development policy has not been driven by the economic policy. Hence reforms are required to initiate it. In this endeavour the support of the private sector is important.”
“Population is another challenge that we have to deal with. Recent declines in fertility rates and increases in life expectancy have produced a significant shift in the global age structure. It has been forecasted that the retirement of baby boomers and the increase in the share of elderly in the population will create economic stresses beginning in the second decade of the twenty-first century.”
“Does population ageing matter? If it does, then why and how does an ageing population matter for the economy and society of Sri Lanka? And how does population ageing affect productivity at the micro and the macro-level?”
“An increase in life expectancy affects the relative share of young and old individuals in the labour force. It does not imply that the absolute number of young individuals declines, and in fact an increase in life expectancy could amount to an increase in labour supply. So it is a positive factor for economic growth although it is a negative factor for social security systems.”
“On the other hand, a rapid decline in fertility rates lowers not only the relative share of young individuals.
“So it could be a negative factor for economic growth. Moreover if productivity declines with age, a decline in quality adjusted labour supply could result. It is critically connected with productivity changes over the life cycle, especially in the older stages of working life.”
“Challenges, of the ageing population, to be faced at enterprise level are associated with number of factors such as productivity, recruitment policies, training, and retirement policies. Therefore, improving productivity of the labour force through increased investment in human capital and technology emerges as a leading policy alternative to the possible negative impact of population aging on economic growth and social development.”
“This could be applied not only at the macro level but also at the enterprise level as well. The serious issue that Sri Lanka has to face with ageing population is the social protection issue. Sri Lanka has not relied on any formal social insurance mechanism for social protection. Where benefits are available they are provided either through public fund that is taxation or through employer mandates.”
“Health care, education, pension poverty alleviation funded by the Government and EPF and ETF contributions, employment injury compensation and maternity benefits which are mandatory for employers are examples in this regard.”
“Therefore, addressing these gaps which are widened by the aging population, an adoption of new methods of provision such as insurance schemes and contributory schemes is essential.”
“Let me say something about labour regulations and union influences on the economy and enterprises.
There are two lines of thinking in this regard. One line of thinking is that labour law in Sri Lanka is over regulated. According to other lines of thinking, rather, from a trade union point of view, labour legislation in the country is not strong enough to address the violation of the rights of the working people.”
“The employers are mandated for the payment of EPF, ETF, gratuity, termination, maternity benefits and employment injury. In order to avoid the burden on employers, a comprehensive social insurance scheme has to be established.”
“You may be aware that Sri Lanka has ratified 41 International Labour Organization Conventions including eight fundamental conventions. We are bound to implement the provisions of those conventions in law and in practice. So that reforms are required to improve productivity, create new employment opportunities while protecting and respecting labour rights of the workers.”
“I strongly believe that dignity and recognition of human capital should be respected. One way of doing so would be the respect for rights of the workers. Organisations should not think that labour regulation are mere rules but are rights of workers.”
“Dignity and recognition for human capital can be ensured through Integrated Management by objectives at enterprise level as well. The traditional MBO (Management By objective) method which focuses on planning, organising, leading and controlling does not support to create a good worker. It does not support the organisation to develop the qualities or attributors of human resource such as thinking ability, personality, basic values and emotional intelligence. Accordingly, policies of business organisations must focus on sustainability of the business through developing their human resources.”
DFCC Bank was the strategic partner of the full-day forum.
Pix by Upul Abayasekara and
Gitika Talukdar
Q: What are your thoughts on reforms and on policy?
Gotabaya Jayarathna: If we don’t understand the global trends we will not be able to develop or decide on our national policies. When it comes to labour policies in Sri Lanka, we have 41 ratified International Labour Organisation Conventions including eight fundamental convections. We implement 64 labour enactments in Sri Lanka to ensure labour rights and industrial peace. We also monitor 72,000 companies whether they are complying with the labour rights.
Dinesh Weerakkody: The biggest issue we have is the people coming out from secondary education and the statistics are quite frightening. Only 25% attend higher education of which a large share is in arts and relative to science and engineering, the arts faculty is three times bigger. Most of our external courses and vocation courses are not really relevant for today. For example we need to generate 350,000 by 2020; the hotel school and all these other schools can deliver only 14,000, so how do we bridge this gap? Another part I want to highlight is the limited involvement of the private sector and we are now trying to get them to involve with us to formulate a policy. On the policy side lot of things have happened and there are so many good ideas floating around, now the time has come to implement this.
Q: Is the private sector ready to face these challenges?
Ishan Dantanarayana: I can assure that the knowledge of our labour force is very high but what’s lacking is the skills gap. If you take Australia for example the education is not really based on knowledge but mostly focused on jobs unlike ours which gives prominence to knowledge. The whole tertiary education situation boils down to whether we have a holistic get together of these institutions to see if we achieve what we want as a country in terms of the skills gap.
Our retirement age in Sri Lanka is 55 while in most countries it’s 65; there is a good segment of people between the ages of 55-65 who can add a lot of value to the economy, but how do we leverage this? The Budget speech of the Finance Minister of Singapore and the development of human resources was given so much prominence to achieve growth. People talk a lot about BPOs but it requires large numbers which we don’t have; we can look into KPOs and be a niche player and if we go into that we can have high margins and good employment in one hand. We also have to change the dignity of job roles and how we define it not only in workplace but also in the courses we do.
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Q: What is the perception of trade unions with regard to reforms?
Wasantha Samarasinghe: There is undeniably a problem when it comes to human resources in our country. Firstly we should have a plan as to where we are going and see how the public and private sectors can support the cause. We as trade unions see that there is no plan ahead; especially just a few months after the Budget was passed, when the country was ready to operate on that basis, they bring in some other new law or tax every other day. This affects the whole economy. The working class expects favourable reforms in this regard.
The Government was talking about giving a million jobs but how and on what basis? And also who will facilitate this? Will it be the public or private sector? Why send mothers to the Middle East where working conditions are horrible? We should aim to send trained personnel, be it nurses, doctors, engineers or technicians, not mothers, so that our country can survive through them. These are just a few pertaining issues for which no proper plans have been made. If we start running without being able to walk, we cannot run for long.
Q: Can the public sector accommodate the Government promise to create one million jobs?
Dinesh Weerakkody: The country needs a strategy; for example, we have a helicopter view that we should be a 100 billion economy by 2020, but how do we get there? What are the sectors we should focus on? We need to have a master plan and it should be communicated to all parties including the trade unions. The Prime Minister is looking at holding a human capital learning conference in September and bringing in a few experts from overseas and they are going to come out with a four-year master plan for Sri Lanka to identify the talent requirement. This will be done consulting the private sector and trade unions. I believe the public sector cannot generate any more jobs, maybe another 20,000 maximum in the next four years is going to come from the private sector. So if we don’t facilitate this and provide the regulatory framework required to motivate them to invest, we are not going to get too far. My conclusion is that the one million jobs should come from the private sector.
Q: Have trade unions been labelled only as demanders? How do they give back to their companies?
Wasantha Samarasinghe: When we work with trade unions, a company has their own agenda as do the labourers. The issue occurs when harmonising these agendas of the two parties. We believe that attitude changes should happen from both sides because there are some issues which could be solved very easily but get dragged on and ends up in strikes and company as a whole losing in the process. We also believe in a win-win situation where we contribute for what we get from our companies. Labourers are not like before; their mindsets have changed to look at issues in a more proactive way.
