A review of the Current Labour Market Situation, Policy and Programs in Sri Lanka

Rozana Salih

Faculty of Economics and Politics

University of Cambridge

November 2001

P

repared for ILO/Japan Tripartite Regional Meeting on Youth Employment in Asia and the Pacific

Bangkok, 27 February – 1 March 2002

This is a working paper written to serve as a basis for discussion at the ILO/Japan Tripartite Regional Meeting on Youth Employment in Asia and the Pacific. The views and opinions expressed in this paper are those of the author and do not constitute an endorsement by the International Labour Organization. The paper has not been edited and should not be cited or distributed without consent from the author and the ILO. Please send comments and suggestions to ILO BAO/EASMAT at E-mail: [email protected].

Acknowledgements

I am grateful to Mr. Kumaradasa (Director, Youth Employment Planning Division, Ministry of Youth Affairs, Battaramulla) for his time, patience and particularly for inviting me over to a very stimulating discussion on ‘Introducing the National Youth Policy’. Many thanks also to Mr. G. Gunawardane (Chairman CINTEC), Mr. Weliwita (CEO, Young Entrepreneur Sri Lanka), Mr. Y. M.G.B. Yapa (Manager Micro Finance Division, HNB) and Mr. Mithraratne (Secretary to the Ministry of Youth Affairs) for their useful explanations and insights. Very useful comments from a referee from the ILO Bangkok Office and Mr. H.M.Gunasekara (Department of National Planning) are also gratefully acknowledged. A special thank you to Ms. Shafinaz Hassandeen and the staff of ILO Colombo office for all their assistance and for making available several useful documents. The usual disclaimer applies.

^

A Review of the Current Labour Market Situation, Policy and Programs

in Sri Lanka

1. Introduction

The Sri Lankan economy liberalized in 1977, undertaking structural adjustment programs and moving in general towards a more market oriented stance. The policy shift seems to have had a positive impact on several macro aggregates. GDP growth rates have averaged around a healthy 5 per cent, unemployment rates have fallen in spite of rising participation, per capita incomes have doubled over a decade, the economy has become a prominent exporter of garments, the private sector has grown and become a significant employer and the value added in services and manufacturing has increased dramatically.

But the political and social environment has been turbulent not just with the on-going civil war but one of the country’s worst youth insurrections in the 1987-89 period that crippled the economy and drove the nation to a near state of anarchy. In spite of falling overall rates of unemployment, youth unemployment remained significantly high while youth discontent and disillusionment rode high. These two factors were certainly not mutually exclusive, with one feeding into the other. The unrest itself had strong roots in youth perceptions about the ‘politicization of employment’ (where gaining access to public sector employment was strongly influenced by receiving a letter from one’s MP) and a general lack of adhering to norms of equity and merit in offering employment. Youth also perceived the education system to fail in fulfilling their career aspirations. Moreover sentiments raged towards the view that the English language was used by the urban elite as ‘a sword of oppression’ and that access to learning and using the language had not been fair. Fuelling the discontent was the emergence of bureaucratic inefficiencies, corruption and apathy in governance. (Presidential Commission on Youth 1990; de Silva and Peiris 1995).

Following the insurrection various remedies were sort to ease the situation. The most important in the economic policy arena was the second wave of liberalisation that commenced in 1989, which aimed inter alia to provide greater employment opportunity to youth. The overall impact of this policy is argued to have been quite favourable in many respects (Athukorale and Rajapathirane 2000). But what exactly was the impact of first and second waves of liberalisation on youth employment and unemployment? What are the key characteristics of the labour market for youth in contemporary Sri Lanka? What are the current labour market policies and programmes addressed towards youth and what are the lessons to be learnt from such efforts? Does the recently drafted National Youth Policy (NYP) address effectively the youth employment issue that was one of the core causes for discontent?

This paper attempts to answer some of the above questions. More specifically, the paper discusses issues pertaining to youth employment in contemporary Sri Lanka with a special focus on policies and programs addressed towards youth. The paper will also discuss the situation of university graduates as a separate group since much of Sri Lanka’s policy discussion about youth is based on them given their politically vocal stance. Technically, however, university graduates are only a small fraction of the labour force (around 1.3 per cent in 1981 and 2.5 per cent in 1998) and may not be encompassed by the definition of youth adopted in the paper. Youth are defined as those within the age groups 15-24, subdivided as teenage youth (aged 15-19 years) and young adults (aged 20-24) as per the TOR. The study has been undertaken for the ILO-Colombo Office, and aims to provide a national context within the frame of the ILO/Japan Regional Meeting on Youth Employment in Asia and Pacific.^¹

Following the emphasis laid by the High Level Panel on Youth Employment,^² the study will look at issues pertaining to youth from three angles: employment (supply side), equity (gender equality) and entrepreneurship (demand side). These three areas of priority have been identified by the Panel based on the analysis of youth employment issues in developing countries and economies in transition. Some of the pertinent issues recognised in youth labour markets are the high levels of unemployment, underemployment and long term unemployment; gender biases in education, training and opportunity; low protection by legislation; poverty and social exclusion. The National Youth Policy (NYP) of Sri Lanka roughly drafted in April 2001, attempts to address some of these issues. It is important to analyse, however, whether the issues faced by Sri Lankan youth are by and large congruent with the generalised situation briefed above or whether the Sri Lankan labour market situation is different. In other words, do country specific variances in institutions, history and socio-economic-political experiences accentuate different issues that have to be addressed and a different set of approaches that have to be whetted in the formulation and implementation of a national policy? A careful analysis of the current labour market situation facing youth in the context of the macro economic situation briefed earlier may offer some insight to the problem.

Unfortunately, there are very few studies focussing on the youth labour market of Sri Lanka, that enable finding a quick answer to the question. Most studies analyse the labour market as a whole with youth mentioned in passing. A few studies that focus on youth in particular concentrate mostly on the sociological aspect but not specifically the economic and employment aspects. This paper, therefore, rests significantly on data for the post-liberalised period (generally after 1977, but mostly after 1992 due to data restrictions) and secondary sources to glean insights into trends and peculiarities that may dominate the contemporary Sri Lankan labour market for youth. Such trends are placed against demand and supply oriented policies and programs currently implemented in Sri Lanka targeting youth. It is expected that the results will be useful in further carving out policy direction espoused by the draft NYP, and offer insights towards formulating an effective plan of action.

The paper is organised as follows. Section 2 gives a brief profile of Sri Lankan youth, then looks at the National Youth Policy (draft) in Sri Lanka, formulated at the request of the Commonwealth in April 2001 and then looks at how the strategies identified in the youth policy will be implemented. Since the policy itself has not yet been worked out clearly, the latter discussion is inherently limited to some issues that have to be considered in constructing an action plan. Section 3 briefs the macroeconomic environment of Sri Lanka since the policy shift in 1977 leading on to the impact it has had on the labour market. Section 4 analyses the youth labour market in terms of employment, unemployment and underemployment in the late 1990s. The next section reviews active labour market policies and programs in contemporary Sri Lanka, that are aimed particularly at youth. Section 6 summarises the lessons and insights that can be gleaned from the two previous sections and emphasises working together to promote employment. Section 7 concludes.

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