Labor Market Trends and Outcomes in Sri Lanka
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Patterns and Trends in Labor Earnings Overall, average real monthly earnings rose by 19.8 percent from 1996 through 2006, with adults and males gaining more from the increase. Average monthly earnings for adults grew by a larger margin (20.4 percent), compared with those for youth. The earnings growth (9.0 percent) was lowest for youth ages 15–24. By gender, real earnings rose 21.8 percent for males and 17.2 percent for females. Youth ages 25–29 were the only age group in which male earnings did not rise more than female earnings. Real earnings grew faster over 1996–2000 (3.8 percent) than over 2000–2006 (0.7 percent). This decline in real earnings growth was similar for males and females and for private sector workers. However, the real earnings in the public sector grew at a higher rate in the latter period. Real earnings showed positive growth in all occupational categories in the 1996–2000 period but slowed substantially or turned negative in the later period for all but three categories—“legislators,” “professionals,” and “skilled agriculture and fishery workers.” By industrial classification, real earnings growth rates continued to grow only for “public administration, defense, and other services.” In all other industries, the earnings either declined or showed very low growth. These trends are largely explained by the poor performance of the garment and tourist sectors, which was largely attributable to increased competition and to the years of conflict. At the same time, high inflation and interest rates over the 2000–2006 period crowded out private investments. The ability of the country to attract foreign investments in the post-2000 period was also low (with the exception of the posttsunami period), because of the unstable macroeconomic environment in the country. On average, public sector employees earn more than private sector employees, and the public-private gap in earnings is wider for adults than for young people. Public sector monthly earnings, on average, were higher than private sector earnings for all age groups, with the highest public-to-private ratio (of 2:1) observed for adults. Over the 1996–2006 period, the public-to-private gap in average monthly earnings narrowed for youth groups. Real earnings rose for workers in both the public and private sectors—by 17.6 percent for private sector workers, and by 24.1 percent in the public sector. Real earnings also grew across age groups and sectors of employment, except for youth ages 15–24 in the public sector. Real earnings for this group fell by 5.1 percent over the period.