Crippling labour shortage

The acute shortage of labour, which stands as a major impediment for the country’s economic growth, gained public attention a few days ago when the Industries and Entrepreneurship Development Minister Sunil Handunnetti remarked that Sri Lanka’s private sector currently has over 400,000 vacancies, forcing industries to recruit foreign workers from countries such as India and China due to a shortage of both skilled and unskilled labour. The Minister had added that labour shortages have severely affected several key industries, including construction, tiles and accessories, footwear, leather products and the automobile sector.

The scarce availability of labour is driven by a combination of economic shifts, demographic changes, and changing social attitudes. The post-2022 economic crisis triggered an unprecedented wave of migration, causing a substantial reduction in the availability of labour. The significant depreciation of the local currency and resultant cost of living have encouraged many people to seek employment abroad. As a result, departures for foreign employment have recorded historic highs over the last few years, exceeding 310,000 annually. Creating a highly adverse impact on the economy, the pattern of departure too has undergone a profound shift, with a considerable number of educated professionals leaving abroad. While migration was once dominated by unskilled housemaids heading to the Gulf, today over 75% of departures are in skilled or professional categories, according to the Central Bank’s latest Quarterly Bulletin on Workers’ Remittances and Labour Migration.

In a distressing scenario, apart from people leaving the shores, many are also abandoning the domestic workforce altogether. As per the Department of Census and Statistics, Sri Lanka’s Labour Force Participation Rate was 49.2% in the first quarter of 2026, reflecting a considerable decline from 52.3% in 2019. Moreover, the younger generation do not prefer to get engaged in physically exhaustive jobs, leaving employers in labour-intensive sectors in the lurch.  Sri Lanka is also currently undergoing one of the fastest demographic transitions in South Asia, hence, the workforce is rapidly ageing, and the volume of youth entering the labour market annually is declining.

Meanwhile, in response to Handunnetti’s remark, several people had suggested introducing age-related restrictions to discourage youngsters from becoming three-wheel drivers as a measure to resolve this pressing economic ailment. The rising preference of the modern-day youth to become part of the gig economy as opposed to looking for conventional jobs has fundamentally reshaped the labour market almost worldwide. However, some local traditionalists despise this trend and instead advocate they should work in physically tiring jobs in plantations and factories.

Unlike working in an office or factory, becoming an Uber or Pickme driver gives more mental freedom and autonomy, raising the appeal of the gig economy to millennials and Gen Zs. There have been many instances of office employees, even bank employees, quitting their permanent jobs to indulge in freelance or contract-based work because of their unwillingness to work under nasty and bossy superiors. Poor treatment of employees in the private sector is a critical human-related issue which has not been properly addressed by policymakers in the country. Therefore, in an environment where HR practices remain far from ideal, imposing age-related restrictions to become three-wheel drivers or be part of the gig economy is a view which should be rejected outright.

Be that as it may, the declining labour force is a serious economic challenge, and policymakers need to develop progressive policies to address the issues arising from this demographic/social phenomenon. Handunnetti’s proposal to provide employment opportunities in the private sector for young people who have completed rehabilitation for drug addiction represents such a progressive remedy. Going forward, the Government needs to introduce a formal, systematic mechanism to regulate the practice of bringing foreign workers to the country as part of a sustainable, long-term solution.