No real economic transformation: Expert

The extremely low level of unemployment and the single digit poverty in Sri Lanka have been achieved not due to a real transformation of the economy but as a result of higher temporary migration and the ever bloating public sector, a top economist in the country said.

Dr. Indrajith Coomaraswamy, decoding the impressive numbers behind those key socioeconomic indicators, identified the money sent by those migrant workers and the transfers from the military families as key reasons for the poverty level to decline in Sri Lanka.

“If you look at the unemployment rate, it has come down to 4 percent (2012) significantly due to the fact that large numbers of people are going out of the country as migrant workers. And there has been a rapid increase in the size of the public service,” he said, urging authorities not to be complacent.

According to the 2012 Central Bank annual report, the rate of unemployment in Sri Lanka has fallen over the last decade to a historical low of 4 percent and the level of poverty dropped to 8.9 percent in 2009/10 from 15.2 percent in 2006/07. Sri Lanka’s public sector more than doubled to over 1.23 million during 2006 and 2012.

Meanwhile an ex-Central Banker, Dr. D.R. Wijewardena recently cautioned against sending more for foreign jobs as it could create a labour shortage in the country at a time when the unemployment rate is as low as 4 percent which is considered as near full employment.

Dr. Coomaraswamy who is the former Director of the Commonwealth Secretariat economic Division also reminded that despite the low unemployment rate, the real challenges still exist.

“The point that I am trying to make is, while these numbers are good (and I don’t think one should take the credit away from that), they have not been generated due to the transformation of the economy. So, the challenge is really out there before the country,” he noted.

Interestingly this situation in Sri Lanka was recently identified by Verite Research, a local think tank, as a phenomenon of ‘jobless growth’. Verite showed that the number of jobs in the country have in fact dropped by 68,222 between 2011 and 2012 despite the fact that the economyhadgrown.

In contrast to an expanding labour force in a growing economy, the reverse has happened where the labour force has contracted from 8.55 million in 2011 to 8.46 million in 2012.

“In other words 195,000 people gave up on looking for work. Therefore, if people get fed up and stop looking because they have lost hope, then unemployment falls,” Verite said.

The think tank further said growth in output that is faster than growth in employment can be seen as a positive over a long-term, due to increased productivity and incomes.

“But decreasing jobs in a growing economy, especially one with a low level of technology does not make sense,” they quipped.