Unemployment, unemployed and the unemployable.........IMPERATIVES FOR ECONOMIC DEVELOPMENT

Unemployment, unemployed and the unemployable.........IMPERATIVES FOR ECONOMIC DEVELOPMENT

By Nimal Sanderatne

Unemployment has been a serious economic and social problem for decades. The incidence of unemployment has reduced owing to several reasons though some of the features and character of unemployment are of concern.

The Governor of the Central Bank Ajit Nivard Cabral recently observed that while the overall rate of unemployment has decreased, unemployment among graduates is high. The inability of university graduates to obtain employment has been a feature of the country’s employment situation for several decades.

There are large numbers of graduates who are unemployable, while at the same time private sector employers complain there is a lack of skilled personnel. This feature of the educated being unemployed is the critical issue in the country’s employment situation.

There is a higher rate of unemployment as education levels increase. The problem of the educated being unemployed in a context of decreasing overall unemployment is of social and economic concern.

Defining unemployment

The definition of, as well as the collection of statistics on, unemployment is wrought with difficulties. The unemployment rate is defined as the number of unemployed persons as a percentage of the labour force and a person is deemed as unemployed if seeking and available for work, but had no employment during the reference period. Since even two days of employment is deemed as employment, there is much skepticism about the estimates of unemployment.



This is however the definition of unemployment used internationally. Unemployment data is particularly difficult to collect as some of those who are actually employed, as in self employment, deem themselves to be not employed. Employment in government service or in a private firm only are often reported as employed. Besides, some of those who are not employed may not be actively seeking employment, though they may say they are.

The statistics do not also capture adequately the extent of under employment that is prevalent in rural areas and among the urban poor. Many are employed for a short period and earn inadequate incomes. In spite of these deficiencies in statistics it is reasonable to assume that overall unemployment has reduced, that females find it more difficult to gain regular employment and that those who are educated are more unemployed than others.

It must however be mentioned that remuneration increases with increasing years of education and therefore seeking more education is rational, despite the high rate of educated unemployed.

Incidence and features of unemployment

The overall rate of unemployment has decreased from double digit levels of the 1970s to a moderate level of 4.5 per cent at the end of last year. However, unemployment among those who had GCE Advanced Level or above was more than double at 10.8 per cent. Graduate unemployment is high and female graduate unemployment is higher than that of males. The highest unemployment rate was reported from the G.C.E (A/L) and above group which was about 10.8 per cent.

The problem of unemployment is more acute for educated females than educated males. Educated female unemployment was about twice that for educated males: 14.5 per cent for females compared to 7.5 per cent for males. The overall rate of unemployment too was higher for females at 7.3 per cent compared to 2.9 per cent for males. It is clear that unemployment was higher among females than males in all age groups.

The highest rate of unemployment was among youth (15 – 24 years) whose unemployment rate was 18.1 during the fourth quarter of 2010. The highest unemployment rate for both males (15.1) and females (23.4) was in this age group. It is to be expected that unemployment would be higher for youth trying to enter the workforce having to wait their turn, as well as because employers would like to hire those with work experience. The reasons for youth unemployment however are not confined to this factor.

Explaining unemployment

The problem of Sri Lanka’s unemployment has been a much studied subject, especially since the youth insurgency of 1971. The reasons for the emergence of a huge unemployment problem in the 1970s were primarily due to the surge in population in the 1950s and 1960s, when the rates of annual average increase in population were 2.8 and 2.6 per cent. This increase in population resulted in a large influx into the labour force in the next decades. Coupled with the large numbers seeking employment was the fact that with the expansion of secondary and tertiary education those seeking employment were educated youth. Their aspirations were for white collar and executive jobs that they deemed their right on the basis of their educational qualifications.

On the other hand, the economy grew at an inadequate rate and remained a largely agricultural one with new job opportunities in other areas of economic activity limited. It was a formula for youth discontent. In contrast to the Sri Lankan situation East Asian and South East Asian countries developed their economy so as to be described as the Newly Industrialized Countries (NICs), providing adequate employment opportunities of a diversified nature. Many of these countries reached over employment status requiring the import of labour, as is the case of Malaysia, South Korea and Singapore. Sri Lanka’s increases in the labour force were not matched by a commensurate increase in economic growth and employment opportunities.

The improvement in the Sri Lankan employment situation has been brought about by several reasons. The rate of population increase is now only a little above 1 per cent. The economy has diversified since the liberalization of the economy in 1977 and industry and services account for over 85 per cent of national production and are the growth sectors. These provide new employment opportunities more consistent with youth expectations unlike peasant agriculture. Unemployment has eased by recruitment to the armed forces, public services and by an exodus of labour to foreign countries. Despite this there is a serious problem of educated unemployed that has to be addressed.

Theories

There have been many explanations for unemployment among the educated youth in Sri Lanka. The most well-known is that there is a skills mismatch owing to the education system not producing the skills the labour market needs. Another explanation is that the public sector employment and wage policies in the country lead to a queuing behaviour among the youth for these “attractive” jobs. The stringent labour market regulations and inflexibility, it is argued, limit employment creation, as firms prefer not to employ persons who cannot be easily discontinued. This may have led to the choice of capital intensive techniques rather than labour intensive ones.

Especially with respect to the educated unemployed, there is a mismatch between the expectations of the educated seeking employment and the available employment opportunities and a mismatch between the capacities and skills of available labour and job opportunities. Youth that have secondary education resist taking jobs they feel are below their dignity. They may even prefer to stay unemployed till they get what they consider is a good job.

This mismatch between expectations from their education and jobs available and skills needed is an important factor in creating unemployment among the educated. This mismatch is created by educated youth having a diploma thinking that they have skills they do not possess for available jobs. The need for English language communication skills in private sector employment compounds this problem. The bias for arts education rather than the sciences is a clear instance of producing many more unemployable graduates than those with skills required in the economy.

In conclusion

In spite of the fall in the rate of unemployment, there is a need to recognize the requirement for real sector growth of a higher level to be able to absorb the numbers coming into the labour force. The causes for unemployment and especially for the educated unemployed are complex.

There is a need to reform secondary and tertiary education to develop the required skills rather than expend large amounts of public funds in producing unemployable graduates, who are then given jobs in the public sector that is bloated. Skills development through vocational training is a move in the correct direction that requires a major thrust to expand.

Private training facilities have also emerged, especially in skills like information technology, accountancy and English. Some of these institutions are however of low quality and produce youth who are not adequately skilled. There is need to reform the education structure and content and fund education and skills development in areas of economically productive employment.