Exports for quality jobs

Exports are important for many reasons. They attract much-needed foreign exchange, fund imports and debt payments, create employment opportunities and bring new knowledge and technology to a country. Exports are also a way to change internal labour markets, but for this, the right policies have to be created. 

Exports, of the right kind, encourage formalisation of the workforce, create higher-paying jobs and increase inclusivity. A new report by the International Labour Organisation (ILO) and World Bank released this week shows that in Sri Lanka income from exports do not necessarily seep into wages. The study said on average, a $ 100 increase in exports would increase the annual wage of a worker by Rs. 975 based on 1999 price levels. In some cases, salaries only increased by Rs. 206 for an increase of $ 100 per worker. Clearly, this trickle-down needs to improve for workers to get the most out of exports.

Even though Sri Lanka has significant exports in apparel and tea, the exports basket needs to be diversified with more focus being on high-end exports that would provide higher income. These however tend to be very challenging as they require a highly-skilled workforce, which Sri Lanka is still struggling to create. 

Even though the workforce has a high level of literacy, they are less skilled. Matters are also made more challenging by the fact that Sri Lanka’s Foreign Direct Investment (FDI) strategy is more focused on big-ticket projects such as refineries, steel plants and LNG power plants that are not geared towards increasing tradable goods and services. 

Even though the largest segment of the workforce is in services, Sri Lanka still has the challenge of increasing workers in the formal workforce. Currently, as much as 60% of jobs are informal and many of these exist in the private sector. Informal jobs also mean fewer workers have access to social protection such as insurance or pensions and smaller numbers of women have secure jobs. 

Sri Lanka has had persistently low female employment in the formal workforce for decades, a situation that could be helped if the right kind of exports are encouraged.   

This is not a situation that is limited to Sri Lanka. One-third of the working age population in low – and middle – income countries lack the basic skills required to get quality jobs, leaving them unable to achieve their full productive potential and limiting economic investment and growth. 

The challenge is further exacerbated by a rapidly changing global economy that increasingly requires workers to be innovative, flexible and adaptive. According to World Bank calculations, more than two billion working-age adults are not equipped with the most essential literacy skills required by employers. Among young adults under the age of 25, the number is about 420 million worldwide.

Unskilled workers are forced into unemployment or are stuck in unstable low-wage jobs that offer little career mobility or growth. As they age, they become increasingly vulnerable to job losses and labour market shocks. This situation does not change even if they are linked to export industries unless they promote high skills. Sri Lanka is additionally vulnerable in this situation as it has an aging population and high labour costs.   

Therefore, the Government has to concentrate on an FDI strategy that attracts high-end tradable exports if the country is to have sustainable growth.