Demographic Transition and the Labor Market in Sri Lanka
Sri Lanka's demographic transition has significantly shaped the age distribution of the labor force and created a large working age population (World Bank 2008). Changing cohort sizes of young and old workers not only affect their own labor market outcomes (job quality, earnings), but also potentially affect growth prospects in the economy. Recovering from a 30-year conflict in the North and the East, Sri Lanka aims to accelerate growth in the medium term by substantially increasing investments. What will be the role of the labor market in delivering this growth? The service sector is expanding and accounts for nearly 60 percent of the Growth Domestic Product (GDP) and almost 40 percent of employment. However, only 56 percent of the working age population is employed, a result of low participation and high unemployment rates among women and youth. Any growth strategy will have to bring in more working age people, particularly women, into economic activity. The paper is organized as follows. The two sections that follow present an overview of the supply and demand side of the labor market. The next section discusses the ways in which the demographic transition could shape the labor market, particularly in terms of unemployment and earnings. This discussion is followed by three sections examining labor force participation and unemployment, job type, and earnings respectively. The last section concludes with some policy recommendations.
Summary: | Sri Lanka's demographic transition
has significantly shaped the age distribution of the labor
force and created a large working age population (World Bank
2008). Changing cohort sizes of young and old workers not
only affect their own labor market outcomes (job quality,
earnings), but also potentially affect growth prospects in
the economy. Recovering from a 30-year conflict in the North
and the East, Sri Lanka aims to accelerate growth in the
medium term by substantially increasing investments. What
will be the role of the labor market in delivering this
growth? The service sector is expanding and accounts for
nearly 60 percent of the Growth Domestic Product (GDP) and
almost 40 percent of employment. However, only 56 percent of
the working age population is employed, a result of low
participation and high unemployment rates among women and
youth. Any growth strategy will have to bring in more
working age people, particularly women, into economic
activity. The paper is organized as follows. The two
sections that follow present an overview of the supply and
demand side of the labor market. The next section discusses
the ways in which the demographic transition could shape the
labor market, particularly in terms of unemployment and
earnings. This discussion is followed by three sections
examining labor force participation and unemployment, job
type, and earnings respectively. The last section concludes
with some policy recommendations. |
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