Inequality on the rise

May Day fever has left the air but many issues that could cause labour unrest remain unresolved in Sri Lanka. According to the International Labour Organisation (ILO), income inequality in Sri Lanka has grown significantly and is only behind China.

A report released by the ILO says that in the Philippines and Indonesia, two countries with significant unemployment challenges, unemployment fell to 7.2 per cent in January and 6.6 per cent in August respectively. When looked at in terms of gender gaps, unemployment rates were higher for women than men in Indonesia (1.7 percentage points) and in Sri Lanka (4.3 percentage points). Moreover, in the Philippines, Sri Lanka and Thailand, assessing the desirable fall in unemployment should be balanced against limited progress in improving the quality of jobs.

It also showed that one in five Sri Lankan youth are unemployed, with the number of female youth out of work 11.7 per cent higher than males. This shows a strong danger of inequality, which is growing despite increasing economic prowess.

On the surface, Sri Lanka has achieved good employment growth and economic growth. But this is only on the surface and if considered carefully there are some concerns and a lot of work needs to be done. At present the Government estimates 500,000 families are on Samurdhi and this is excluding the north and east while 43 per cent of Colombo’s population alone live in shanties. Examples of inequality can be seen everywhere if one decides to look with empathy.

The report goes on to say that despite the strong economic growth, there is concern that formal sector employment is showing very little growth while Sri Lanka’s informal sector continues to be large. The ILO has observed employment increase faster across the informal sector such as in the daily wage category and those working in households. This means that the country’s employment growth is not really coming from the formal sector and this is a concern because it leads to the question as to whether economic growth is creating enough quality jobs.

Underemployment is a significant problem in Sri Lanka and what is startling about this report is that not only does inequality undermine sustainable growth, but it also means that the technological transition to a knowledge economy is not happening in Sri Lanka. Though unemployment numbers continue to be low, it is doubtful if crucial industrial and technologically-advanced job creation is happening.

Ultimately, this boils down to development. Unless Sri Lanka can graduate to higher formal sector employment including better levels of exports and other sectors, there will be little room for real growth. Investment, particularly foreign and capital investment, will not happen unless there is a strong impetus from human resource development. Without better jobs in larger number, inequality ratios will only continue to grow.

In a recent report released by the Asian Development Bank, analysts point out that if the inequality ratio in Asia remained the same as in the 1980s during the last two decades, more than 250 million people would have been lifted out of poverty. This alone shows the debilitating power of inequality, especially for a country in a post-war environment. If this is not addressed competently, especially in a country with a history of revolutions, the results could be another war based on money lines.