Job losses in Sri Lanka to rise due to global crisis

ILO calls for greater social protection; EFC wants flexibility in difficult times

A top ILO consultant has warned job losses to increase this year on account of the global crisis.
According to Dr. Ramani Gunatilaka, author of a report by the International Labour Organisation (ILO) during the first quarter of this year 96,000 jobs were lost in the industrial sector with 60,000 jobs lost in the apparel sector and 36000 lost in the construction sector. However 203000 new jobs were generated in the agricultural sector while 129000 jobs were generated in the services sector.
“Job losses are likely to continue for the rest of the year as the economies of our principal export markets are still in recession,
” Mrs. Gunatilaka told The Bottom Line.
“The crisis is hitting Sri Lanka,” she explained “And those who have lost their jobs in the formal sector have moved into the informal sector resulting in changes in living and working conditions.”
She explained that the study indicates that the Garments sector which is the largest industrial and export sector contributor, is the worst affected by the present crisis.
“Data from the District Offices of the Department of Labour confirms that out of the 55 firms affected by the crisis and had to be closed down, over half belonged to the apparel sector.”
While more women lost jobs in the apparel sector, more men were left unemployed in the construction sector and majority of those who lost their jobs belonged to the semi-skilled unskilled and skilled operators rather than those in executive positions. However, her study revealed that retrenchment and closure remained as the last option in a list of strategies deployed by these firms to counter the crisis.
In a bid to cut down costs in the wake of declining orders employers had embarked on strategies such as freezing recruitment, natural labour attrition, closure of production lines and rationalization of factories with no overtime, reducing number of days of work and eliminating special allowances.
“A handful of firms have instituted wage cuts progressively,” she informed, “And the employer’s response has been largely reactive. They have focused on cutting labour costs instead of focusing more proactively on alternative strategies like multi skilling, greater functional mobility and alternative work schedules.”
Poverty Implications
“Many employees laid off due to the crisis are migrants from rural homes,” she informed, “And avoid going back if possible, so many are taking up casual, informal work such as bakeries while some are re-employed by small enterprises which are provided with subcontracts by the factories.”
She cautioned that with migration of family members to urban areas and overseas being curbed by the crisis the rural poor are going to be in dire straits if sufficient safety nets are not implemented. The situation is worse among plantation estates where many do not have the resources to look for jobs and have no identity cards. ”The number leaving for foreign employment has decreased from 82282 in the first four months of 2008 to 73264 in the first four months of 2009, with remittances declining by 1.9%.”
She said that Samurdhi’s new eligibility criteria need to be implemented and the programme reformed so that more support can be provided for those who really need it.
”But for those losing their jobs in the formal sector, we urgently need an unemployment benefit insurance scheme. The government may be able to supply the seed money, but to be sustainable, employers and employees need to agree to make contributions to it, something which they have yet to do,” Mrs. . Gunatilaka pointed out.
Transmission of Crisis
The global crisis has transmitted itself to Sri Lanka by affecting the construction sector where foreign investors are unable to complete the projects undertaken, drop in tourism numbers, fall in the number of ships entering the Colombo port , contraction in exports and a squeeze in banking lending affecting Small and Medium Enterprises adversely.
While the crisis has caught the Government unprepared and unaware, the report explained that the crisis has brought out how ineffective policy making has been in Sri Lanka in terms of creating a social safety net to protect vulnerable workers and those who have lost their jobs.
“The global crisis along with the collapse of Golden Key in Sri Lanka has resulted in a new class of middle class poor who do not fall under the Government’s safety net for the extremely poor,” she explained adding that the system ‘Samurdhi’ is also stretched thin among those who deserve it and those who do not.
Speaking on the reaction of the labour authorities in the country she stated, “They are striving to provide employers with as much flexibility as possible within the law to keep the businesses going, from temporary layoffs to a relaxed working week to deferred EPF and ETF payments,” she said, “but the informal workers who have lost their jobs are still left unprotected.”
However NATURE General Secretary T.M.R. Rasseedin stated that the employee unions will not approve of a five day week with the additional work hours added to the five days unless some form of compensation is made.
More executives taken VRS
Employer’s Federation of Ceylon (EFC) Director General Ravi Pieris stated that Sri Lanka has a social policy of a developed country whilst having an economic policy of a developing country in terms of its labour laws. “This causes a higher burden on the employer,” he added.
“The Termination Act is the best example,” he stated, “While those who have benefitted from the compensation provided by the act are those at the top we need to come up with a policy that would provide adequate protection to the ordinary worker.”
A survey conducted by the EFC has also revealed that among the 129 respondents of EFC’s 540 members, 614 employees had accepted Voluntary Retirement Schemes (VRS), with 53.7% of them in executive levels. “However, 49% will not resort to retrenchment with a further 41% stating that they are unlike to.”
However, he explained that the country has been more resilient in comparison to many countries. “We have seen only three members in the federation go before the Termination Unit for retrenchment with only 43 employees retrenched within the whole year.”
International perspective
Speaking at the launch of the report Geneva based ILO Economist Steven Kapsos explained that many in Sri Lanka are vulnerable to loosing jobs in the present scenario with the youth 7 times more vulnerable. “Migrant workers are among the first to be retrenched,” he explained “while many choose to accept almost any condition just to keep their jobs resulting in an undocumented shadow economy.”
He called on the Government and policy makers to focus more on improving spending in the domestic markets of the country. “The Government of Sri Lanka has come up with many stimulus packages for the export industry which contributes to 30% of the GDP, but the question is, given the limited fiscal space in Sri Lanka what policies can best boost social protection, stimulate demand and support employment?”