By Dr. S. Colombage
Employment generation has decelerated considerably in the midst of the recent economic downturn. Around 520,000 persons are unemployed in the country excluding the northern and eastern provinces, according to official sources. The situation would be much worse if the war-ridden areas are taken into account. Agricultural production is currently on a downward trend. In the industrial sector, it is feared that a large number of small and medium scale factories, particularly in the garments industry, will be closed down shortly due to domestic constraints and low export orders. Employment in trading and tourist activities are also badly affected by the recent events. Thus, the future outlook appears bleak.
The measurement of unemployment is always difficult. How can we assess the magnitude of unemployment? For this purpose, we can use the quarterly labour force data compiled by the Census and Statistics Department since 1990. The data was collected from a sample of housing units. At present, about 4,000 houses are surveyed in each quarter, thus covering about 16,000 houses each year. This survey provides useful information on the labour force, employment and unemployment. But, being a sample survey, it has various statistical limitations. For instance, it does not cover the northern and eastern provinces for security reasons. Also, the survey covers only the persons living in housing units and excludes the institutional population. In addition to these coverage limitations, the survey results are distorted by some abrupt changes in definitions of concepts. Specifically, since 1998 the concept of the labour force has been broadened to include unpaid family workers as employed persons in the labour force. This has tended to show a lower unemployment rate than the actual. Strictly speaking, unpaid family workers cannot be treated as employed persons.
Given the above limitations, let us now look at the unemployment figures derived from the quarterly surveys. The latest figures available are for the first quarter 2001. The unemployment rate rose from 7.4 percent in the fourth quarter 2000 to 7.7 percent in the first quarter 2001. If we exclude unpaid family workers to get a more realistic picture, the unemployment rate goes up to 9 percent for the first quarter 2001. This high unemployment rate is an outcome of the low GDP growth of 1.3 percent in that quarter. As the GDP grew only by 0.4 percent in the second quarter of this year, unemployment would have risen further. In the aftermath of the domestic political turmoil, power cuts, Katunayake airport attack, and the US terrorist attack, the economic slowdown has aggravated resulting in substantial job losses, mainly in export and tourist industries. According to my estimates based on recent production setbacks, the unemployment rate now exceeds 10 percent. This means one out of ten persons in the workforce is unemployed. Rising unemployment is a reflection of Sri Lanka's poor track record of GDP growth. Product diversification has been limited and as a result, employment generation is concentrated in a very few sectors. Agriculture is still dominant providing jobs for 35 percent of the workforce. Despite the much-publicised industrial growth, employment in manufacturing firms is confined to 15 percent of the workforce. About 13 percent are engaged in trading activities. All these sectors are stagnant now.
Foreign employment opportunities, mainly in the Middle East countries, have helped to ease the unemployment problem to a large extent. Such employment, however, is vulnerable to the economic ups and downs in such countries. There is a downward trend in recruitment from Sri Lanka due to rising insurance premiums and airfares following the airport attack.
Unemployment is a multi-dimensional problem in this country. Age-wise, unemployment is acute among the youth. The unemployment rate is as high as 27 percent in the age group 15-19 years and 22 percent in the group 20-24 years. Another aspect is the concentration of unemployment among the educated persons. Of the unemployed, around 50 percent have attained educational qualifications equivalent to GCE (O/L) or above and 33 percent have GCE (A/L) or above. Gender-wise, female unemployment rate is higher. Geographically, disparities can be found among provinces with the highest unemployment rate of 12 percent in the Southern Province.
Appropriate policies should be adopted to deal with the unemployment problem. In a market-oriented framework there is little scope to create jobs in the public sector. Sri Lanka already has one of the largest bureaucracies per capita in Asia. Nearly one fifth of the workforce is in the government and semi-government sectors. In contrast to the government's commitment to reduce the size of the public sector under the Standby Agreement with the IMF, large numbers of new employees are being absorbed into the public sector on the eve of the general election. Expansion of public sector employment in this manner aggravates institutional inefficiencies and the fiscal burden.
Ideally, the government should have fostered a market-friendly economic environment to induce the private sector, which is considered as 'the engine of economic growth', to boost production and thereby to generate employment opportunities.
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