The ‘Just About Managing Class’: The challenge of Yahapalanaya

A poor child begging for food on the street. Sri Lanka has done well in many areas such as raising incomes of individuals and maintaining a substantial growth rate over many decades. However, the fruits of economic growth have not been shared equitably among the population – Pic by Shehan Gunasekara

By Harindra B. Dassanayake

If the Unity Government was talking democracy for the last two years, it seems to have changed priorities now. So far, the relative expansion of the democratic space is welcome but the achievements are not definitive or irreversible; far from it. Yet, President Sirisena was right when he announced recently Friday (25) outlining his vision for 2017, the year of poverty alleviation, at a high-level meeting held at the Parliament that “it is upon the foundation of economic achievement, that all other forms of success can be built”.

His statement identifies a hierarchy of priorities and economic achievement is at the top of it. The President’s remark echoes the contemporary trend where economic distress translates into political unrest as seen in Brexit and the American presidential election. In Sri Lanka, poverty has been a key concern of all governments in the last three decades. Many programmes have been launched and much has been achieved. Yet, there are serious structural issues, which President Sirisena will have to focus on, if he is serious about making things work for those ‘left behind’ by economic growth and those who are ‘Just About Managing’ (JAMs), as British Prime Minister Theresa May recently stated. 

The JAMs of Sri Lanka

The journey so far has been a story of smiles and tears. Sri Lanka’s poverty reduction measures have been moving in the right direction. Over the last three decades, poverty has gradually reduced to 6.1%, going by the Official Poverty Line (OPL) which is around $ 1.5 per day per person when adjusted to Purchasing Power Parity (PPP). 

Our OPL is moderate by regional standards. Bhutan and Maldives have higher standards for poverty and we’re slightly above India and in par with Pakistan. For a middle-income country of roughly $ 4,000 per capita income (PCI), this may not be the right bar for measuring poverty. Another two measures usually adopted by middle-income countries is the $ 2.5 and $ 4.00 per person per day PPP. That corresponds to respectively Rs. 6,100 and Rs. 9,750 approximately. 

Translating the figures into a family context, a four-member family needs a monthly family income of Rs. 25,000 to stay over the poverty line. One-third of the population lives below that mark. If the higher bar is applied, a four-member family needs a monthly income of Rs. 39,000 to stay afloat. This standard leaves half of the population under poverty, including most low raking employees in the public and private sectors as well as those who are self-employed.

In short, many who stay above the Official Poverty Line don’t actually fare well in real terms. They are the ‘Just About Managing’ class; and it is the majority. They have managed to keep their noses just above the water and may lose poise and sink any time. And they are desperate. Why not?

The broken bridge between the rich and the poor

Sri Lanka has done well in many areas such as raising incomes of individuals and maintaining a substantial growth rate over many decades. However, the fruits of economic growth have not been shared equitably among the population. Writing to this paper on 12 May, W.A. Wijewardena showed how post-independent Sri Lanka has stubbornly remained a country with a high income disparity (http://www.ft.lk/2014/05/12/sri-lankas-growth-paradox-when-poverty-yields-income-gap-holds-stubbornly/). 

Sri Lanka is a country where the share of the richest 20% of the population is about 53% of the economy. The poorest 20% of the population share only a meagre 5% of the economic pie. The bottom 40% has less than 15% of the economy. Persistent inequality is an impediment to economic growth, social well-being as well as environmental resilience.

This disparity reflects itself in the tax structure of the country. Currently, the government’s income is around 13% of GDP, recovering from a deep plunge. Yet, this is quite low for a middle-income country. Such low income strains the government expenditure on uplifting the livelihoods of those in need. What worries more is the high amount of direct taxes that burdens the poorest the most. Prime Minister Ranil Wickremesinghe has declared plans for achieving a 60%-40% composition of direct vs indirect tax. Its implementation is an urgent priority. 

Many faces of inequality

A key topic of the meeting on the year of poverty alleviation was the inequality between regions. Luckily it is decreasing, yet the gaps are high, with Western Province having a whopping 41% share of the economy. In the meantime, North Central and North Western Provinces have done well to improve their share. If you zoom in more, at the local authority level, there are greater disparities in overcoming poverty. In the last decade, some Divisional secretariats in the Puttalam and Badulla Districts have shown remarkable progress while their adjoining DS Divisions have not been able to make much progress. 

A simple comparison of Household Income and Expenditure survey of 2002 and 2012 shows that Kalpitiya and Mundel in Puttlam and Badulla, Passara and Bibile DS divisions in Badulla District have done exceptionally well. What has caused the emergence of one area while its neighbours lag behind? This shows that, while poverty is a national issue that requires macroeconomic policy responses, there also exist region-based answers to the incidence of poverty and inequality.

Sri Lanka’s labour force participation of women remains very low. Of course, the definition of labour is problematic, as women contribute a lot to the non-monetary part of the economy. They ensure the well-being of the family and society. Until the GDP growth-orientation is complemented by a holistic development perspective, so that more inclusive tools of measurement that reflects overall contribution of the population, this warped image of low female contribution to GDP will be seen.

Nobel laureate Paul Samuelson once joked, that ‘national income falls when a man marries her maid’, as the man ends paying his maid a salary, once he marries her; same job – no value. However, when the figures say that labour force participation of men and women is 74% and 35% respectively, it still shows a huge gender gap and a gross gender hierarchy. In his stated mission to ‘leave no one out’, President Sirisena will have to take the gender very seriously. 

Global currents and local waves 

Sustainable Development Goals (SDG) agreed upon by the United Nations for the period 2015-2030 have set eradicating extreme poverty and ensuring inequality reduction between and within countries by 2030. However, the winds of nationalism blowing across the rich world prioritise slowing down globalisation, specially, economic and production globalisation, that helped industrialise Asia and created many jobs here. If the largest losers of globalisation have been the working class of the West, the principal winners were the Asian middle class. Now, if Trump wants to produce locally with US soils, Sri Lanka, among other Asian countries, risks losing some export-related jobs. 

With this hindsight, the Year of Poverty Alleviation has to think anew. The best way to resist negative outcomes of reverse globalisation is to be ready with local responses, like Thailand’s ‘One Village – One Product’ programme, that emphasised local production. Development decision making should be done at local level, in compliance with the national agenda. Divisional development appraisals can set its own targets to address the needs of the area. Existing safety-net programmes need to be depoliticised and better targeted to elevate the extreme poor. 

The real challenge is the empowerment of the JAMs or those who are not extremely poor but just above the poverty line. What economists say with graphs and numbers, politicians know by instinct. It is now time for action. 

(The writer can be reached via [email protected].)