Challenges to the Sri Lankan Labour market

1
Challenges to the Sri Lankan Labour market

• Nisha Arunatilake
• Institute of Policy Studies, Sri Lanka

2
Challenges to the labour market

• 1- Facing up to the impacts of demographic
  transitions on the labour market
• 2 Making use of opportunities created by
  technological change and globalization
• 3 Making productive use of youth labour
  resources

3
Facing up to the impacts of demographic
transitions on the labour market
4
SL population is ageing, and it will soon contract
Source UN population projections
1- 60 population is increasing 2 - SL pop will
start to decline between 2025 and 2030 3 - The
working age population will start to decline
around 2010
5
Sri Lankas population is ageing fast
International comparisons
1) Due to low fertility rates (replacement level
(2.1) in 1994, 1.7-1.9 in 2000s) 2) And
increased life expectancy (men-69, women -77
high compared to developing countries)
6
SL Labour Force Growth Rate has Slowed

• Population is growing at a slower phase, so is
  the labour force
• Older segments are growing faster compared to the
  lower segments

7
Labour Force Will Soon Start to Decline
Source Calculated using UN population
projections and LFS data

• Based on population projections and constant LFP
  rates
• LF will start to decline around 2030 (standard
  assumptions)

8
And, the Labour Force is Ageing
LF is growing older. Proportion of older workers
are increasing.
9
Summary

• Sri Lankan LF is growing at a slower pace and
  will soon start to decline
• This is mainly due to demographic changes
• Growth rate is slower in the 2000-2006 period
  (relative to 1992-2000 period)
• Younger age cohorts are growing at a slower pace,
• And, the 15-19 year old population has actually
  declined
• But, also due to lower participation of younger
  age groups
• Overall LFPR has not changed
• But, youth (15-29 year olds) participation rates
  are declining
• While, adult (30 plus) participation rates have
  increased
• The labour force and the population is aging

10
Challenges of a contracting labour force

• A contraction in the labour force can reduce
  economic growth
• No evidence for Sri Lanka
• But, evidence for other countries shows that
  decline in the work forces will reduce per annum
  economic growth rates
• (0.2 to 0.5 in France and Germany, by 0.8 in
  Japan)

11
Policy Options

• Counteracting the effects of a reduction in the
  LF
• Increasing labour force participation (of both
  young and the old and of females)
• Encourage creation of jobs that are more
  attractive to these population groups
• Change working conditions (more part time jobs)
• Role for govt changing legislation
• Role for firms organizing work to facilitate
  part-time employment
• Improving the productivity of the labour force by
  improving its quality
• Better training
• On the job training and incentives for better
  performance
• Continuous training facilities

12
Making use of opportunities created by
technological change and globalization
13
Changing demand for better skilled workers

• Globalization and technological change has
  increased the demand for better skilled workers -
  both internationally and domestically
• Expansion of the business process outsourcing
  (BPO) industry
• Increased demand for better skilled migrant
  workers
• Increasing demand by local businesses for workers
  skilled in modern technology

14
Education attainment of the labour force

• --- but to make use of these opportunities we
  need an educated workforce
• An increasingly important aspect of labour
  market performance and national competitiveness
  is the skill level of the workforce levels of
  education attainment is currently the best
  available indicator of labour force skill levels
  (ILO)
• Education attainment indicates Countrys capacity
  
• to compete successfully in the world market
• to make efficient use of rapid technological
  advances

15
LF have become more educated over time.. but
gain is marginal
16
Education is not sufficient for finding jobs

• Higher education attainment does not mean better
  employability
• (Global employment trends for youth, ILO, 2006)
• This is true in some developed countries
• But in developing countries high unemployment
  rates amongst highly educated youth shows
  otherwise
• Where economic development has not kept up pace
  with educational attainment
• Where educational system has not provided young
  people with skills most needed in the economy

17
Many educated are unemployed
Source Labour Force Survey Data
18
Unemployment rates are higher for females, for
youth and for the educated
Source Labour force survey
19
Why? quality of supplyLow job aspirations
indicating low skill levels
Source Labour force survey
Most unemployed aspire for jobs requiring low
skills
20
Why? quality of supplyLack of access to good
quality training (Evidence from Jobs Net data)

• Majority of the job seekers are educated, having
  high levels of both formal and tertiary level
  education.
• A/Levels 70 O-Level further 22
• A/Levels 8 degree 33 diplomas 31
  certificate level
• O/Levels 20 diplomas 31 certificate
• Some individuals have obtained non-formal
  education in a variety of educational programs
• But, majority were English illiterate.
• Self rated English knowledge 3 very good, 80
  fair, 18 poor
• Better English knowledge were more likely to
  obtain skills required for jobs in the higher end
  of the occupation ladder.
• English is needed for access to better quality
  training
• Majority of job seekers have obtained training
  from non-descript institutions indicating
  questionable quality (possibly due to language,
  financial and geographical constraints)

21
Why? quality of demandThe availability of
formal sector jobs for inexperienced, educated is
low (Evidence from Jobsnet and LMIB data)

• Vacancies for low skilled workers are high.
• Most job vacancies are for informal sector jobs.
• Moderately high number of vacancies for
  professionals, senior officials and managers in
  the formal sector (LMIB data) but require
  experience
• Availability of formal sector jobs for first time
  job seekers with education is low.

22
Summary

• The demand for skilled workers are increasing,
  both internationally and domestically, but the
  market is making little use of these
  opportunities
• Employed have become more educated over time
• Job seekers are educated but lack skills needed
  by the market
• English literacy is very low
• Lack of English literacy restricts access to
  training aimed at higher paying jobs
• Low skill pool lowers investor interests
• Many unemployed aspire for jobs that require low
  skill levels, possibly due to lack of soft
  skills that are demanded by the market
• Most jobs available in the market are for
  informal sector workers requiring low skill
  levels
• There is moderately high demand for higher
  skilled workers --- but most of these require
  prior experience

23
Challenge for the labour market

• Improve skills of the labour force (both employed
  and unemployed)
• Training alone is not sufficient, what is needed
  is good quality training
• Improve access to better quality training
• Improve English literacy
• Make training available outside of Western
  Province
• Provide scholarships and loans for vocational
  training (so talented can access better quality
  training programs)

24
Making productive use of youth labour resources
25
Importance of improving youth employability

• A quick transition from school-to-work is
  important for
• Reducing poverty in later life
• Optimizing returns to investments in education
  and health
• Providing work experiences and improving
  interpersonal skills that improve productivity
  and employability in later life
• Improving wellbeing
• (World Development Report, 2007)

26
Unemployment rate is high for youth, although
declining
Labour Force Survey Data
27
International comparisons of youth unemployment
28
Unemployment rate is not a sufficient indicator
of youth labour market challenges

• An ideal labour market will provide opportunities
  for productive employment
• Unemployment rate does not take into account
• Discouraged workers
• That is those who are not in the labour force due
  to being discourages
• Workers not engaged in decent work
• Workers in hazardous work
• Workers without social protection
• Working poor
• To get a better understanding of the youth labour
  market challenges one must also look at
• Employment-to-population ratio
• Employment by sector

29
Employment-to population ratio is low for youth
Labour Force Survey data
Employment-to-population ratio the ability of
an economy to create employment (ILO)
30
Majority of the employed are in the informal
sector, particularly youth
Source Labour Force Survey Note private
sector employees include those without a
permanent employer
31
Summary

• A quick transition from school-to-work for youth
  is important for reducing poverty and improving
  returns to health and education
• There is high youth unemployment in Sri Lanka
• The capacity of the economy to create employment
  for youth is low
• Moreover, majority of those who are employed are
  employed in the informal sector
• Where returns to education is low
• Where there is low social protection
• And, where the employment experience does not
  contribute to higher employability later in life

32
Challenges to the labour market

• Improving labour market restrictions that prevent
  investments (changing restrictive legislation)
• Improving investment climate (reducing
  transaction costs, improving infrastructure)
• Improving access to better training opportunities
  (scholarships, loans for vocational training, on
  the job training)
• Improving the quality and relevance of secondary
  education
• Providing second chances for those who have lost
  out initially (vocational training for school
  dropouts, literacy programmes, etc.)

33

• Thank You
• www.ips.lk

34
Departures for foreign employment are increasing
1- Departures have steadily increased over time
2 - Significant share of male emigrants are
skilled labour (Sri Lanka Bureau of Foreign
Employment data issues)
35
Emigration rate is high for tertiary educated Sri
Lankans
Source Dumont J-C and Zurn P. (2007) Immigrant
Health Workers in OECD Countries in the Broader
Context of Highly Skilled Migration, in
International Migration Outlook, SOPEMI, Paris.