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Opinion: Labour scarcity shackling Sri Lanka’s growth

Opinion: Labour scarcity shackling Sri Lanka’s growth

Sri lanka : The recently published ‘Sri Lanka Development Update 2018’1 by the World Bank focuses on creating more and better jobs for an upper middle-income Sri Lanka. It usefully analyses the state of Sri Lanka’s labour market and identifies challenges to attaining this development goal. The World Bank report’s deep dive into the issue of women’s labour force participation in Sri Lanka, including in post-conflict areas, is particularly thought-provoking. The report also reiterates the World Bank’s usual macroeconomic narrative about slow growth and lacklustre progress in economic reforms.

In my view, Sri Lanka’s experience does not tally with the typical Arthur Lewis model, in which surplus labour moves from the low-productivity rural sector to drive the expansion of a high-productivity modern sector. Today, Sri Lanka has a paradoxical combination of slow growth (3.2% in the first quarter of 2018)2 and labour scarcity (a low unemployment rate of 4.2% in 20173). A tight labour market means that the private sector is increasingly starved for skilled labour. Although several international and domestic factors are shackling Sri Lanka’s growth, the labour market deserves special attention. The time is ripe for a few well-implemented measures to increase labour market flexibility and boost growth. The private sector has to raise its game too.

Four kinds of labour market issues merit serious discussion in Sri Lanka. First, the World Bank report rightly identifies the need to raise female participation rates to increase Sri Lanka’s labour supply amidst its transition to an ageing population. Nobel Laureate Amartya Sen candidly observed that investing a dollar in girls’ secondary education provides the best social return4 on development finance. In this vein, Japan is trying to increase female participation rates as a part of the so-called “Abenomics” structural reforms. Affordable child care is a key need, including in subsidised nurseries at large private firms and community-run creches at the village-level, to encourage mothers to return to work. The top Sri Lankan firms should unilaterally set the example and others are likely to follow. Another need is ending harassment of women at the workplace and on transport through a “#MeTo” social media movement, with compulsory workplace training in both the private and public sectors.

Second, while the mismatch in available and required skills in the private sector is mentioned in the World Bank report, a missing issue is the poor English language ability of workers, which hampers labour productivity in the country’s growing services sector. When wages rose in Bangalore’s global IT hub a decade ago, Indian firms did not come to neighbouring Sri Lanka, partly due to a shortage of ample supplies of English speaking graduates. Instead, Indian IT firms went to the Philippines to set up shop. The language problem is compounded by a lack of competent English teachers. A radical solution from East Asia is to import low-cost but competent English teachers from the Philippines on short-term work visas under a technical cooperation arrangement. A similar scheme may be developed for importing Chinese teachers given a growing Chinese tourist and investor presence in Sri Lanka and a dearth of Chinese-speaking local workers and managers.

Third, the World Bank report discusses the unemployment of arts graduates. Almost half (48%) of university graduates in 2016 were from an academic programme in the arts.5 This indicates a poor return on costly educational investments at the tertiary-level and a source of social distress, which have propelled two youth insurrections in Southern Sri Lanka. As a part of their recruitment efforts on university campuses, the private sector should offer paid internships during university holidays, to provide a taste of what it really means to work in a competitive business. These internships should also become a compulsory part of all degree courses. University careers services should be properly resourced and forge links with the private sector and state institutions. Furthermore, charging even affordable, modest fees for university education would attune young minds to job market prospects. It might also reduce incentives for antisocial behaviour like ragging and unjustified student protests.