Unemployment: a priority matter | Sunday Observer

Unemployment: a priority matter

25 September, 2022

The prevailing economic crisis has drastically affected the entire job market in the country for many reasons. Job losses for workers and their families are an extremely disruptive life event with far-reaching impacts on their life trajectories.

Particularly vulnerable are Sri Lankan middle-class families who lack adequate financial alternatives. The uncertainty that emerges from the insecure employment situation can be ambiguous, complicated, and volatile for people who have no options other than their existing jobs.

Due to the shortage of foreign currency, a dangerous threat is posed to the indigenous industries in small-medium and large-scale enterprises. Most of these manufacturing concerns are on the verge of closure, causing severe job losses.

According to industry sources, scores of direct and indirect jobs are under threat due to restrictions imposed by the Government on raw material imports on one hand and other financial constraints. Massive increases in bank interest rates and price escalations of materials and labour have also become added restraints.

First blow

Two major sectors, in addition to small and medium-scale industries, are the construction and tourism industries, which have taken the first blow in 2020/21 due to Covid-19 and thereafter. Even though the tourism industry shows clear signs of a good recovery, the construction industry sector, with its large direct and indirect workforce, was affected destructively, with most construction projects coming to a standstill.

According to industry sources, the construction sector does not show any sign of recovery and the attention given by the authorities to the crisis is completely unsatisfactory.

The National Construction Authority reveals that close to 90 percent of work is at a standstill and the vast majority of its extra-large workforce has already lost employment and is in dire straits currently fighting for survival.

The construction industry spokespersons say that unprecedented cost escalations, spikes in exchange rates, severe scarcity of materials, and the inability to import essential raw materials are some of the reasons that currently affect the industry. In addition, the prevailing unbearably high interest rates and other stringent actions by lending institutions impose added inconvenience.

Economic recessions and unemployment are the two sides of a coin. It is a clear sign that a recession has begun. Joblessness has become a common occurrence due to a financial downturn where the private sector, the largest employment provider in Sri Lanka, has to cope with diminished market demands, elevated costs, and declining profits.

In such scenarios, the number of unemployed continuously rises while the overall performance of private-sector organisations declines.

Reports reveal that the Covid-19 pandemic slashed hundreds of thousands of jobs, mostly affecting young and middle-skilled workers. The pandemic dramatically reduced employment conditions in the country. In 2021, the unemployment rate rose to 5.2 percent, making the count nearly half a million unemployed people.

The current crisis that hit the country with a sucker punch in March this year has undoubtedly increased the numbers immensely. Except for the export sector, none of the other segments has shown significant improvement in performance since the pandemic’s emergence. The employees in the tourism industry were the hardest hit, with the annual revenue dropping to US$ 67 million in 2021 and losing hundreds of thousands of jobs during the year.

Although part of the media time and again brings the subject of unemployment into the limelight, the accountable authorities do not seem to pay adequate attention to this serious societal issue. The bureaucrats and politicians turn a blind eye to this desperate issue that soon will distress the entire society.

The social and personal costs of unemployment include severe financial hardship and poverty; debt; homelessness; family tensions; crime; and increased social isolation, among many other negative facets of the overall social life of our countrymen.

Therefore, the bitter truth is that rapidly increasing unemployment due to the present economic conditions will impose high costs on society and the country. Also, most of these costs are unrecoverable, so everyone in the country has to bear a part of all of

In addition, those who are working in low-paying and low-skill jobs will be underemployed and may not have enough opportunities for alternative work and earn enough to last.

Living standards

The individual cost of a job loss creates an immediate impact on the victim’s living standards. Fear of facing the future and maintaining a family is the first mental stress an individual may experience. Among other negative effects, psychological tension can be detrimental to such an individual.

Apart from the trauma of losing a job, the prevailing unbearable cost of living creates immense pressure on an unemployed person.

Extended idleness can also cause an erosion of skills.

For example, according to tourism industry sources, currently, tourist hotels are experiencing a shortage of skilled workers. Employees who have lost jobs during the pandemic have either idled for a long time or moved into other professions, creating a vacuum in the industry. The only solution is to train or retrain a new group of workers for hotels, at a colossal cost.

The overall social cost due to unemployment and underemployment cannot be mathematically calculated. Yet, they are real and may cause numerous social issues. The loss of revenue for family maintenance can increase petty crime in the neighbourhood.

More crucially, the already out-of-control drug abuse might encourage the addicts to find alternative methods to make money when they lose their jobs. Due to these causes, in urban areas, the menace of petty theft has already increased, according to city dwellers.

The unemployment issue causes heavy burdens and concerns for the economy in no uncertain terms.

Not only is the contribution to the national GDP affected, but also the state may be compelled to spend extra on social protection campaigns.

Family income is obviously extremely important for everyone. Hence, at this crucial juncture, finding ways to support the jobless must be a policy of the Government. However, there is only one concrete solution that exists to support such people and to reduce the burden.

The solution is that the Government must support and encourage, as a policy, the private sector organisations, specifically Sri Lanka’s micro, small- and medium-scale enterprises (MSME) sector, which has contributed massively to the economy during the past many decades.

The Government must give more attention to uplift of the MSME sector than anything else, perhaps even more than social welfare programs planned ahead. No welfare effort will match the impact that can be created by a successful business enterprise that can assist in creating jobs.

Negligible amounts

The simple reason is that the common citizen needs money to protect their families first and foremost. The negligible amounts distributed by the Government through welfare programs are not sufficient for people to live on. They are only useful as a supplement.

Evidently, the Government is focusing heavily on tourism, the most valuable foreign exchange earner (after ex-pat remittances), as the vast majority of its revenue remains inside the country. This certainly will help reduce unemployment with more tourist arrivals and more related operations restarting their businesses.

Likewise, the export sector keeps growing continuously, giving relief to the whole country.

However, as discussed earlier in the article, the Government’s attention to the MSME sector does not seem to be adequate.

Even with heavy financial burdens, if the Government can provide considerable assistance, many jobs can be created once again, especially in suburban and rural communities.

Whilst imposing restrictions on non-essential imports is a substantially positive move, the Government must relax some of them on raw material imports to help indigenous industrialists.

Only the development of the private sector with local industrialists and foreign and local investors can provide a clear solution to the newly emerging unemployment in Sri Lanka.