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Saturday June 15th, 2024

Without female engagement, Sri Lanka’s Growth will sputter

In rich countries, almost as many women as men work. Women’s labour market participation is also high in poverty-stricken countries where it takes at least two incomes to keep a family sheltered and fed. In Nepal, a poor landlocked country, around 80% of working-age men and women are in the labour market. In Sri Lanka, 73.6% of working-age men are in the labour market but only 36.6% of working-age women. This 37% gap between participation of working-age men to women in the labour force is the 14th highest in the world.

Planters contend morning sun, evening rain and cool nights are best suited for growing orthodox or black tea, the type for which Sri Lanka made a name for itself in the century and a half since the crop was first planted. Sri Lanka’s misty, cool and damp central highlands provide the perfect backdrop. Mist covered mountain slopes are cold and wet when female workers, who do most of the plucking in Sri Lanka’s highland plantations, arrive at the fields.

Tarpaulin head covers, fraying jerseys and saree clad to keep the cold and damp at bay, they work briskly to pluck at least 18 kilograms of tea leaves before returning home to finish housework. Although it’s not so obvious, once plucked, tea has to be moved along the processing line quickly to preserve the quality of the final product.

Leaves plucked in the morning are transported to the factory without exposure to the midday sun and processed the same day. Until the late 1980s, tea dominated Sri Lanka’s exports and funded imports of petroleum, food and machinery for production. However, tea’s economic contribution didn’t benefit the over a million workers who plucked and processed the crop.

The working conditions of people living in estates aren’t as idyllic as depictions in postcards and tourism promotion images suggest. Mostly of South Indian origin, tea estate workers record the lowest educational levels and life expectancy in Sri Lanka. They are also the poorest people in the country. Poverty in the estate settlements, dominated by tea but including rubber and coconut, is at 10.9%, almost three times the national average.Estates have the lowest percentage of recipients of social safety net benefits, according to an estate sector nutritional study by the World Bank.

However, a greater number of women in estate settlements are more likely to work than those in other rural areas or cities. The difference between the male and female labour force at 9.6% is narrowest in the estate sector (see Chart 1). In urban areas, the gap is 31.4% and 26.2% in rural areas. Currently, 95.8% of those in the labour force (labour market) have jobs.

However, the estate work ethic is an isolated phenomenon. Those in estate settlements account for just 4.5% of Sri Lanka’s labour market, and their high labour force participation doesn’t have much of an effect on the national average. In rural areas, where most people live, the gap is 26.2%; it is highest in cities at 31.4%.

For the purposes of this story it’s important to appreciate the difference between the labour market, which is those over 15 years old who have a job or are looking for one, and the labour force participation rate (LFPR), which is the labour force (market) as a percentage of the total working-age population.

For instance, a 20-year-old university student won’t be included in the labour force (LF) if she is unwilling to work. However, someone of the same age who is job hunting will be included. Data shows that in rich countries, almost as many women as men work. Women’s labour market participation is also high in poverty-stricken countries where it takes at least two incomes to keep a family sheltered and fed. In Nepal, a poor landlocked country, around 80% of working-age men and women are in the labour market. In Sri Lanka, 73.6% of working-age men are in the labour market but only 36.6% of working-age women.

This 37% gap between participation of working-age men to women in the labour force is the 14th highest in the world according to data compiled by the International Labour Organisation (ILO) with data from national statistics offices worldwide. Female participation in the workforce in Sri Lanka has been creeping along in the last three decades but the numbers are staggeringly low compared to other countries in a similar stage of development. Other lower-middle-income nations like Georgia, Paraguay, Indonesia, the Philippines, El Salvador and even the Maldives have rates of female labour market participation between 10% to 25% higher than Sri Lanka.

In a country which elected the first female prime minister in the world, it’s shocking that women’s workforce participation is one of the lowest globally.

Sri Lanka’s laws mostly grant equal rights to genders. Female politicians like Chandrika Kumaratunga have shown women that anything is possible. It’s arguable that forces that bore aloft politicians like Kumaratunga to the presidency and before her, her mother to prime minister, had little to do with feminism. But the country’s willingness to elect female leaders may indicate that most Sri Lankan’s aren’t sexist.

Only 4.2% of Sri Lankan’s are unemployed. Many private sector businesses struggle to find talent. Some are hiring workers from overseas while others like the ready-made clothes makers are locating new factories in foreign countries because they can no longer find enough people in Sri Lanka. Not many more men can be working. Globally, male labour market participation is 75%, approximately the same level as in Sri Lanka. In rich countries, the rate of male labour market participation is lower and it’s around the global average in poor countries.

The global female labour market participation rate is 48%. This is higher in rich countries and lower in some poor ones. If the rate of female participation were equal to male, 2.24 million more women would be in the workforce and Sri Lanka’s labour market would swell to 10.8 million.

If the average Sri Lankan household has four family members, then around 2.5 of them will be in the workforce. Even if Sri Lanka’s female participation rose 15 percentage points to around 50% that would bring over one million people. If Sri Lanka plans to create one million new jobs, they will have to be filled by foreign workers unless a million women can be encouraged to join the workforce.

Conjecture aside, so many women being outside the workforce is a loss for women. But it’s also a social and economic loss for people and businesses. Economic empowerment of women across the world underlies the remarkable economic and social transformation during the last 50 years.

Millions of people who were once dependent on men have been able to take control of their own economic lives. Social change of this scale and involving people’s identity is usually chaotic. However, in most places, the transformation has taken a benign form, welcomed even by men. In rich and middle-income countries,the transformation didn’t just happen by women deciding they needed economic independence. Social arrangements have had to change around women’s roles as mothers, house workers and caregivers – all unpaid responsibilities.

How successfully a society is able to address the social consequences has determined the success of the transformation. he World Bank, a lender for development to low-income countries, grouped these challenges into three broad areas in a 2017 report on improving Sri Lanka’s female participation in the workforce. They are: the disproportionate responsibility for household work falling on women, the challenge of women not acquiring skills the job market demands and third, gender discrimination in the workplace. Of the 8.4 million working-age women in the county, only 3.1 million are in the labour market and 6.8% or 358,000 are unemployed. Male unemployment is only 2.7%. Housework keeps 92% of women between the ages of 25 and 54, around 5.4 million women, economically inactivity or outside the market. Sri Lanka and its female population have passed up the social and economic transformation of the emergence of women into the workforce over the last 50 years that benefited many countries. Goldman Sachs, an investment bank, calculated that increasing women’s participation in the economy to levels equalling men will add between 8-21% to GDP in a number of the countries it examined including Italy, Germany, Spain, Japan, America and France.

Except for Italy and Japan, all the other countries mentioned in the study have female labour market participation rates that are no more than 10 points less than those for men. Sri Lanka’s labour force participation gap between the sexes is 37%. Worse still, it’s taken over a decade for women’s participation rate to rise 12 points. Even worse still is that progress in the last two decades is much slower compared to the decade before.

Politics, the feminist kind, and its vilification of domestic slavery and lambast of workplace discrimination were the foundation for most of the progress in wealthy nations. In poor countries, potential starvation offered no other choice for women. Sri Lanka didn’t identify with either group; neither being universally poor to force all women to the workforce, nor having an influential enough feminist movement to inspire a social and economic transformation. Despite electing women to leadership, Sri Lankan men don’t universally respect females.

A survey a few years ago found that 80% of females had experienced sexual harassment on public transport. Recently a follow-up survey found the number to be 90%. It’s a paradox that a society holding women and motherhood in high esteem is capable of such casual and widespread harassment of strangers in public transport. Women hold responsible positions in government and private companies, proving they are as capable as men as leaders. On other qualities like honesty, empathy and willingness to compromise, many judge them to be superior. Viscerally, men that casually harass girls in public transport or ignore such behaviour of others, would find a female leader as unnatural or unacceptable.

Commentators offer various reasons why educated women stay out of the labour market. An International Labour Organisation survey published in 2016 asked women, of which 56% of respondents were full-time homemakers, about their choices. Of them, 29% said they preferred to manage the home over all other options, while a third suggested it was one among several preferred options. 36% of survey respondents said they would much rather be doing something else than managing the home. Of those who opted to manage the home, the vast majority said they enjoyed it, this also had to do with raising children.

Sri Lanka’s economic growth, driven by expansion in services where brainpower triumphs brute strength, could equally match women with men. Despite this, women remain frustrated because they are forced to choose between motherhood and their careers. The gap between the sexes is greatest in cities. Urban women have seen a slight bump (1 to 2 percentage points) in labour market participation over the last decade. However, the gap remains greatest here ‘considering the polarisation effect of marriage,’ according to the World Bank’s ‘Getting to Work’ report.

The report, analysing available government and other data, highlights how the probability of a married woman being in the workforce is 4.4% lower than for an unmarried one (the corresponding data for 2009 & 2006 is 6% & 8% lower). Meanwhile for men, marriage provided an 8% premium nationwide (the corresponding data for 2009 & 2006 is 14% for both years).

Some jobs preferred by mothers, such as teaching, don’t see an increase in wages with experience, and hours are relatively light. Government jobs also have similar characteristics, leading many educated women to pursue them. However, few new government jobs are being created and female youth unemployment is now 24% for girls up to 24 years and 17.4% for those between 25 to 29 years old. Unemployment among boys of the same age is about 10 points less. By opting for jobs with light hours – and low opportunity for a pay increase with experience – women are ill-equipped to enter the market for private-sector jobs where wages can rise but schedules are demanding.

Dileni Gunewardena, an academic at the University of Peradeniya with an interest in topics related to female labour market participation, points out that employment needs to make financial sense: “If the wages are not worth their while, they would not come to work.” Sri Lanka’s antiquated laws, designed to protect female employees, have the opposite effect. Concepts like part-time work, flexible hours or remote work are not clearly defined and leave employers to bear the same level of responsibility for these roles as for their full-time staff.

This makes it harder for women, who prefer flexible terms, to find opportunities because large companies won’t want the complexity and the risks associated with working in the law’s grey areas. For instance, the Shop and Office Employees Act forbids women working beyond 8pm or more than eight hours a day. While companies can claim an ‘administrative relaxation’, which is an exception, it remains a risk for small and medium employers. The overprotective laws regarding shops and offices contrast with the Factories Ordinance, a document that legitimises factories demanding 60 hours of overtime a month if there is a need to ‘deal with the pressure of work in the factory’.

As it turns out, it can be easier for women to work in the informal sector, as it gives them more flexibility, even at the cost of security. Universally, working parents feel guilty and worry about the limited time they spend with their children due to their crowded schedules. Since childcare is expensive, two-income homes need babysitting help from family. When this is unavailable mothers are often forced to quit work even if that means narrowing their financial opportunity. Different countries have different solutions to the challenge of combining work and parenthood. These range from state-sponsored childcare to long leave with pay, both often choices available in rich countries.

Those keen to get women back to work soon, offer childcare. Others make it easier for parents to work part-time. In poor countries, the resources for such options are limited. Another problem looms. Due to falling fertility rates, Sri Lanka’s over 60 population will double in the next 25 years. This could add taking care of elderly parents to family responsibilities. For decades, girls have had equal access to education and in most cases outperformed the boys. As many as 98% of girls successfully complete their lower secondary exams, and they outnumber boys in tertiary education. This progress surpasses all regional averages of developing countries and has had a positive impact on women’s health. At the same time, women are still more likely to take up ‘typical’ female jobs instead of considering the current labour market demand.

While a government position is seen as a prestigious career path, the overflow of applicants makes it nearly impossible to land one. Surprisingly, almost half of information technology students are female. Although their interest in IT degrees is rising, it is not yet being reflected in the workforce and women are missing out on well-paid jobs that could be done from home if they choose to. In many cases, a woman’s higher education degree is nothing more than a ticket to a better marriage. A waste of talent and resources invested in education. Even when women do acquire relevant job skills they somehow drop out of the labour market. This is particularly disappointing because Sri Lankan families have benefited from access to birth control for decades and small planned families have empowered women. The pill was followed by electricity, which made available refrigerators, allowing food to be prepared for consumption over many days, washing machines to automate the work even a passionate homemaker dreads, and fans and air conditioners for a restful night’s sleep.

The paradox is that these advances have not moved the needle on females in the labour market by more than four percentage points in the last two decades. In other countries, they have incentivised people to invest time in acquiring skills that are hard to learn and pay off over many years. In the ILO study, responders explained the low number of female managers and supervisors on factory floors was due to the fact that even a small number of men could not be supervised or ‘handled’ by women. Occupational segregation of men and women was considered normal – therefore not unacceptable – establishing the ground for differing treatment and reward. Gunawardena’s research suggests even though Sri Lankan women possess higher cognitive skills, and the same level of non-cognitive ‘soft skills’ so highly valued in the market, they are not rewarded accordingly.

Women also believe they will be discriminated against in the workforce. In a survey questioning if they believed men and women with similar qualifications will be offered similar opportunities, 48% of respondents disagreed or said women will be discriminated against. Conducted in 2012, some of the survey results were reproduced in a World Bank report on improving female workforce participation Even so, the effects of workplace discrimination and lacking skills demanded by the job market doesn’t obstruct women to the same degree as household roles and responsibilities, which fall disproportionately on females. Practical considerations will soon push the agenda. Private companies will need more skilled managers and they won’t find enough of them in the ranks of men. Many more young women will have expectations greater than the role of a housewife, and the resulting economic empowerment will alter the landscape.

Unless social arrangements, particularly those that hold women back for household responsibilities, catch up with economic changes world over, Sri Lanka’s development march will falter.


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Sri Lanka beats key IMF program targets for March 2024 amid rupee stability

ECONOMYNEXT – Sri Lanka has exceeded key quantitative targets set in an International Monetary Fund program for March 2024, based on preliminary data the Washington based agency said in a report.

The March data are not performance criteria on which reviews are conducted but are indicative targets which shows the progress of the program and are a stepping stone for a September review based on June data.

An indicative target for the primary balance (roughly overall deficit minus interest costs), was assessed at 316 billion rupees more than four times the 70 billion rupee target set in the program.

Primary balance can be a big surplus if the interest bill is high and capital expenditure is cut and is a type of crisis management tool after a central bank triggers a currency crisis by cutting rates with inflationary liquidity tools.

However, Sri Lanka’s Treasury has also kept a lid on most current spending. A state salary hike is however due after the currency collapse made life difficult for everyone.

Meanwhile more taxes have been collected from the people to finance the island’s bloated state.

A 750 billion rupees central government tax revenue floor has been exceeded to reach 837 billion rupees.

Central bank credit to government (outstanding stock) has been reduced to 2,691 billion rupees in March compared to a target of 2,800 billion rupees. In December the CB credit was calculated 2,742 billion rupees.

Net international reserves of the central bank were brought up to a negative 1,268 million US dollars exceeding the target of a negative 2,035 by almost 700 million dollars.

In order to collect foreign reserves, which is a type of appropriation of domestic savings of the people by the central bank (taking in deposits) and exporting it to the US and other countries to finance their deficits or by other agency debt in reserve currencies.

In order to collect such ‘deposits’ the central bank has to prevent them from being invested domestically.

It is achieved with deflationary policy through sell-downs of down its Treasuries holding to domestic banks or others, at a market rate, collecting interest from the government or repayments of re-finance credits, subject to any nominal changes in reserve money at a given exchange rate.

In 2024 the central bank allowed the exchange rate to appreciate, which can also reduce prices of traded goods boost real and nominal savings and make it easier to collect foreign reserves.

When domestic credit is weak it is easier to collect reserves. Reduced domestic credit and collection of reserves, including by private banks which then cannot be invested domestically, can push the external current account into surplus.

The central bank also met a 5 percent 12-month inflation target, with an achievement of 4.3 percent.

Sri Lanka’s economy grew 5.3 percent despite reserve collections, amid the stability provided by the central bank.

There were no central bank purchases of Treasuries from the primary market.

However the central bank injected overnight and term money to banks (not on a net basis) showing how easy it is for a rate-obsessed monetary authority to get around the requirement and create external instability again as soon as private credit recovered.

The central bank also allowed excess liquidity from dollar purchase to remain unsterilized for an extended period under its ad hoc pegging arrangement, getting a short term falls in rates, but triggering pressure on the rupee as a result in May and June.

It is not possible to collect reserves with a free floating exchange rate. (Colombo/June15/2024)

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Sri Lanka GDP grows 5.3-pct in first quarter of 2024 amid monetary stability

ECONOMYNEXT – Sri Lanka’s gross domestic product grew 5.3 percent in the first quarter of 2024 data from the state statistics office showed as the central bank continued to refrain from generating monetary instability.

Instead of printing money to cut rates under ‘flexible inflation targeting’ and printing money to boost growth by taking into account ‘potential output’ as permitted by its new monetary law, the central bank ran deflationary policy and also allowed the rupee to appreciate.

“The Sri Lanka economy experienced a more favorable economic condition[s] in the first quarter 2024, when compared to the first quarter in the year 2023,” the Department of Census and Statistics said.

“The high inflation had prevailed in the first quarter of year 2023, gradually reduced to a lower level by the first quarter of 2024 and this low inflation incentivized the economy by providing inputs at [a] much lower price.

The agriculture sector grew 1.1 percent in the first quarter of 2024, after also growing 1.6 percent last year.

Industry grew 11.8 percent in the first quarter, against a 24.3 percent last year.

The economy grew amid falling prices, the statistics office said in sharp contrast to the Anglophone macroeconomic claim that inflation is needed to boost growth, on which Sri Lanka has 5-7 inflation target has apparently been set.

Related Sri Lanka central bank pushing for high inflation target to boost growth

“Among ‘Industrial activities’, coinciding with the decline in input prices, the ‘Construction industry’ grew by 14.2 percent, parallel to this, the ‘Mining and quarrying’ industry too expanded by 18.3 percent during this quarter,” the Statistics Department said.

Sr Lanka’s services sector grew 2.6 percent, against a decline of 4.6 percent recorded last year.

The International Monetary Fund has also urged the central bank to give priority to stability.

Sri Lanka dropped the stability mandate in the earlier monetary law which was violated after the end of a civil war to push the country into serial currency crises especially after the International Monetary Fund gave technical assistance to calculate potential output.

Related Sri Lanka has a corrupted inflation targeting, output gap targeting not in line with monetary law: Wijewardena

Sri Lanka survived a 30-year civil war by giving priority to a stability mandate despite shortcomings in its operational framework but defaulted in peacetime amid activist monetary policy which denied monetary stability to the people. (Colombo/June12/2024)

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Sri Lanka’s NPP notes five-point crisis for economic growth sans details

Former JVP MP Sunil Handunneththi

ECONOMYNEXT — The leftist National People’s Power (NPP) has identified five crises that need resolving for Sri Lanka’s economy to progress, much of which emphasise a production economy targeting export growth though sparse on the detail on resource allocation.

NPP spokesman and former parliamentarian Sunil Handunneththi speaking at an event in Mulaitivu on Thursday June 13 said Sri Lanka is grappling with firstly, a collapse of the production economy, second, a budget deficit, third, a balance of payment crisis which has, fourthly, created a debt crisis, and finally, a resultant gap between haves and have-nots.

“We must first understand the crisis. We reocgnise five main crises that have the same impact irrespective of differences between the north and south.

“The first is the collapse of the production economy. We can see this historically. Agriculture that used to be some 30 percent of gross domestic product (GDP) has now fallen to 8 percent. Essential food is imported. We cannot produce the rice needed for the small population here. Things that can be made here are also imported.

“Second is the income crisis. For the people, their expenses are twice their income. The budget deficit is two or three-fold every day. Banks cannot give loans to businesses and industries because the government takes funds to address the budget deficit. The government takes most of the people’s savings for this,” he said.

The balance of payment crisis Sri Lanka is facing the third crisis, according to Handunneththi, which has triggered a debt crisis, in turn leading to a crisis of income disparity among the people.

“Third is the balance of payments crisis. Imports are two or three fold export income. The government has to take 11 to 12 billion US dollars in loans from foreign countries. When GDP is 80 billion US dollars, debt has gone over 100.”

“All this creates a massive gap between haves and have-nots. Without finding solutions to these crisis, there is no point distributing goods,” he said.

Handunnethi’s remarks appear to be departure from the NPP’s anti-corruption rhetoric which had centred its economic development policy agenda primarily on fighting corruption.

‘Fighting corruption’ and ‘recovering stolen assets’ have been popular slogans since the Aragalaya protests in Sri Lanka and the NPP has made it its central theme in its bid for power. The leftist outfit had also adopted a position that’s cautiously critical of the International Monetary Fund (IMF) and the reforms the international lender has prescribed for Sri Lanka in exchange for a 2.9 billion-dollar bailout.

However, NPP leadership had recently acknowledged the need to continue the IMF programme since the agreement has already been signed.

The Marxist-Leninist Janatha Vimukthi Peramuna, which controls the NPP, though it was never in government barring a brief stint in an Sri Lanka Freedom Party (SLFP)-led coalition in the early 2000s, has been instrumental in driving popular support against privatisation.

Three key policy pillars articulated by the JVP from 2001-2004 and embraced by mainstream politician Mahinda Rajapaksa’s administration in 2005 onward have been highlighted by experts.

From 2005, Sri Lanka halted privatisation, started recruiting tens of thousands of unemployed graduates into the public service every year with lifetime pensions, expanding an already bloated public sector and denying any benefit of a peace dividend to the country.

Sri Lanka also abandoned a price formula for fuel that had helped keep the rupee stable and inflation low from 2001 to 2003 even as global commodity prices went up from the ‘mother of all liquidity bubbles’ fired by the Federal Reserve from 2001.

From 2001 to 2003, state workers fell from 1.164 million to 1.043 million. By 2020, the public sector cadre has grown to 1.58 million with another batch of 53,000 unemployed graduates being paid tax money. (Colombo/Jun14/2024)

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