ECONOMYNEXT -Sri Lanka’s women between the ages of 20-40 are most likely to be unemployed because hiring them is expensive for the private sector, mostly because employers have to bear the full cost of maternity leave benefits (MLB) Verité Research has found.
Verité, a Colombo based think tank and research body said that this is a problem unique “in terms of opportunities for young women to effectively participate and contribute to the labour force.”
Dr Nishan de Mel, head of Verité said they discovered the issue during research into finding solutions to reduce youth unemployment in the country.
“One of the things we investigated was the laws and rules governing employment requires employers to pay 12-week MLBs however there is no equivalent paternity leave which means hiring women between the ages of 20-40 becomes more expensive in the private sector,” De Mel said.
A law in Sri Lanka mandates that the employer provide 12-week maternity benefit which is a 3-months fully paid leave. However, the country does not have paternity leave.
Sri Lankan women only participate at half the rate of men in the labour workforce and their unemployment rate is twice that of men and their disadvantage increases when they enter this age group while they only secure 30 per cent of the jobs in the private sector compared to 45 per cent in the public sector.
If there was a paternity leave as well, De Mel says the outcome would have been equal.
Verité Research in partnership with YouLead-USAID’s Youth Employment and Business Start-up program conducted this research as part of USAID’s initiative to reduce youth unemployment in the country.
Women’s disadvantage increases when they enter this age group while they only secure 30 per cent of the jobs in the private sector compared to 45 per cent in the public sector.
According to Sri Lanka’s Annual Labour Force Survey published in 2018, women in the 20-40 age group are 6.6 times more likely to be unemployed than women outside this age group.
The Department of Census and Statistics, Labour Force Survey Annual Report 2018 indicates that out of the 4.4 per cent unemployment in the country, 208,667 or 7.1 per cent are women. Unemployment rates for specific ages groups – 20-24 is 29.4 per cent female (14.7 per cent male), 25-29 is 19.8 per cent female (5.4 per cent male) and 30-39 is 5.9 per cent female and 1.4 per cent, male.
According to a Labour Demand Survey (2017), 41 per cent of the employers out of 3,500 private sector entities had claimed that “maternity leave and working hour relaxation” is a factor they consider when recruiting.
A recent World Bank report suggests the following main factors as hindrances to women’s participation in Sri Lanka’s paid workforce: marriage, childrearing, and related household chores that fall disproportionately on women.
Globally, the gap in female participation in the workforce has closed 57.8 per cent according to the Global Gender Report of 2020 by World Economic Forum. Women holding senior managerial posts has increased 2 per cent to 36 per cent in the private sector and public sector.
“Despite this progress, the gap to close on this aspect remains substantial as only a handful of countries are approaching parity,” said the report.
A state-supported maternity leave benefits
In Sri Lanka, gender parity is also a factor to raise its gross domestic product (GDP) by as much as 20 per cent in the long run by closing the gender gap in the workforce, an IMF assessment of Sri Lanka’s program said in 2018.
“For Sri Lanka’s economy to grow, it needs to maximize the potential of its workforce.”
Verité Research proposes that to reduce these disadvantages the government should set off the exorbitant cost borne by the private sector via tax incentives.
1. Tax relief for MLBs translate into positive economic and labour market outcomes.
Increased female participation in the labour force will increase income flow into households
and cushion post-Covid19 job-losses.
2. Tax relief for MLBs cost less than other welfare initiatives. Based on 2018 data, Verité
Research estimates the annual cost of MLBs to be LKR 4.2 Billion. This amounts to
approximately 0.25% of tax revenue. In contrast, Samurdhi subsidies amounted to 2.3%
(LKR 39.2 Billion) of tax revenue.
3. Tax relief for MLBs is more cost-effective than the government’s recent initiative to
boost employment. Verité Research estimates that the government’s plan to recruit 160,000
workers will cost approximately LKR 58.67 Billion annually. State-supported MLBs will
boost the employment of women for less than one-tenth of this cost.
4. State support for MLBs is consistent with existing MLB practices across the world. 129
states either fully (96 states) or partially (33 states) fund MLBs.
5. The 2019 budget included a proposal for the state to partially support MLBs through
tax deductibility, but the proposal was not implemented. Subsequently, the tax cuts
implemented at the beginning of 2020 were worth LKR 52 Billion – ten times the value of
tax concessions necessary to support MLBs. Yet the opportunity to structure these tax
concessions in a manner that would fund MLBs was lost.
Society and the state have an obligation to ensure that women have equal opportunities in the labour
While employers must bear the cost of MLBs, women will continue to be disadvantaged.
The state can boost female economic participation and combat this unfair disadvantage against women
in the 20-40 age group by including MLBs in the forthcoming 2020/2021 budget, Verite proposed.
(Colombo, October 1, 2020)
Reported by Mahadiya Hamza