The nature and structure of employment in Sri Lanka has changed drastically since the

PRECARIOUS WORK IN SRI LANKA Nisha Arunatilake1 Institute of Policy Studies of Sri Lanka Email: [email protected] Abstract This study describes different u...
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PRECARIOUS WORK IN SRI LANKA Nisha Arunatilake1 Institute of Policy Studies of Sri Lanka Email: [email protected] Abstract This study describes different uncertain, insecure and unstable working arrangements experienced by workers in Sri Lanka. Findings show that most informal sector workers experience precarious employment. The main types of precarious workers are temporary or contractual workers who

work in the formal sector. Faced with competition, and in their attempts to cut costs and increase productivity, employers pressure workers to produce better goods, faster. Also, to adjust the workforce to meet the fluctuating demand in the market at lower cost, workers are given temporary or contractual contracts, so that their work is easily discontinued. The insecurities and instabilities of these workers come from several sources. First, they are deprived of some of the protection afforded by labor legislation because they do not have a permanent contract, and they have to constantly look for alternative work. Second, the intense nature of the work they are exposed to can increase their risks to different adverse health conditions. Poor health or lack of a permanent job can adversely affect their income earning potential. Third, being temporary workers, they have fewer interactions with labor unions. Better information on the size and trends in precarious employment need to be systematically collected so that policy makers are better informed on the issues relating to precarious work in Sri Lanka and can initiate informed initiatives to improve the situation. Keywords Sri Lanka, precarious work, employment

The nature and structure of employment in Sri Lanka has changed drastically since the introduction of a far-reaching economic liberalization program in 1977. The reforms moved the production structure of the economy from an import substitution-oriented industrial policy to an export-oriented industrial policy. With this change, new employment opportunities opened up, mainly for young women, in the export-oriented labor-intensive light manufacturing sector and trade- and tourism-oriented services sector (see Lakshman, 1997; Rodrigo, 2001). To be competitive in the global market, the firms in the liberalizing economy continuously had to improve productivity and decrease costs. Faced with increased competition, employers looked to improve flexibility by resizing workforces and lowering fixed costs to better adjust to the changing demand patterns in the global market. Some measures adopted by enterprises included 1

reducing the permanent workforce and offering more contractual and temporary working arrangements, making employment more unstable and uncertain to workers. Along with this, there was greater demand on the workers to meet targets and sustain quality, creating a more intense working environment and raising issues concerning the health and safety of workers. Together, these developments have made new employment opportunities more uncertain, unstable and insecure. This paper defines such working arrangements as precarious work. Precarious work is not only apparent in new employment opportunities created. Agricultural informal-sector workers producing for the domestic market as well as workers in the exportoriented plantation sector are also largely in precarious working arrangements.

(Table 1 about here)

Precarious work is not a commonly used term in Sri Lanka. Different categories of work that could possibly come under the broader definition of precarious work have received varying attention by policymakers and researchers over the past several decades. A better understanding of the prevalence of these different types of work, and the specifics of the uncertainty, instability and insecurity relating to precarious work conditions, are prevented by lack of information. This paper attempts to bring together the existing literature on the different types of workers who may be experiencing precarious employment in Sri Lanka. The paper will also provide profiles and detail trends of different types of precarious employment, as the available data permits. The following section provides background information on the changing economic environment since independence in 1948 and the development of labor standards. This is followed by a discussion

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of informal-sector workers in Sri Lanka and different types of precarious work conditions they experience. The final section looks at precarious workers in different industrial sectors.

BACKGROUND

Structural Change

Sri Lanka is a small country with a low-middle-income economy located in the Indian Ocean. It has a population of nearly 20 million (see Table 2). A large share of the country’s gross domestic production is in services, and this proportion has increased over time. In contrast, the share in agriculture production has declined over time. The share of industrial production has remained stagnant, although its absolute value has increased (Table 1).

As summarized by Lakshman (1997), immediately following independence in 1948, the primary sector, consisting mainly of agriculture, forestry and fishing, was the main contributor to the economy. Over time, successive governments have attempted to diversify the economic base of the country. In the initial period, the main emphasis was on promoting import substitution, first in the agriculture sector and, since 1956, also in the industrial sector. These reforms were instrumental in changing the structure of the economy away from agriculture. Despite a weak attempt at introducing more export-friendly economic policies under the 1965-1970 political regimes, in general, the country continued with import substitution economic policies until 1977. However, like other countries that followed a similar policy regime, Sri Lankan policymakers also soon realized the limitations of the import substitution policies, and the United National

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Party that came into power in 1977 introduced widespread liberalization policies, sharply moving the economy towards an export-oriented industrialization regime. The United National Party continued to be in power for the next 17 years and even after its defeat, successive governments continued the liberal, export-oriented economic policies adopted in 1977.

In 1983, ethnic tensions that had long troubled the country turned violent. This conflict lasted intermittently for nearly three decades, ending only in May of 2009. Although the country continued to maintain an average growth rate around 4.6% throughout the conflict period, the rapid economic growth experienced following initial liberalization slowed.

The above-described attempts to diversify the economy had considerable impact. The agriculture share of the Gross Domestic Product (GDP) declined from 46% in 1950 to 31% by 1977, reaching 13% by 2010. In services, there was an increase over the same period, from 37% to 41% and then to 59%. For industry, the increase was from 20% in 1950 to 29% in 1977, and then remained relatively stable at around 30% after that (Lakshman, 1997; Central Bank, 2010).

Changes to Employment Patterns

Immediately following independence, reflecting the structure of the economy at the time, the agricultural sector was the main contributor to employment. In 1953, nearly 53% of total employment was from agriculture, forestry and fishing. Despite the decline in the agricultural sector, it continued to dominate as a source of employment, contributing 51% of total

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employment even in early 1980s. The importance of agriculture as a source of employment has declined with liberalization, in 2010 accounting for roughly a third of employment opportunities.

The labor-intensive light manufacturing industries that were established with the liberalization of the economy following the 1977 reforms attracted mainly young females from both rural and urban areas into the factories. Although at the aggregate level the employment share in the industrial sector has changed only marginally since early 1980s, the sector experienced a structural change in the post 1977 period. With the adoption of more liberal economic policies, the tourism and trade sectors also expanded. Along with these domestic developments, and helped by an oil price rise in the Middle East, opportunities for foreign employment increased from the early 1980s. Again, mostly unskilled female workers benefited from these opportunities in the initial period. The main sources of formal employment for young men were in military and security services (Rodrigo, 2001).2 Over the past decade, there has been an increase in the service sector jobs for more educated workers in the information and communication technology. There has also been an increase in information technology and information technology enabled services.

(Table 2 about here)

In 2010, close to half of Sri Lanka’s population aged 10 and above was economically active. The official unemployment rate is less than five percent, indicating that labor is a relatively scarce commodity. As indicated in Table 2, almost 43 percent of the employed population is in the services sector, followed by the agriculture (32.5 percent) and industry (24.6 percent) sectors.

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Although industry’s share of production has remained reasonably constant, its share of employment has increased over time. Mirroring changes in production, agriculture’s share of employment has declined over time, while services’ share of employment has increased.

The workers of Sri Lanka can be divided into those who work in the formal sector and those who are in the informal sector. While the formal and informal sectors are defined below, in terms of the statistics shown in Table 3, formal sector workers include all permanent public sector employees, as well as permanent workers working in private sector establishments that are registered, keep regular accounts and employ more than 10 workers. As may be seen in Table 3, the proportion of public-sector workers in the country have declined since 1990 and despite an uptick in 2010, the proportion in 2010 remains lower than that for 1998. In the private sector, the official data show a big increase in the proportion of workers in the private sector between 1990 and 1994, with stagnation since then, at around 41 to 44 percent. The available information indicates that in 2010, close to 40 percent of private employees, amounting to 1.7 million workers, were working in the informal sector (Department and Census and Statistics, 2010, excluding data from Northern Province). In addition to these private informal sector employees, own-account workers and unpaid family workers may also be considered as being in the informal sector. As can be seen in Table 4, the proportions of own-account workers and unpaid family workers have not changed much over these years.

(Insert Table 3 about here)

Labor Standards and Social Protection

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The initial labor legislation in Sri Lanka was developed to safeguard the Indian migrant workers in plantations.3 During the colonial period, with the growth of the better educated middle class and the influence of the urban workers in the early 20 th century, Sri Lanka (then Ceylon) was granted universal adult suffrage in 1931 and was the first British colony to hold an election with universal adult franchise (Alailima, 1997). The impact of this change and the rise of Marxist and labor parties and unions saw the government responding by becoming more responsive to social issues. The depression of 1930-1933 and a malaria epidemic in 1934-1935 also highlighted the need for state intervention to provide social assistance during times of economic downturns and adverse economic shocks (Alailima, 1997). The labor legislation that is in place today (with amendments) was initiated during the 1930-1935 period. The broad areas of labor legislation in the country at present are to: a) specify terms and conditions of work, b) ensure industrial safety, c) improve industrial relations, d) provide social security, and e) provide special safeguards to vulnerable employees such as women and children (Ministry of Labour Relations and Productivity Promotion, 2010).

Labor disputation and political contestation saw legislation to introduce terms and conditions of work was enacted at an early stage, starting with the Shops Ordinance of 1938, which specified working hours, overtime payments, holiday and casual leave for shop workers. The Wages Board Ordinance No. 21 of 1941 extended the minimum wage legislation, which was previously applicable only to the Indian plantation workers, to 35 trades. These wages boards were empowered to specify minimum wages, statutory holidays and leave for workers in their respective sectors. The Factories Ordinance No. 45 of 1942 and its amendments specify

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standards to uphold in the functioning of a factory to ensure safety and cleanliness, and the Workman’s Compensation Ordinance No. 19 of 1934 specifies compensation for occupational injuries (Ministry of Labour Relations and Productivity Promotion, 2010).

Legislation to improve industrial relations was introduced soon after the granting of universal franchise, reflecting the active participation of workers in politics at the time. The Trade Union Ordinance introduced in 1935 allowed employees to organize and bargain for their rights with employers. The Industrial Disputes Act No. 43 of 1950 and its amendments aimed to prevent, investigate and to settle industrial disputes. The Termination of Employment of Workman Act of 1971 provides a high level of job protection to formal private-sector workers. According to this act, employers with more than 14 workers must seek authorization of the Commissioner of Labor for layoffs. In the case of a layoff, workers are provided with compensation. These compensation amounts are quite high according to international standards, and are more than sufficient to cover wages for six months, even for those with only three years of service (see Gunatilaka & Vodopivec, 2010).

Specific

legislation

concerning

employer-employee

relations

was

enacted

following

liberalization in 1977. For instance, the Employee Council Act No. 32 of 1979 aims to facilitate co-operation of employees and employers in achieving industrial peace and working together to improve productivity in large public organizations. Similar to these, the Board of Investment of Sri Lanka (BOI) facilitates the establishment of Employee Councils in BOI enterprises.4

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The permanent public servants in the country are the only group who are covered by a government-funded pension plan—the Civil Service Pension Schemes. Table 4 summarizes the current state of social protection schemes. As seen in the table, there are voluntary pension schemes for informal-sector workers, depending on their occupation, including farmers’ pension schemes, fishermen’s pension schemes and self-employed pension schemes. These contributory schemes have poor coverage and inadequate benefits. The Employee’s Provident Fund, established since 1958, provides superannuation social security for private sector workers. But rather than an annuity, it provides a lump sum payment to the employee at retirement in accordance with contributions. Initially, only workers in establishments with more than 5 workers were covered by the Employee’s Provident Fund, but in 1971, coverage was extended to all workers. This is a contributory scheme, where both employers and workers contribute an agreed proportion of the employee’s salary towards a fund. The Trust Fund Act, No. 46 of 1980, covers all public employees not covered by the Civil Servant’s Pension Scheme and all privatesector employees. Employers are required to remit three percent of the gross earnings of their employees to the fund. Employees or their beneficiaries can withdraw funds at death or in the case of a serious injury or disability. The payment of Gratuity Act No. 12 of 1983 also specifies the employer’s liability to pay employees’ gratuity for workers with more than five years tenure, as a severance pay.

(Insert Table 4 about here)

In addition to the above mentioned labor legislation, Sri Lanka has several laws to safeguard female and child workers. The country has also ratified most of eight core ILO

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conventions, all eight human rights covenants and 11 conventions on the environment (Sivananthiran, n.d.).

PRECARIOUS WORKERS IN THE INFORMAL SECTOR

What is the Informal Sector?

Comprehensive information on the informal sector is available starting only in 2006, through the revised Labor Force Survey conducted by the Department of Census and Statistics. Yet even in the version of the schedule of the Survey, only the informal sector is defined and not informal workers. The Department of Census and Statistics defines formal sector organizations as those that are registered with either the Employee’s Provident Fund or the Inland Revenue Department and that also keep regular accounts and employ more than 15 workers. All other organizations are considered to be informal sector organizations. By this definition, all permanent workers who are employed by formal organizations are considered to be formal employees. All others—that is, self-employed, employers of informal organizations, employees of informal organizations, and casual or temporary employees of formal organizations—are considered to be informal workers. All informal employees—that is, all workers in the informal sector as well as nonpermanent workers in the formal sector—can be considered precarious workers in Sri Lanka.

3.2 Types of informal sector workers

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Although all precarious workers can be lumped together, it is recognized that their characteristics differ widely according to their employment status. At a broad level, informal workers are comprised of: (a) own-account workers; (b) unpaid family workers; and (c) informal employees. While the share of unpaid family workers of the total employed has decreased marginally over the years, the proportion of these workers and own-account workers have remained much the same between 1990 and 2010 (see Table 3). Data in 2006 and 2010 demonstrated that all informal workers made up more than 60% of all workers in the country (see Table 3).

Own-account workers—also often referred to as self-employed—are individuals who work for themselves. According to the Department of Census and Statistics (2010) nearly 95% of ownaccount workers, amounting to 2.3 million workers, are in the informal sector. Some of these workers produce for larger manufacturing companies, who in turn export their products (for example, small tea producers sell their green leaves to factories that process the tea and sell it in the world market). Unlike the permanent workers in the manufacturing sector, these own-account workers do not enjoy social protection afforded by the legislation. In 2010, 76% of own account workers were male (Department of Census and Statistics, 2010). A majority (51%) of own account workers were in the agriculture sector, followed by the services sector (33%) (Department of Census and Statistics Labour Force Survey, 2010).

Unpaid family workers are workers who are in home-based income generating activities, including in agricultural activities. Nearly 92% of unpaid family workers amounting to 0.7 million workers are in the informal sector (Department of Census and Statistics, 2010). The majority (72%) of unpaid family workers were female. A large proportion (70%) of unpaid

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family workers were in the agricultural sector, followed by the services (19%) and industry (11%) sectors (Own calculations based on Department of Census and Statistics Labour Force Survey 2010 data).

Informal employees are mainly low-skilled workers, who work in elementary occupations or in low-skilled occupations. Informal employees can be considered to be in three distinct categories. If they are working for an employer, they fall into the informal category when their work is not permanent. These non-permanent workers are contractual workers hired to complete a specific task, temporary workers hired for a specific period of time, and workers with no employers who are largely wage workers who constantly change their employers.

Workers in professional grade occupation categories and white collar jobs are likely to be permanent workers. Skilled agriculture and fishery workers, and craft and related workers, are workers in traditional occupations. A relatively small proportion of these are permanent workers. Fewer than 40% of sales and service workers, plant and machine operators and assemblers and those in elementary occupations are permanent workers.

Characteristics of workers in the informal sector

Prior to 2006, only own-account workers and unpaid family workers were distinguishable as informal-sector workers. However, according to data in 2010, 4.8 million (or 62.6%) of total employed population worked in the informal sector (Department of Census and Statistics, 2010;

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data excludes the Northern Province.) This included 85.6% of agricultural workers and more than half (51.0%) of non-agriculture workers.

Generally, low-educated males are more likely to be informal-sector workers than females. Of the total employed, 65.4% of males and 57.1% of females work in the informal sector and around 75% of those working in the informal sector have less than a junior secondary-level education (Department of Census and Statistics, 2010). By industry, the proportion of informalsector workers was highest (86.5%) in agriculture. Construction, mining, quarrying, electricity, gas and water supply was a close second with 83.2% of workers in the informal sector (Department of Census and Statistics, 2010). The majority (56.1%) of those in the hotel and restaurant sector and 45.1% of those in the manufacturing sector are also informal-sector workers (Department of Census and Statistics, 2010).

Informal-sector workers are spread across a variety of occupations. Almost 97% of skilled agriculture and fishery workers are informal-sector workers (Department of Census and Statistics, 2010). Among other occupation categories, proprietors and managers of enterprises (77.1%), craft and related workers (66.8%), elementary occupations (62.1%), plant machine operators and assemblers (60.4%) and sales and service workers (59.8%) have large proportions of informal-sector workers (Department of Census and Statistics, 2010).5 As can be seen in Figure 1, most of the above-mentioned informal-sector workers do not have permanent work arrangements. A large proportion of skilled agriculture and fishery workers, craft and related workers and workers in elementary occupations are workers who are temporary or who do not have permanent employers. They are mostly wage workers who move from employer to

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employer. On the other hand, most sales and service workers and plant and machine operators and assemblers are temporary workers. These statistics confirm that employment in the liberalized economy tends to be precarious; it is uncertain, insecure and unstable, most especially for non-professional and low skilled workers.

Vulnerabilities of Informal Workers

As social protection in Sri Lanka is linked to employers, workers in the informal sector who either work for themselves, work for their families, or do not have permanent employers simply are not covered unless they participate in voluntary social insurance schemes. In addition, informal sector private employees are less likely to be protected against income losses and health expenditures resulting from illness and disability (see Table 4). Vodopivec and Arunatilake (2011) find that compared to public and private sector workers, informal-sector workers—both casual and self-employed—work until they are very old and retire primarily due to poor health. An analysis of wages received by different types of workers by their work arrangement shows that, in general, permanent workers receive higher wages than temporary or casual workers. For example of “plant and machine operators and assemblers” permanent workers earn Rs.5,200 more than temporary workers and Rs.3,600 more than casual workers on average, per month (see Figure 1).

PRECARIOUS WORKERS, PRECARIOUS EMPLOYMENT

Workers in the Export Processing Zones

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The first Free Trade Zone (FTZ) in Sri Lanka was set up in 1978, immediately following the liberalization efforts of 1977, in Katunayake, close to the only international airport in the country. Since then, similar FTZs have been opened across the country. The main objectives of these zones are to attract foreign direct investment, expand exports, earn foreign exchange and generate employment. The enterprises in the zones are offered free trade conditions and a liberal regulatory environment. Although in the initial period there were attempts to have more liberal labor laws in these zones, resistance by labor unions compelled the government to grant the workers in the zones the same legal protection enjoyed by workers outside. However, Sivananthiran (n.d.) shows that there are issues regarding the lax enforcement of these laws within the zones. Although several trade unions have come forward to protect the rights of the FTZ workers, the establishment of unions and their activities are restricted in the zone.

Industrial activity in the zones is characterized by light manufacturing such as garment factories and other export products. Large numbers of mostly young female workers work in this zone (Hewamanne, 2006; Shaw, 2007). Many of them are workers who have migrated from rural areas and the agricultural sector (Hewamanne, 2006; Shaw, 2007). Systematic information on these workers is not available from official government sources. Roughly 250,000 workers are estimated to work in 14 free trade zones spread throughout Sri Lanka (Free Trade Zones and General Services Employees Union, 2010). In these zones around 80% of the workers are women.

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Hewamanne (2006) highlights many of the hardships faced by workers in the FTZ. Many have come to the free trade zone from poor rural areas in search of better employment. However, the working and living conditions inside the FTZs are poor. Available evidence suggests that the work is stressful, as workers have to meet difficult and demanding production targets. Those who do not meet these targets are harassed in different ways by the supervisors. The work is also monotonous with little that is challenging. In addition, there is no clear career path for the workers. The pay, taking into account the fact that the workers have to spend money on residing away from home, is high. Being internal migrants, many are residing in temporary boarding houses close to the zones, where the conditions are very poor. Based on the author’s observations, it is clear that, if unmarried, several workers will be required to share small poorly ventilated rooms with minimum facilities. Workers share common kitchens and toilets. These boarding houses allow very little personal space. The main reason for their dissatisfaction with the work is the non-work environment; 59% of the workers chose this as the main reason for dissatisfaction (Shaw, 2007).

Shaw (2007), who investigated the employment decisions of female garment workers in FTZs, shows that most workers are pushed into employment in the FTZs by poverty and the lack of opportunities in their home villages. Shaw finds that the majority chooses to work in the FTZ to contribute to the household incomes. It was also found that most workers were not satisfied with their work and would prefer to work elsewhere, but the lack of alternative employment opportunities tied them to their FTZ jobs.

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After 2004, with the phasing out of the Multi Fiber Agreement that had regulated the export of garments from developing countries to developed countries through a worldwide system of bilateral tariffs and quotas, competition amongst producer countries increased, as the assured market was gradually lost. Kelegama and Epaarachchi (2001) envisaged that this increased competition would compel producer firms to become increasingly conscious about cost and quality and to deliver goods on time. The authors further argue that this will need to be done while upholding labor standards as pressure from consumer groups and buyers are increasingly demanding adherence to international labor standards. Sivananthiran (n.d.) finds that social audits and the reorganization of the labor inspectorate at the Labour Department of the Ministry of Labour have actually resulted in improvements in the enforcement of labor standards in the FTZs compared to those in 1997. However, the same study finds that the number of labor inspections was reduced immediately following 2005. Since the end of the Agreement, several factories have closed abruptly, leaving over 3,000 workers without employment or proper compensation on their termination. Some companies also defaulted on the payment of provident funds—a criminal offense in Sri Lanka (Sivananthiran (n.d.).

In recent times, the pressure from buyers, consumer groups and trade unions for improving wages and working conditions has also changed operations in the FTZs (Sivananthiran, n.d.). The government, together with some exporting companies, developed initiatives to promote Sri Lankan products on ethical grounds. The “garments without guilt” is one such initiative; it makes the case that Sri Lanka has relatively high labor standards as a marketing tool (http://www.garmentswithoutguilt.com/). The “factory improvement program” is another initiative

by

the

Employers

Federation

of

Ceylon

and

ILO

(http://ilo-

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mirror.library.cornell.edu/public/english/region/asro/colombo/ilotechprgms.htm). This program attempts to improve productivity and working conditions in factories through a participatory and training approach (see Peiris, 2007). However, for several years, trade unions have questioned the effectiveness of these initiatives in improving labor standards (Lanka Business Online, 15 September 2006; Sri Lanka Apparel Association, 2012).

Until 2010, in Asia, Sri Lanka was also the only country to benefit from the Generalized System of Preferences (GSP) Plus, which reduced import duty to zero percent on 7,200 items exported to the European Union. This benefit was provided to show commitment to the uplifting of labor standards through the ratification of all core ILO conventions and human rights conventions as well as 11 conventions on the environment (Sivananthiran (n.d.). However, the GSP Plus status was not renewed after August 2010, due to alleged non-compliance with some of the ratified conventions (European Commission, 2010). With the removal of GSP Plus, Sri Lanka lost a price advantage it had enjoyed over its competitors. However, major apparel manufacturers in Sri Lanka indicated that they were not unduly affected by the removal of the GSP Plus scheme in terms of orders (Island, 1 December, 2010).

Workers in the Plantation and Commercial Crop Sectors

The estate sector consists of workers who are engaged in work in plantations producing commercial crops. Around 224,000 workers, including both permanent and casual workers, were employed by the larger companies in the sector in 2009 (Ministry of Plantation Industries, 2009). Although traditionally tea was produced in large estates, the small-holder sector has gained

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importance in recent times (Van de Wal, 2008), and more than 60% of the tea produced in the country is by small holders. Recently, this trend has also been for rubber and coconut production. According to the agricultural census of (2002), 44% of the area devoted to tea, 59% of the area for rubber and 82% of the area planted with coconuts are small holdings below 20 acres (just over 8 hectares) (Ministry of Plantation Industries, 2009).

Many of the workers in the larger plantations were brought to Sri Lanka from South India in the early 19th century, particularly for the purpose of working in the large tea and coffee plantations. The plantation sector has undergone several structural changes in the last couple of decades. In 1992, recognizing the need to revitalize and modernize the sector, the government grouped approximately 449 state-owned plantations into 23 Regional Plantation Companies and transferred their management to private agents on five-year renewable contracts (Arunatilake, 2000). Starting in 1995, in a second phase of privatization, these were extended to 50-year leases with the hope of generating capital investments. By the end of 1997, 20 companies, comprised of all the commercially viable tea and rubber estates, were fully privatized. This privatized regime faced many challenges. On the one hand, external factors such as variable world prices, technological advances, developments in competitor countries and, more generally, the government strategies in restructuring the sector have influenced the competitiveness of the sector in the world market. On the other hand, the sector is faced with a plethora of internal problems relating to production costs, resource availability, allocation and management. Among these, the future cost and availability of labor are gaining importance.

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In earlier times, the plantation companies were solely responsible for providing workers residing in large plantations with everything from employment to housing, health and education facilities (Arunatilake, 2000; 2001). The workers in the large plantations are highly unionized, have guaranteed work for 300 days each year, are covered by the national Employees Provident Fund, a formal retirement program, and receive wages arrived at through a tripartite negotiation process.

Despite these advantages, plantation sector workers continue to work in poor circumstances. Many estate-sector workers do not own land or houses outside the plantations. Even in the plantations, only those who are actively working in the estate are entitled to stay in estate housing. While the legal environment in the country does not prevent estate workers from obtaining assets outside the sector, financial constraints resulting from lack of access to credit (due to unavailability of collateral) and poor financial management prevent them from moving away from estates. There is a recent trend of younger individuals moving from estates to urban centers in search of employment. However, interviews with estate workers reveal that these movements are largely temporary movements, and many migrants come back to the estate after getting married. Despite better pay and social protection, there is persistent poverty in the estate sector. The nutrition and other health outcomes of the sector are also worse than in the rest of the country. This is partly due to the historical deprivations of the sector (Kamphuis & Sivaram, 2001).

The increase in the small-holder sector has increased the number of casual and non-permanent workers working in the sector. This greater casualization has partly been attributed to the high

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costs of permanent workers arising from the aforementioned fringe benefits. This is especially the case in the small-holders sector (Bandara, 2002). Increased international competition and periods of oversupply of tea in the international market, and the resulting downward trends in global tea prices, have induced tea plantations to lower costs and be more productive, putting pressure on working conditions and wages (Van de Wal, 2008).

Workers in the Hotel Industry

One of the sectors that benefitted from the liberalization of the economy was the hotel and hospitality sector. Although the initial expansion of the sector later slowed, after the onset of the violent civil conflict in 1983, the hotel sector remained important in the economy. According to the Labor Force Survey, 145,795 workers were working in the hotels and restaurants sector in 2010. Qualitative information gathered from the hotel sector reveals that many of the workers in the sector are temporary seasonal workers, who are unlikely to benefit from social protection. It is also the sector with the longest working hours in Sri Lanka. According to the Labor Force Survey (2010), more than 65% of workers in the hotels and restaurants sector work more than 50 hours a week.6 A large proportion of the workers in the chain are variable workers who are hired for a short period. While permanent workers received better social protection and more stable employment contracts, variable workers are hired for short periods of time, usually during the tourist season. Interviews with hotel managers reveal that variable workers are usually hired for about five months. At the end of the season, contracts are terminated with an assurance that they will be rehired in the next season.

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Workers in Outsourced Companies

Very little literature is available on the issues faced by workers in outsourced companies. These workers work for labor contractor companies that provide labor services to third-party companies. The type of services provided by these companies includes cleaning services, security services or clerical services. The main characteristic of these workers is that they are not directly employed by the companies for which they provide services. Depending on the requirements of the market, the working locations of these workers can change from time to time. They are distanced from their direct employer, as they do not work in the same location. Since only a few workers from each company work in a particular workplace, they are also distanced from their fellow workers. As such they have limited opportunities to discuss or voice their grievances. Actual numbers of these types of workers and the types of work conducted by these workers are not readily available.

CONCLUSIONS

The above analysis describes different uncertain, insecure and unstable working arrangements experienced by workers in Sri Lanka. According to the analysis, most informal-sector workers are in precarious work conditions. The main vulnerability of informal-sector workers who work in the informal sector—that is, own-account workers, unpaid family workers, and private employees without a permanent employer—arise from exposure of their livelihoods to natural and manmade disasters. Given the difficult working conditions they face, the incidence of disabilities and injuries are likely to be higher for these workers. Being their own employers, the

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labor legislation of the country that provides social protection to workers through the employers does not apply to them. These workers are also at a higher risk of adverse health outcomes. However, since most of them are working for themselves or their families, not working could leave them destitute, and unlike the workers in the permanent sector, these workers will not receive compensation for occupational hazards, again as they work mostly for themselves. Further, evidence shows that due to lack of social protection in old age, most informal-sector workers are compelled to work into very old age and many retire due to poor health.

The other main type of precarious workers is temporary or contractual workers who work in the formal sector. Faced with competition, in their attempts to cut costs and increase productivity employers pressurize workers to produce better goods, faster. Also, to adjust the workforce to meet the fluctuating demand in the market at lower cost, workers are given temporary or contractual contracts, so that their work is easily discontinued. The insecurities and instabilities of these workers come from several sources. First, they are deprived of some of the protection afforded by labor legislation, due to not having a permanent contract, and they have to constantly look for alternative work. Second, the intense nature of work they are exposed to can increase their risks to different adverse health conditions. Poor health or lack of a permanent job can adversely affect their income earning potential. Third, being temporary workers, they have fewer interactions with labor unions. This distances them from a mechanism to voice their grievances.

There are two main issues facing precarious workers in Sri Lanka. The first issue concerns the conditions of work, namely issues such as the safety at work, working hours, and production expectations, paid leave days and superannuation payments. The second issue concerns the

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nature of employment contract. Over the years several pieces of legislation has been added to the labor code in Sri Lanka to safeguard the rights of the workers through legal means. These also have increased the cost of labor for employers. Imposing high fixed costs on employers can be counterproductive, when employers resort to different means to avoid such costs, such as hiring workers on temporary and contractual basis. Given the nature of their employment, temporary and contractual workers have less say in the terms and conditions of work. Also, as many of these workers are rehired, it is apparent that in many instances short term work arrangements are given to avoid higher costs of hiring permanent workers. There have been some attempts outside the legal framework to find solutions to the issues faced through participatory schemes (for example, employee councils). But these measures aim more to improve working environments in the factories, rather than make changes to the nature of employment contracts. Information on the size and trends in precarious employment in Sri Lanka is not readily available. This article attempts to bring together available information to highlight the main issues. Better information could draw the attention of the policy makers to the nature and extent of the issue to aid informed policy making.

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REFERENCES Alailima, P.J. (1997). Social policy in Sri Lanka. In W. D. Lakshaman (Ed.), Dilemma’s of Development (pp. 127-170). Colombo, Sri Lanka: Sri Lanka Association of Economists.

Comment [TMN1]: Please include pages if applicable. Given.

Arunatilake, N., & Jayawardena, P. (2005). Labor market trends – informality in the labor market. Colombo, Sri Lanka: World Bank, Background paper written for the World Bank Social Protection Study, 2006. Arunatilake, N. (2000). The effectiveness of welfare programmes in improving estate profitability. Colombo, Sri Lanka: Institute of Policy Studies of Sri Lanka, Human Resources Development Series No. 4. Arunatilake, N. (2001). Economic impacts of estate welfare programmes. In H.E.B. Kamphuis, & B. Sivaram (Eds.), Human Perspectives in the Plantation Sector (pp. 138-149). Battaramulla, Sri Lanka: Programme Support Group. Bandara, S. M. J. (2002). Promoting better industrial relation through social dialogue in the plantation sector in Sri Lanka. In A. Sivananthiran, & C.S. Venkataratnam (Eds.), Labor and social issues in plantations in South Asia: Role of Social Dialogue. ILO, New Delhi. Retrieved from http://ilomirror.library.cornell.edu/public/english/region/asro/newdelhi/download/plntation.pdf

Comment [TMN2]: Please include pages if applicable. Given

Comment [TMN3]: Please include Location:ILO. done

Board of Investment. (2004). Guidelines for the formation and operation of employees’ councils. Colombo, Sri Lanka: Board of Investment. Central Bank. (2010)..Annual Report 2010. Colombo, Sri Lanka: Central Bank. Department of Census and Statistics. (2010). Labor Force Survey Annual Report – 2010. Colombo, Sri Lanka: Department of Census and Statistics. European Commission. (2010). Sri Lanka. Retrieved from http://ec.europa.eu/trade/creatingopportunities/bilateral-relations/countries/sri-lanka/. Free Trade Zones and General Services Employees Union. (2010). Retrieved from http://www.ftzunionlanka.org/index.php. Gunaratna, R. (1998). Sri Lanka’s ethnic crisis and national security. Colombo, Sri Lanka: South Asian Network on Conflict Research. Gunatilaka, R., & Vodopivec, M. (2010). Labor Market Institutions and Labor Market Segmentation in Sri Lanka. In R. Gunatilaka, M. Mayer, & M. Vodopivec (Eds.), The challenge of youth employment in Sri Lanka (pp. 49-66).Washington, DC: The World Bank.

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Comment [TMN4]: Please include Title of document. Location: Instituation. This reference is to an entire website.

Comment [TMN5]: Please include pages if applicable. Given.

Hewamanne, S. (2006). Participation? my blood and flesh is being sucked dry: market-based development and Sri Lanka’s free trade zone women workers. Journal of Third World Studies, 23(1), 51-74.

Comment [TMN6]: Please include page numbers. Done.

Kamphuis, H. E. B., & Sivaram, B. (2001). Human Perspectives in the plantation sector. Battaramulla, Sri Lanka: Programme Support Group. Lakshman, W. D. (1997). Dilemma’s of Development. Colombo, Sri Lanka: Sri Lanka Association of economists. Ministry of Labour Relations and Productivity Promotion. (2010). Labour Code of Sri Lanka. Colombo, Sri Lanka: Ministry of Labour Relations and Productivity Promotion. Ministry of Plantation Industries. (2009). Statistical information on plantation crops – 2009. Colombo, Sri Lanka: Ministry of Plantation Industries. Peiris, R. (2007). Productivity: A case study of the Factory Improvement Programme, Sri Lanka. International Labor and Social Policy Review (IOE) Colombo: Sri Lanka: International Organisation of Employers. Retrieved from http://www.ioe-emp.org/ fileadmin/user_upload/ documents_pdf/papers /guides/english/guide_2007june_ilspreview.pdf Rorigo, C. (2001). Labor market developments: Sri Lanka country profile in the 1990s. Background paper for the Workshop: Towards an employment strategy framework in Sri Lanka. Colombo, Sri Lanka. Samarajiva, R. (2010). Sri Lanka ITES sector: People are still the problem. Lanka Business Online. Retrieved from http://www.lbo.lk/fullstory.php?nid=1135964237. Shaw, J. (2007). There is no work in my village – employment decisions of female garment workers in Sri Lanka’s export processing zones. Journal of Developing Societies, 23(12), 37-58. Sivananthiran, A. (n.d.). Promoting decent work in export processing zones (EPZs) in Sri Lanka. Retrieved from http://ilo.org/public/french/dialogue/download/epzsrilanka.pdf. Sri Lanka Apparel Association. (2012). Garments without guilt. Retrieved from http://srilankaapparel.com/index.php?option=com_content&task=view&id=73. Van de Wal, S. (2008). A comparative analysis of six leading producing countries. Netherlands: Centre for Research on Multinational Corporations, SOMO report. Retrieved from http://somo.nl/html/paginas/pdf/Sustainability_Issues_in_the _Tea_Sector_ EN.pdf. Vodopivec, M., & Arunatilake, N. (2011). Population ageing and labor market participation of old workers in Sri Lanka. Journal of Population Ageing, 4(3), 141-163.

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Comment [K7]: Check this. Corrected.

Wickramasinghe, V., & Kumara, S. (2010). Work-related attitudes of employees in the emerging ITES-BPO sector of Sri Lanka. Strategic Outsourcing: An International Journal, 3(1), 20-32.

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Table 1. Structure of the Sri Lankan Economy 1980

1985

1990

1995

2000

2005

2010

GDP (constant 2000 US$ millions)

6,515

8,295

9,822

12,774

16,331

19,839

27,029

GDP (current US$ millions)

4,025

5,978

8,033

13,030

16,331

24,406

49,552

Agriculture, value added (current US$ millions)

1,038

1,512

1,909

2,686

2,908

2,885

6,341

Agriculture, value added (% of GDP)

27.6

27.7

26.3

23.0

19.9

11.8

12.8

Industry, value added (current US$ millions)

1,116

1,431

1,884

3,098

3,986

7,368

14,586

Industry, value added (% of GDP)

29.6

26.2

26.0

26.5

27.3

30.2

29.4

Services, value added (current US$ millions)

1,612

2,518

3,461

5,890

7,718

14,154

28,625

Services, value added (% of GDP)

42.8

46.1

47.7

50.5

52.8

58.0

57.8

Source: KILM, International Labor Organization and WDI, World Bank.

Table 2. Sri Lanka: Labour Force Participation and Employment Patterns (in millions) 1980

1985

1990

1995

2000

2005

2010

Total population (No.) Economically active population(No.)2

14.7 n.a

15.8 n.a

17 6.0

18.1 6.1

19.1 6.8

19.7 8.1

20.7 8.1

Unemployed (No.)2 Labour force participation rate (% of population )3

n.a

n.a

1.0

0.7

0.5

0.6

0.4

33.8

38.9

51.9

47.9

50.3

49.3

48.1

in Agriculture (% of employment)4

51.2

47.7

42.2

36.7

36.0

30.3

32.5

4

19.5

21.6

20.1

22.2

23.6

26.3

24.6

in Services (% of employment)4

29.3

30.7

37.7

41.1

40.3

43.3

42.9

1

in Industry (% of employment)

Sources: 1. Central Bank, 2010, Annual Report. 2. Department of Census and Statistics, Labour Force Survey- Annual Report, 2010. Values exclude Northern and Eastern Provinces except for 2005, where all districts are included.3. Central Bank, 2010, Annual Report. The value for 1980 is approximated with the value for 1981. 4. Values for 1980, 1985 and 1992 are for the closest year. Values for 1980 and 1985 are from the Central Bank Annual Report, 2010, other values are from the Department of Census and Statistics, Labour Force Survey, 2010.

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Table 3. Employment Status, Selected Years, 1990-2010 (%) Year

1990a 1994a 1998a 2002a 2006a 2010 b

Employee Public

Private

21.5 16.4 14.5 13.4 13.4 14.3

33.7 44.3 41.2 44.5 42.1 41.2

Employer

1.8 2.3 1.9 2.8 3.1 2.6

Ownaccount worker (A) 29.2 27.2 28.9 28.6 30.8 31.5

Unpaid family worker (B) 13.8 9.8 13.6 10.7 10.5 10.4

A+B

43.0 37.0 42.5 39.3 41.3 41.9

All informalsector workers n.a. n.a. n.a. n.a. 61.6 62.6

Notes: Based on Labor Force Survey data of the Department of Census and Statistics –2010. a Excluding Northern and Eastern provinces. b Excludes Northern province.

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Table 4. Summary of major social insurance, by type of worker

Public sector

Old age and survivors support1 Civil service pension Contributory Widows and Orphans Pension scheme (WOP)

Formal private sector (permanent workers)

Retirement benefits and survivors benefits under mandatory Employers Provident Fund (EPF)

Informal private sector (self/ employed, unpaid family workers, contractual or casual workers)

Some voluntary pension schemes (e.g. farmers pension, fishermen’s pension, self-employed pension Survivor’s pension and death gratuity from voluntary schemes

Disability, illness, sickness and pregnancy Disability plan is available under a voluntary scheme2 Covered by statuary sick pay only Maternity leave Disability insurance mostly for injured soldiers Disability and some health insurance under Employees Trust Fund. Maternity leave

No health scheme at present except disability under voluntary schemes

Unemployment None. Employments of public servants are terminated very rarely.

None. But employees are given large compensations at termination. Termination of workers for nondisciplinary reasons is only possible with permission from the worker of the commissioner of labour. None.

Note: 1. Pensions refer to a stream of income, while benefits refer to a lump sum payment. All types of workers can access government medical services, which is provided free of charge in state hospitals. 2. Public servants have an optional disability plan. If they join, they have to make contributions.

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Table 5. Type of Work Arrangement, by Occupation Category (2009) (% of total)

Permanent

Temporary

Casual

No permanent employer

1 Senior Officials and Managers

90

8

3

0

100

110,744

2 Professionals 3 Technical Professionals

87

9

3

1

100

410,118

and

Total

Total (No.)

Associate 81

14

4

1

100

360,872

4 Clerks 5 Proprietors and Managers of Enterprises

72

20

7

1

100

308,262

69

15

12

4

100

8,677

6 Sales and Service workers 7 Skilled Agricultural and Fishery workers

39

44

13

3

100

329,706

11

36

15

39

100

117,699

8 Craft and Related workers 9 Plant and Machine operators and Assemblers

26

35

14

25

100

798,037

36

44

12

8

100

363,091

10 Elementary occupations

29

28

13

30

100

1,497,755

Source: Own calculations using Department of Census and Statistics Labor Force Survey Data, 2009. Note: 1.Senior Officials and Managers 2.Professionals 3.Technical and Associate Professionals 4. Clerks 5. Proprietors and Managers of Enterprises 6. Sales and Service workers 7. Skilled Agricultural and Fishery workers 8. Craft and Related workers 9. Plant and Machine operators and Assemblers 10. Elementary occupations

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Figure 1. Average Monthly Earnings, by Occupation Category

Average monthly earnings, by occupation catgory Elementary occupations Plant and Machine operators and Assemblers Craft and Related workers Skilled Agricultural and Fishery workers Sales & Service workers Proprietors and Managers of Enterprises Clerks Technical and Associate Professionals Professionals Senior Officials and Managers No permanent employer

Casual

20,000 Temporary

40,000

60,000

Permanent

Source: Own calculations based on Department of Census and Statistics Labour Force Survey Data, 2009. Note: Monthly earnings include gross salary, other earnings and in kind payments.

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NOTES

1

This paper is a part of a Sawyer Seminar Program that received support from the Andrew W. Mellon Foundation. The support provided by a workshop held in Seoul and supported by the Institute of Sociology at Chung-Ang University is also gratefully acknowledged. 2

The insecurities brought on by the secessionist conflict increased the need for guards at entry points to establishments. The total strength of armed forces increased from 12,000 to 210,000 from 1981 to 1997 (Gunaratna, 1998, pp. 293-294). 3

From the early 19th century the workers for first coffee and then tea plantations in Sri Lanka were brought down from mainly South India. These workers were given accommodation in the estates and remained Indian nationals until recently. The legislation on health and education and social security was first introduced in Sri Lanka for these Indian migrant workers (Alailima, 1997). 4

An Employee Council is an elected group of employees representing different departments of an enterprise. The election of the council is facilitated by the BOI. The objective of the Council is to work with the management to find solutions to industrial issues and to contribute and promote industrial harmony and work towards the improvement of the enterprise (BOI, 2004). 5

Managers in informal enterprises are defined as being informal workers.

6

According to the Shop and Office Employees Act of 1954 the hours of work cannot exceed 45 in any one week. The maximum hours of work a week are different for different sectors. According to BOI guidelines maximum hours of work for shift workers are eight hours during week days and five and half hours on Saturdays (www.investsrilanka.com/pdf/labour_sandards.pdf). For work beyond these specified hours, workers need to be compensated with overtime pay.

33