Real wages continue to lag inflation; informal private sector wages add gains

Real wage growth or the wages accounted for inflation in the country has remained in the negative for private sector employees for over one and half years before the informal private sector wages turned positive in January this year. But the formal private sector wages are still wobbling at negative levels, although with signs of recovery. 

For the public sector employees, who amount to 15 percent of the labour force, the real wage growth which remained in the positive from October through December 2020, turned negative in January, said Charts.lk, a statistical analysis platform, after analysing data from the Central Bank and the Labour Department. 

Sri Lanka’s formal private sector, which employs 28 percent of the country’s workforce, saw its real wages declining every month since August 2019 through January 2021 over the same month in the previous year, though prices in the economy remained benign. 

However, the negative growth has been softening since February 2020 when the real wage growth turned a negative of nearly 6.0 percent year-on-year, recovering to just 1 percent in January 2021.

This could be attributed to the low overall prices in January 2021 as the headline inflation measured by the Colombo Consumer Price Index fell to 3.0 percent from 4.2 percent in December 2020. 

Meanwhile, the informal sector which is 57 percent of the country’s labour force, saw its earnings increasing in real terms in January 2021, after staying in the negative since around August 2019. 

In January 2021, their real wages grew by about 1 percent year-on-year. 

The rising real wages is also attributable to the falling unemployment as there are more job opportunities in the economy now than the people who are looking for jobs, which send the wages up.

Sri Lanka has an acute people and skill shortage which has hamstrung businesses in almost every sector.   

Early this week Mirror Business reported that Sri Lanka’s unemployment rate had reduced to 5.2 percent or around 450,000 people by end of the fourth quarter in 2020, from 5.8 percent in the third quarter. 

Meanwhile public sector wages suddenly turned to record a negative growth of nearly 4.0 percent in January, after remaining in the positive since October 2020.