Unemployment and causes in Sri Lanka Economy (1977 to up to date)

Background of unemployment in Sri Lanka after 1977

After 1977, Sri Lanka has moved towards liberalization and reformed the economy into a
country which will gain maximum benefits from globalization. This reformation has profoundly
affected Sri Lankan employment, unemployment, and underemployment. According to
A.G.W. Nanayakkara, unemployment consists of persons who are without work, currently
available for work, actively seeking for work for pay or self-employment. As another definition,
according to the Central bank’s series of Consumer Finance Survey (CFS), persons in
unemployment contains those who had no work during the reference period but are
actively seeking employment or available for work, if action is found. (L.L.Gunaratne, 1993).
After the reformation in 1977, until 1990s unemployment among male was higher than 50%
(Table 1). But after 1990 this has changed, and around 50% of unemployed were females
(Figure 1). The main reason for this higher unemployment among female may be because many females refuse to work far away from their residences (Nanayakkara, 2004).
Many research findings say that many females are not very flexible with the number of hours
they have to work in the workplace; especially overtime activities. And many organizations
still refuse to hire female as employees due to the child baring role and the endless chores
she has to perform due to the patriarchal role in the family. The unemployment rate among
females who have G.C.E (O/L) and above educational qualifications is about 11.25%
(Statistics, 2015). Which means many unemployed females are educated. Due to that, they are
very selective of the job and waiting for the right position, and that takes a lot of time. Due to
these reasons unemployment of female is high in the country.

Underemployment of different age groups takes different significance. In the year the 1990s, the
highest unemployment rate was reported among the age group of 15-19 (Table 2). But the
unemployment percentage of the age group of 15-19 has been gradually decreasing since
2000. At the age of 15-19, many people are students and sit for the G.C.E. (O/L) and G.C.E.
(A/L) Examinations. Therefore, many of them are considered economically inactive. Out of
all the students who sit for the G.C.E (O/L) examination, only about 40% will get qualified to
sit for the G.C.E (A/L). This means most of the people who are in the age group of 15-19 will
enter into the labor market to find jobs. But due to their lack of education, lack of skills and
practical knowledge, many of them fail to find a job. Because of that, the unemployment rate
in this age group is high. Even after the age of 19, there is a high unemployment rate recorded
in the 1990s (Table 2). It is around 30%. In the 1990s the reason for this issue was, even many
students fail to gain university entrance after G.C.E. (A/L) they somehow continued their
higher studies in various streams and did not consider in entering into the labor force until
the age of around 24. Since 2000, the same reason can be applied. But the percentage rates
are slightly lower than that of in the 1990s, and it is around 15% (Table 2). Since 2000 the
education and employment trend had a different direction. Students who have not gained
university entrance have started gaining many other professional qualifications while being
an employee. This is why the unemployment rate has decreased since 2000 for the age group
of 20-29. The primary reason for youth unemployment also lies with this age group. People
who enter higher education at the age of 20-24, enter into the labor market, after
completing higher studies, at the age of 25-29. In the current era, many job opportunities’
Required period is below 25year. While companies are hiring employees, many suitable
candidates are still studying. This has become one of the crucial reasons why they were
unable to gain employment, especially in private companies (Nanayakkara 2004). According to
many surveys, another reason for this youth unemployment in the private sector is the lack of
knowledge in English communication. Many private companies require English as an essential
requirement.

As shown in table 4, the highest unemployment rate is recorded under the G.C.E (A/L &
Above) category. As Guaratne and Herath (1993) say, the unemployment in the 1980s was very
lower among those who had a deficient level of education and a higher level of education. The
reason is at that time, people who had a more moderate level of education were not able to be very
selective about the job, and grabbed the very first opportunity they had to earn
money. The primary issue of unemployment by education that is discussed by Guarantee and
Herath (1993) is that a large number of dropouts with secondary or post-secondary levels
of education and the difficulties faced by these individuals in obtaining employment. By that
time, the number of dropouts has been increased due to the increase in educational
opportunities. Those students were with some academic training but with less practical
training. That has become a barrier, and due to that, they were unable to be employed.
Table 4 shows the unemployment rate by education level from the year 1990-2015. The highest
unemployment rate is reported under the highest level of education. However, out of all the
unemployed persons, more than 40% are people who were only educated up to grade 10
(Nanayakkara 2004). Therefore, the policymakers should not only pay attention to the job
creation targeting the youth with higher education qualities but also the child who does not
have the G.C.E (O/L) qualification.

Overall Unemployment Trend in Sri Lanka After liberalization, and the reasons for the
reduction of unemployment

After the economic policy reformation, the trend of unemployment shows a downward
pattern (Figure 2) which indicates that unemployment has been reduced. Even though the rate
of unemployment has decreased in the 1990s, it was higher than 10%. Only after 1998, the country
was able to maintain the unemployment rate below 10% (Table 1). The reduction of this rate was
a result of many programs undertaken by the government after the liberalization.
The first program undertaken by the government to reduce unemployment is the Export
Processing Zone (EPZ) in 1978 in Katunayake, Biyagama, and Koggala. By the end of the year
1992 the total direct employment created by EPZ is more than 77,000 (Saravanandan, 2004).
In 1992, 200 export-oriented garment factories program was introduced. By that, well-organized factories were set up in the rural area. In that year the highest foreign exchange
earner was the garment industry, and out of all the employed people 33% of them were from
the textile and garment industry (Saravanandan, 2004).
In 1995 as a continuation of the EPZ a new step was taken, and that is called the ‘New
Industrialization strategy for Sri Lanka’. Under this step, five new export processing zones
and one industrial park was established. This has also highly contributed to the reduction of
unemployment.
Another main development program which contributed to the reduction of unemployment in
Sri Lanka is the Mahaweli Development Program. By achieving the primary purpose of the
whole program; make irrigation facilities for cultivation in the dry zone, the Mahaweli program
was able to increase the agricultural sector production. Due to that, many people who were
unemployed in the dry region became employed, and the overall unemployment of the country
decreased.
There are more reasons other than projects undertaken by the government, such as foreign
employment. Labor migration has started in the 1980s with the liberalization (Saravanandan,
2004). By the end of the year 2015 there, about 1 million people working in foreign countries and
foreign departures in that year is more than 260,000. Another reason for the decrease in
unemployment is recruitment into armed forces due to prolonged hostilities during the 1980s
(Saravanandan, 2004). Around 240,000 people were recruited to armed forces due to this
reason (Saravanandan, 2004).

Under-Employment
“Underemployment” exists when a person’s employment is inadequate, about
specified norms or alternative employment, account being taken of his occupational skill
(training and working experience)” (Statistics, 2006). Estimation of underemployment is
difficult due to the visibility issues. Visible underemployment can be determined by
comparing the number of days that a person actually worked, with the number of days that
the person was willing and able to work. If the number of days the person actually worked is
less than that of willing and able to work, visible underemployment exists (L.L.Gunaratne,
1993). According to Gunaratne & Herath (1993), in the 1980s out of all the people, who were
considered as employed, around 40% were underemployed. This means that at the 1980s around
50% of the labor force (10% unemployment and 40% underemployment) was not fully
contributing to the economy. In the 1990s the average underemployment rate is around 21.7%
and in 2000s it is around 21.6% (Karunaratne, [no date]). According to Karunaratne, the
behavior of underemployment is affected by many factors, and out of the 50% of the
reasons were the nature of work, reduction in economic activity, off-season activity.

Causes for unemployment
By considering all the factors, there are several reasons for unemployment in Sri Lanka. One
is that from the very beginning to up to date, the Sri Lankan education system has not been
modified according to the needs of the labor market. The skills that the person gain from the
system mismatches with what the market needs. Another one is that lack of job
opportunities for the educated youth, which can highly contribute to proper economic growth.
(Due to the age when they complete their university education, lack of skills in English
language, private sector reluctance to hire graduates over the misconception that they are very
radical, etc.).

Some suggestions to overcome the unemployment problem:
As for the youth unemployment due to age mismatch, universities should enroll students as
soon as the G.C.E (A/L) examination ends. Skill development education should be given to
the students from the very beginning, and the skill development strategies should be modified
according to the demand in the market. Industries that create a significant number of job
opportunities, such as the High-tech industry, should be encouraged. The youth who wish to be
self-employed in agriculture or non-agriculture sector should be supported by providing the
infrastructure facilities and providing them credit facilities which can be easily obtained.
As a conclusion, the Sri Lankan economy is gradually decreasing the unemployment rate after
the open economy policy adoption. But still, the frustration due to unemployment has not
been reduced but slightly increased. What Sri Lanka has is not the problem of lack of job
opportunities, but the lack of creation of candidates who are suitable to grab the opportunity.
What the economy should do is, to improve the skills and capabilities within the people while
creating job opportunities.