Promoting Employment Intensive Growth in Sri Lanka

Seminar on National Employment Policy

October 2011

Prof. Sunil Chandrasiri

Dean

Faculty of Graduate Studies

University of Colombo

Promoting Employment Intensive Growth in Sri Lanka

1. Why employment intensive growth is important? 2. Macro level evidence3. Priority Sectors4. Policy implications

Stages of Development

Innovation Driven Business Sophistication Innovativeness

Efficiency Driven Labour Market EfficiencyGoods market efficiencyTechnological Readiness

Sri Lanka

52 out of 142 countries

Factor Driven

* Health & primary education

Employment Intensity of Growth

  1996-2002 2002-2010Primary sector

1.23 0.17Secondary

0.52 0.38

Tertiary sector0.94 0.13

All sectors 1.16 0.14

Sub-sector experience- Elasticity

Sub-sector 2002-2010

1. Agriculture -2004-090.57

2. Manufacturing 0.50

6. Construction 0.80

7. Wholesale and retail trade 0.35

8. Hotels and Restaurants 0.189. Transport and Communication 0.21

10. Banking, insurance and real estate 0.49

12. Private services 0.07

Growth of Real Value Added and Employment – 2002-2010

2. Manufacturing; 3. Construction: 5. Hotels and Restaurants 6. Transport, Storage and Communication; 7.Banking: 1. Agriculture; 4.Wholesale and Retail; 8.Private services

Priority Sectors- Employment Intensity

Sub-sector 2002-2010

1. Tea2.22

2. Rubber 1.06

6. Coconut 1.69

7. Textiles and Garments 0.44

8. Jewelry 1.19. Hotels and Restaurants 1.41

10. ICT 1.41

Note: Health & Gem sectors: not estimated No data

Growth Implications of Priority SectorsSector Growth of

Exports %Employment Elasticity

Female Employnt %

1. Tea 7.3 1.40 55

2. Rubber 19.6 0.96 40

6. Coconut 5.6 2.45 35

7. Textiles & Gmts 5.1 0.53 48

8. Food & Bevgs30.5 0.63 40

9. Gem & Jewelry0.79 1.1 30

10. ICT 15 1.41 45

11. Tourism

12.8 1.41 30

Government Policy SupportSources: Key policy documents at national and Ministry

level

National Level1. Promote Investment2. Control Inflation3. Promote employment4. Fiscal and monetary

policy5. No mention about

wage policy

Sub-sector level1. Productivity

enhancement2. Tax incentives3. Skills development4. Technology support5. Export promotion6. Value addition

Government Policy Support contd

1.Sub-sector specific policy support system is

comprehensive and action oriented

2.Both national and sub-sector specific policies do

not cover wage policies, employee welfare, quality

of employment, and industrial labour relations

3.Priority sectors have the capacity to promote

job-rich growth

Summary -Overall

1. Employment intensity in secondary sector

is higher

2. Presence of medium and long-term

development targets

3. Influence of institutional factors on growth

of employment

4. Presence of low-productivity and low –pay

policy

Summary – Sector specific

1. Policy support for export oriented-growth

in promoting employment

2. Emphasis on productivity , skills

development and R & D orientation

3. Influence of institutional factors on growth

of employment

Recommendations – National level

1. Application of sub-sector approach to promote

growth and employment should be continued

2. The wage levels and employee welfare should also

be included in policy documents

3. High-productivity and high-wages policy needs to

be promoted at national level

4. Export oriented growth promoting employment

should be further strengthened

Recommendations – Sub-sectoral level

1. Agriculture- Application of sub-sector approach

to promote growth and employment should be

continued

2. The wage levels and employee welfare should also

be included in policy documents

3. High-productivity and high-wages policy needs to

be promoted at national level

4. Export oriented growth promoting employment

should be further strengthened

Conclusion

The small open economy of Sri Lanka is well poised

to make a transition from factor driven to

efficiency driven stage.

Policy support for job-rich growth would

promote Sri Lanka as one of the key investment

centers in Asia.