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Labour
Productivity
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As
far as productivity is concerned, it is generally referred
to labour productivity. This concept relates to the value
added per worker. When compared with similar terminology,
such as capacity, productivity is more concrete concept to
measure the efficiency of economic activities. Hence this
chapter presents some of the data to be reflected labour productivity
in the Sri Lankan economy.
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3.1
GDP Per Capita
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GDP
Per Capita is an indicator which is generally used to represent
the wealth of a country in Sri Lanka it amounted LKR 41789.8
(in real terms) in year 1997 and went up to LKR 56130.69 in
year 2006. The percentage increase is 34.3% .But at current
market price it was LKR 50292.17 in year 1997 and increased
by 180% up to LKR 140894.50 in year 2006.
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Table
- 3.1 Gross Domestic Product per Capita
(1997 -2006) |
The
difference reflects the increase in GDP deflator during
the period. Except year 2001, it has increased over
the years in both prices. GDP per capita of a country
is measured in terms of US$ for international comparison.
According to this criteria, GDP Per Capita has reached
up to 1355.28 in year 2006, categorizing Sri Lanka as
a middle (lower) income country. This in turn will affect
in such a way that, Sri Lanka may not be entitle to
obtain foreign founds as Grants and Aids. The controversial
issue is such that though Sri Lanka is categorized as
middle (lower) level income country, more than 40% of
total population, in the country is covered by the Samurdi
benefits which is largest poverty elevation program
in the country. |
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Source - Own
calculation of LMIU with the data from Central Bank Reports
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| 3.2
Average Labour Productivity |
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The
average labour productivity measures the efficiency
of labour used for production . This has been calculated
as such that real GDP is divided by the total working
population. Hence this reflect the physical labour productivity.
It does not explain the situation of economic labour
productivity. However this indicator is widely used
to oversee the trends of the labour productivity in
a country.
The average labour productivity in the Sri Lankan economy
has further increased in year 2006 with compared to
the previous year both in local currency as well as
in US$. However the level of productivity is not enough
to enhance the quality of life of the people in the
country.
As
shown in the below table 2.8 there is a functional relationship
between labour productivity growth ratio, employment
rate growth ratio and GDP per capita growth ratio. That
is, |
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Source
- Own calculation of LMIU with
the data from Central Bank Reports |
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GDP per capita
growth Ratio - Employment rate growth ratio = Productivity
growth ratio |
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Hence,
to increase the wealth of a country, labour productivity
as well as employment rate has to be increased. However
strategies and policies should be aimed to enhance productivity
while providing the meaningful employment opportunities
for the entire labour force in the country.
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Table
- 3.3 The Relationship Between Labour Productivity Growth,
Employment Rate Growth & GDP per Capita Growth
( 1999 - 2006) |
Figure
- 3.1 GDP per Capita, Employment
Rate and Labour Productivity Growth
Ratios (1999-2006) |
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Source
- Own calculation of LMIU with
the data from Central Bank Reports |
Source - Own calculation of LMIU with
the data from Central Bank Reports |
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| Table
- 3.4 Sectoral Average Physical Labour Productivity (LKR)
(1999 - 2006 ) |
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| Source - Own calculation of LMIU with
the data from Central Bank Reports |
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As
far as sectoral labour productivity is concerned, service
sector dominates other two sectors. Labour productivity in
service sector is more than double that of labour productivity
in the agricultural sector. In terms of US$, sectoral average
labour productivity has decreased from year 2000 to 2004 and
then increased marginally in year 2005 and 2006 with compared
to previous year.
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| Table
- 3.5 Sectoral Average Physical Labour Productivity (US$)
(2000 - 2006) |
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| Source - Own calculation
of LMIU with the data from Central Bank Reports |
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Labour
productivity in agriculture sector is far behind the National
Average. Since 18% of GDP is shared by the 32% of total employment,
productivity in this sector should definitely be at lower
level. Hence, policy and decision makers should have to play
a key role to enhance productivity in this sector. Use of
new technology, R & D, and reduction of post harvest lost
will enhance the productivity in agricultural sector.
The data on table 3.4 and 3.5 defects the following important
features in relation to sectoral labour productivity.
1) The
highest average labour productivity in recent past was recorded
for services sector following industrial sector in terms of
LKR as well as US$.
2) Labour productivity in service as well as industrial sectors
exceeds the national average of labour productivity.
3) Highest
labour productivity was recorded for sub sectors such as Transport,
Storage & Communication and Trade, Hotels & Restaurant.
4) Most
of the sub-sectors, even sectors which record highest level
of labour productivity, have
decreasing tendency of their labour productivity growth.
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| Table
- 3.6 Sectoral Average Labour Productivity Growth (%) ( 1998
- 2006 ) |
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| Source - Own calculation of LMIU
with the data from Central Bank Reports |
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In 1998,
sectoral labour productivity growth in agriculture was -14.48
percent and in 2006 it has increased up to 5.12 percent. On
the other hand labour productivity growth in industry has
decreased from 13.57 percent in 1998 to 4.50 percent in 2006.
Further it has fluctuated over the years. The services sector
records as important sector which shows an upward trend in
labour productivity in recent years. Within the services sector,
labour productivity growth in financial services, Real Estate
& Business services sector has increased tremendously
over the years.
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| Table
- 3.7 Sectoral Employment Growth (%) (1999 - 2006 ) |
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| Source - Own calculation
of LMIU with the data from Central Bank Reports |
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| Table
- 2.8 Sectoral GDP Growth (%) ( 1999 - 2006 ) |
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| Source - Own calculation of LMIU
with the data from Central Bank Reports |
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The
simple functional relationship between labour productivity
growth, GDP growth and the employment growth can be shown
as follows.
Labour Productivity Growth = GDP growth – Employment
Growth
The true need is to increase labour productivity without compromising
employment opportunities. In other words, GDP must increase
faster than increase in employment to increase Labour productivity.
One can examines carefully and see how the above relationship
experiences in the Sri Lankan economy. The table 2.6, 2.7
and 2.8 are examined simultaneously, number of facts can be
observed.
- Generally,
employment growth is higher than GDP growth and leads to
negative productivity growth.
- In
most of the sub sectors, productivity growth has increased
due to negative growth in employment.
Hence actions have to be taken to improve productivity in
such sectors at least without comprising
level of employment.
- Financial
Services, Real Estate and Business Service is the only sector
that labour productivity
continuous to increase over the time due to GDP increase
faster than employment growth in this sector.
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| 3.2
Labour Productivity ( Forecasted, 2007 - 2010) |
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The
table 2.14 defects the forecasted labour productivity from
year 2007 up to year 2010 for the Sri Lankan economy. The
forecasted value for some sectors are not statistically significant.
However it is significant for the sub sector of Manufacturing
, Trade, Hotel & Restaurant and financial services, Real
Estate & Business Services. Among these sectors Manufacturing
and Trade, Hotels & Restaurant sectors show decreasing
trendency of labour productivity while financial services,
Real Estate & Business Services sector shows increasing
trendancy. Hence, the policy makers and the institution engaging
in productivity promotion activities must consider this situation
and make appropriate policies and strategies to enhance productivity
in those sectors.
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| Table
- 2.9 Forecasted Labour Productivity ( 2007 - 2010 ) |
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| Source - Own calculation of LMIU
with the data from Central Bank Reports |
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