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Labour Force Participation,
Employment and Unemployment
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2.1
Labour Force Participation Rate
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The
labour force participation rate that measures the percentage
of eligible populationthat is working or seeking work is an
important dimension of labour supply to the economy. Shown
in the figure 2.1 for the years of 1995, 2000 and 2006 is
the labour force participation rate for male, female and all
demographic groups together. During 1995 - 2006, the total
labour force participation rate rose from 48 % to 51 %, by
3%.
Male
participation rate has increased from 64.4% to 68.1% while
female participation rate increased from 31.7% to 35.7%
during the period.
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Figure
: 2.1 - Labour force participation rates by sex
(1995, 2000 & 2006 ) |
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| Source: Department of Census
& Statistics |
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| Figure
: 2.2 - Labour force participation rates by age and gender 2006
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The
important feature of the participation rates shown in the
figure 2.2 is their pattern over the life cycle of each
age group. The pattern for both men and women is nearly
identical with participation rising from the teenage years
to a peak in the mid-life years.
The
structure of labour force participation is the way that
total LFP has been made. This can be presented by various
characteristics. For an example, structure of the LFP by
level of education shows the importance or percentage share
of each level of education in the total LFP.
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| Source: Department of Census & Statistics |
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Table : 2.1 - The Composition of the Labour Force Participation
by Age and Gender. |
Shown in the table 2.1 for the years of 1997 and 2006 is the
age structure or composition of the Sri Lankan labour force
for male and female. The percentage share of age group 40
& above to the female labour force participation has increased
from 33% in 1997 to 45% in 2006, while it has decreased for
all other age groups. Within the male participation, percentage
share of age groups 40 & above and years 25-29 has increased
from 41% to 43% and from 13% to 22% respectively, while the
share decreased for all other age groups in year 2006 when
compared to year 1997.
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| Source: Own calculation
of LMIU with the data from Department of Census & Statistics |
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situation clearly indicates that, the population available for
work is ageing rapidly. |
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Figure : 2.3 - Composition of Labour Force Participation by
Level of Education and by Sex, 2006. |
The figure 2.3 depicts the composition of total labour force
participation by level of education and by sex. The percentage
share of labour force participation by level of education
has been calculated for male, female and total labour force
participation separately.
There
are number of features that data shows. First within the total
female labour force participation, the percentage share of
grade 5-9 education level is higher than all other levels
of education. Second, within the male labour force participation,
share of below grade 5 level of education is higher than all
other education levels. What this situation indicates is that
the average years of schooling in the Sri Lankan labour market
is at some what low level.
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| Source: Own calculation
of LMIU with the data from Department of Census & Statistics |
Third,
it shows that higher the level of education lower the share
of participation within the male labour force participation.
Fourth,
unlike the share of male labour force participation, the
share of more educators is very significant in the female
labour force participation. Share of GCE (O/L) and above
level of education in the female labour force participation
amounts 38 percent but in the male labour force participation,
this education level represent just only 17 percent.
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2.2 Employment |
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The demand
for labour is reflected in the level of employment among all public,
private institutions, self employment and unpaid family workers.
Several key features of the pattern of employment in Sri Lanka
are illustrated in figure 2.4 .
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Shown
there are the annual level of employment in the entire economy
for the 1997 through 2006 and the level of employment in
the three major sectors: Agriculture, Industry and Services.
The features of the pattern of employment reflected in figure
2.4 can be pointed out as follows.
1) The
trend over time in the total level of employment in the
economy: through out the last decade, Sri Lankan economy
has created 1499454 new jobs with approximately 150000 jobs
per year.
2) Service sector dominates agriculture and industrial sectors
contributing 41.2% to the total employment.
3) Percentage
share of employment in agricultural sector is still significant
(32.2%) which indicates the low level of productivity.
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Figure
: 2.4 - Percentage distribution of Employment by major industry
group : 1997-2006 |
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| Source:
Department of Census & Statistics |
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| Table
: 2.2 Employed Persons by Employment Status |
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| Source: Department of Census
& Statistics |
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Table : 2.3 Employment by Major Industry Groups (1997-2006) |
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| Source: Department of Census & Statistics |
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2.2.1 Employment Rate |
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The figure
2.5 shows the level of employment and its trend over the years.
Total employment rate has increased from 89.5% in year 1997
to 93.5% in 2006. The employment rate for male rose from 92.3%
to 95.3% and for female from 83.9% to 90.3% during this period.
Due to favorable working conditions made by the reforms of
labour laws and other factors, the female employment has increased
faster than male employment. |
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Source: Own calculation of LMIU with the data
from Department of Census & Statistics |
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The
male employment rate at younger age brackets is some what
higher than the female rate, but among old aged their is no
such difference. |
Figure
: 2.6 Employment rate by age and by Sex - 2006 |
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Source: Own calculation of LMIU with the data
from Department of Census & Statistics |
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Figure
: 2.7 - Composition of employment by age and
by Sex ( 1997 & 2006) |
The figure 2.7 depicts the composition
of the employment by age groups and by sex. The information
in this figure shows that, the high contribution to the working
population is made by the middle and old age workers. By this
situation important features can be pointed out.
1)
Since, the higher proportion of aged workers is in the working
population, the cost of social security will increase in the
future.
2)
Majority of people enter to work at their middle age and therefore
their working life is limited. This in tern may affect their
living standard resulting from an extra burden on their child
education, building their own houses etc.
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| Source:
Own calculation of LMIU with the data from Department of Census
& Statistics |
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3) The
labour productivity may decline since depreciation rate of human
capital is very high with the structural changes implemented in
the economy. |
2.3 Unemployment Rate |
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unemployment rate measures the percentage of the labour force
that does not have a job but is seeking one. A decrease in
the unemployment rate is a good indicator that business firms
and government organizations are adding jobs in response to
rising levels of production.
As
shown by the figure 2.8 unemployment rate for both male and
female has decreased over the years. However unemployment
among the female is higher than that of male. But, high labour
migration due to improved opportunities for foreign employment
has contributed to a slowdown in both the overall growth of
the labour force and unemployment. |
Figure
: 2.8 - Unemployment Rates (1997-2006) |
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| Source:
Own calculation of LMIU with the data from Department of Census
& Statistics |
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Table : 2.4 - Composition of Unemployment by age and gender |
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| Source:
Own calculation of LMIU with the data from Department of Census
& Statistics |
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Table : 2.5 Employment and Unemployment (Forecasted ) (2006
- 2010) |
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| Source: Own calculation of
LMIU with the data from Department of Census & Statistics |
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Figure : 2.9 - Employment & Unemployment Trend |
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| Source: Own calculation of LMIU with the data
from Department of Census & Statistics |
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2.4 Employment Elasticity |
One
of the indicators that used for analyzing the operation
of the labour market is employment elasticity. It measures
the percentage change in employment with respect to percentage
change in GDP. Therefore the employment elasticity seeks
to capture the responsiveness of the labour market to change
in GDP.
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This can be used for policy making. For an example, one percent
growth in GDP leads to the creation of 44000 jobs in the Sri
Lankan economy. |
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On
the basis of this information, the conclusion can be made
as such that the Sri Lankan economy would have to grow at
3.1% to absorb new entrants to the labour force. However,
this growth rate will not be able to cope with the existing
number of unemployed and underemployed. |
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The
table 2.6 shows the annual average and sectoral employment
elasticities estimated using arc elasticity. |
Source: Own calculation
of LMIU with the data from Department of Census & Statistics |
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Up
to year 2001 all sectors show significant fluctuations from
year to year. Hence it is difficult to analyze the sectoral
composition of the employment elasticity. However after 2001,
some what less fluctuation can be observed. |
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