Wednesday, March 13, 2013

We have had 7 years of jobless growth, apparently.

A research firm, Verité Research, has published a new report which claims that:

Excluding the Northern and Eastern Provinces the labour force and employment statistics data for Sri Lanka recorded the existence of 7,105,322 jobs (number employed) in the country, in 2006. Since then, despite the real GDP growing in excess of 40%, job growth was less than 1%. (The number of jobs recorded in the second quarter of 2012 was 7,120,518).
The lack of job creation in the domestic market explains why there is so much pressure for jobs in the Middle East. Those who propose to ban the export of labour should first consider how jobs can be found for the hundreds of thousands that leave school every year.

It is also worth noting that the net job growth of 1% is after the state created 179,675 new jobs in the public sector, between 2006 and 2012.  This means that the number of jobs actually shrank. (Public sector employment stood at 1,134,561 in the second quarter of 2012, compared to 954,886 in 2006.)

So what does growth, sans jobs, mean? Not as much as it should, I'm afraid.

GDP is simply a measure of output (see calculation here) so it may mean that the level of activity has increased. Even if no new jobs were created, if there is a general increase in activity it will translate into higher profits, salaries, rents etc which means that the people should be better off. Are we? Do we feel that we can lead a much better lifestyle, save more or invest than we could in 2006?

I would bet that except for a small band of cronies, the answer would be in the negative. One reason is that the GDP figure looks good is because of the enormous government investment and expenditure that takes place. The Norochcholai coal plant, the Mattala airport and similar infrastructure projects help boost the GDP figure. Infrastructure brings long term benefits in the way of improved productivity, but if it is badly designed, the potential benefit will be small. 

The second reason the GDP looks good is because of an incorrect measure of inflation. GDP is reported net of inflation (ie nominal growth minus inflation). Therefore the lower the inflation figure, the higher the GDP.  According to official statistics inflation was 9.8% last year but how accurate is that figure? Private estimates put the figure at double that.

Therefore, despite some impressive statistics, we may conclude that the real benefits to the people have been small.  Anyway, read the published excerpts, there are some interesting points that have been discussed. 

1 comment:

Anonymous said...

I think the problem is more to do with a gaping mismatch of skills and available jobs. As someone doing recruitment I'm surprised at the low number of applicants we get for not so specific job verticals.