Policies needed to let export earnings trickle down to Sri Lankan workers
Wednesday February 27, 2019 12:31
ECONOMYNEXT- The International Labour Organization (ILO) called on Sri Lankan manufacturers and policy makers to let earnings from trade trickle down to workers, after a World Bank report found exports increase inequality.
"Understanding impacts of globalization on labour markets continue to be a important issue for Sri Lanka," ILO Sri Lanka Country Director Simrin Singh said.
"Yes, international trade offers opportunities for efficiency and productivity gains and all that jargon we’re all used to hearing about, but the question is, for whom exactly?"
"It’s especially important to ensure that the right labour policies are in place to ensure that everyone benefits, and not just a few," she said.
She was speaking at the Institute of Policy Studies in Colombo, at the launch of the ‘Exports to Jobs’ report co-written by the World Bank and ILO.
"Many people around the world are asking what are the benefits of globalization and what are the benefits to me, to us, to workers in particular, and labour markets and social systems," Singh said.
"These are very fundamental questions being asked."
The report said that exports increase inequality in Sri Lanka.
"The largest impact of exports on wage changes is for high-skilled workers, as in India," it said.
"Plus, positive rising exports increase the standard deviation of wages; hence, income inequality between workers increases."
On average, a 100 US dollar increase in exports would increase the annual wage of a worker by 975 rupees based on 1999 price levels.
Gladys Lopez-Acevedo, a Lead Economist at the World Bank, and one of the report’s authors, said based on current price levels, the wage increase would be around 12 percent higher.
The report found that high-skilled workers on average earned over 2000 rupees for a 100 US dollar increase in exports, while for low-skilled workers, wages fell.
Exports in Sri Lanka are mainly driven by low-skilled workers in the apparel and tea industries.
Lopez-Acevedo however said that the study only took into account differential increases at worker-level based on districts and the type of labour, and not the changes exports bring to the entire economy, which could also increase wages.
"When put together, the aggregate and the differential, the gains would be much better," she said.
"But it’s very important to ensure that workers can benefit from exports."
"If we had workers being able to work in the export sector, we wouldn’t see this differential."
"In fact, we don’t want to see a large differential because it would show more inequity in the labour market."
"We want to see a low differential in the labour market, because then more people are benefiting from exports."
Training workers to have higher skill levels would benefit them, the report said.
It said that increasing the scale of exports with diversification into more industries could lead to higher wages for workers.
Including more women at work with equal pay as men, and hiring people from disadvantaged groups could also improve the benefits of exports, the study said.
The study also found little evidence of exports increasing employment levels and formality of jobs in Sri Lanka. (Colombo/Feb27/2019-SB)