Most Sri Lanka workers without formal protection amid Covid-19 shock: IPS study

ECONOMYNEXT – About 75 percent of Sri Lanka’s workforce or 1.5 million employees are facing a high risk of falling in to poverty, with 68 percent in informal employment amid a Coronavirus crises, a survey done by a Colombo based think tank said.

Institute of Policy Studies in Sri Lanka said a68 percent of the total employed population in Sri Lanka is in informal employment, employed under low wages or precarious jobs.

“These jobs lack the basic protection that formal jobs provide, including social protection coverage and paid leave,” an IPS research note said.

“Besides, these workers have no income replacement if they are unable to work in case of illness.

IPS said 75 percent of the jobs created in the private sector within 2006 – 2018 were temporary and casual jobs and due to the pandemic, private sector employees with temporary jobs with limited job security and social protection are facing high risk in falling in to poverty in the future.

“Without appropriate policy measures, around 1.5 million unprotected temporary workers face a high risk of falling into poverty due to income and job losses,” IPS said.

Sri Lanka has been downgraded to ‘CCC’ with rising government spending and a large public sector workforce triggering a current account deficit in the budget, which taxes on private citizens and private businesses are finding it difficult to cover.

Most state enterprises make losses.

Public debt is rising towards 100 percent of gross domestic product, not counting state enterprises, with a current account deficit of the budget as well as an overall deficit. Public sector workers have large unfunded pension liabilities, which have to be covered by day to day taxes.

The IPS survey found that only 29 percent of the total workforce are covered by social protection which mainly includes all public sector employees and the majority of private sector permanent employees, the IPS

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“Although employees in temporary forms of employment are entitled to be enrolled for EPF social security scheme, only 12percent of temporary/casual workers are covered ” IPS research said.

“This is mainly because the adherence to labour laws are not properly monitored in the informal sector, thus, many informal sector workers are not enrolled in EPF. Furthermore, there is no established social security scheme for self-employed workers.”

The research said, the labour market policies in Sri Lanka provide employment security, but not labour market security.

Given that ETF provides some income support in the event of unemployment, the government can consider converting the ETF fund as a proper unemployment insurance scheme.

“Going forward, social dialogue between employers, unions and government, and the ETF fund should be transformed into an unemployment insurance (UI) scheme for all categories of workers, based on a fair sharing of the cost between employers, workers and government” IPS said.

“This is an important step to promote decent work and support transitions from the informal to the formal economy and job-rich recovery in Sri Lanka.”

The proposal came as the government planned to raise the retirement age and raising fears that private sector workers would not be able to draw the money out by 55 years and the government would use it for deficit spending at low interest rates.

The government also slapped a 0.25 percent tax on turnover of companies.

The full statement is reproduced below:

COVID-19 and the World of Work

From the IPS flagship publication ‘Sri Lanka: State of the Economy 2020’

Sri Lanka has a high proportion of workers (around 68% of the total employed) in informal employment. These informal workers usually work for low-wage and precarious jobs. These jobs lack the basic protection that formal jobs provide, including social protection coverage and paid leave.

Besides, these workers have no income replacement if they are unable to work in case of illness.

As such, lockdowns and other containment measures imposed due to the COVID-19 pandemic – closure of businesses, travel restrictions etc., are affecting income-generating activities of millions of informal workers, putting them at risk of falling into poverty during the crisis.

Data reveals that 75% of the wage employment created in the private sector during the 2006-2018 period, was recruitment for temporary and casual jobs.However, the current COVID-19 crisis has revealed the worrying consequences of a high proportion of temporary employees, with limited job security and social protection. Without appropriate policy measures, around 1.5 million unprotected temporary workers face a high risk of falling into poverty due to income and job losses.

Labour Market Challenges

Only 29% of the total workforce are covered by social protection which mainly includes all public sector employees and the majority of private sector permanent employees. Although employees in temporary forms of employment are entitled to be enrolled for EPF social security scheme, only 12% of temporary/casual workers are covered. This is mainly because the adherence to labour laws are not properly monitored in the informal sector, thus, many informal sector workers are not enrolled in EPF. Furthermore, there is no established social security scheme for self-employed workers.

There is no unemployment insurance scheme in Sri Lanka and active labour market policies are generally weak. Sri Lanka is constrained by limited fiscal resources and also lacks an adequate administrative framework to govern enterprises and implement unemployment insurance. Employers already contribute to the two social security funds, namely EPF and ETF, and to two termination schemes — severance pay, and gratuity . Thus, although unemployment insurance was proposed by the government in 2003, lack of agreement concerning financing between employees’, employers and the government has held it back.

Around 1.5 million temporary or casual workers are employed in the private sector. These workers are most vulnerable for job losses due to the prevailing economic hardships of businesses due to the pandemic. Further, an increased number of migrant returnees (especially in the Middle-East due to COVID-19 and low oil prices) could also aggravate the reduced job placements. Beyond these limited placements, re-deploying is further challenging given Sri Lanka’s unskilled workforce. For instance, of the working-aged (15-59 years) informal sector workers, around 72% have not passed the Ordinary Level Examination (O-Level), and 92% are unskilled. As such relevant skills’ development programmes are key to preparing unemployed workers for re-employment between various economic sectors.

Way Forward for Job-Rich Recovery

Countries that have effective social protection systems in place are better prepared to respond to crises. The COVID-19 crisis revealed the coverage gaps of the country’s social protection system for informal workers — temporary workers, daily waged workers as well as self-employed workers. It is necessary to ensure adequate social protection coverage that can be adapted to the circumstances of all categories of informal workers – temporary workers, daily waged workers, self-employed and migrant workers. Such a social insurance scheme will safeguard those who have lost livelihoods in a crisis.

The labour market policies in Sri Lanka provide employment security – but not labour market security. Given that ETF provides some income support in the event of unemployment, the government can consider converting the ETF fund as a proper unemployment insurance scheme. Going forward, social dialogue between employers, unions and government, and the ETF fund should be transformed into an unemployment insurance (UI) scheme for all categories of workers, based on a fair sharing of the cost between employers, workers and government. This is an important step to promote decent work and support transitions from the informal to the formal economy and job-rich recovery in Sri Lanka.

Beyond employment retention measures, it is important to support job seekers who have lost jobs. Due to the current crisis, there are possible labour market changes which result in significant shifts of workforces from the struggling sectors, to the booming sectors. For instance, sectors like hospitality, retail, manufacturing, and tourism are experiencing drastically low demand resulting in worker redundancies, while supermarkets’ supply chains, social care sectors and pharmaceutical supplies which are experiencing significantly high demand need new temporary staff.

The government could mediate in these worker shifts in the labour market to assure a more decent transition for these vulnerable workers.Thegovernment must request companies to provide data on employment shortages and surplus. With this data, the government should facilitate the redeployment of human resources between diverse economic sectors and the required re-skilling measures of job seekers.

Further, the government should take measures to re-skill the unemployed workers as it is the key to transiting to new employment in booming sectors. To build recognition for re-skilling, public-private partnerships and recruitment schemes that feed directly to the job market are prerequisites. These allow re-skilling programmes to keep up-to-date with emerging trends, identify skills required in the job market, and provide relevant training.

The COVID-19 crisis also provides an opportunity for firms to build the kind of technology and culture that could make remote work easier for those who want to capitalise on it in the future. For many companies, the current outbreak has triggered an anxious trial run for remote work on a grand scale. Businesses have to accept the fact that remote work is different.

Employers should review their remote working policies and ensure that the use of appropriate home workstations is required and comply with relevant company procedures if using personal devices for work. Managers have to develop a better system of judging productivity by setting targets and monitoring specific goals.If working from home is not an option, employers should ensure that occupational safety measures in the workplace comply with COVID-19 health guidelines such as sterilised working areas, sanitising of processes, and secure transportation facilities.

This Policy Insight is based on the comprehensive chapter on “COVID-19 and the World of Work” in‘Sri Lanka the State of the Economy 2020’report – the flagship publication of the Institute of Policy Studies of Sri Lanka (IPS). The complete report can be purchased from the Publications Unit of the IPS.

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