Trade unions of various State-Owned Enterprises (SOEs) within the public service have intensified their demands through strikes in the past couple of months, primarily demanding a salary hike of Rs. 20,000. However, each trade union representing different SOEs has its distinct set of demands, reflecting specific concerns relevant to their occupations.
Over 200 trade unions belonging to the State, semi-State, and provincial sectors engaged in a massive trade union action by reporting sick on Monday (8) and Tuesday (9), mainly demanding solutions to their salary concerns caused by the economic complications of the country. Some, such as university non-academic workers, have been persistently engaging in strikes as they believe the Government has not accommodated their requirements.
However, trade union action in many sectors such as railways, post, schools, and healthcare impacts the general public directly, posing a concern regarding rights versus responsibilities. Moreover, it is believed that the ongoing strikes could have significant economic implications for the country as well, in terms of taxation, debt, productivity, investments, and other potential ripple effects.
Teachers
Trade unions play an influential role in any society as they hold the potential to reflect the prevalent labour standards of a country. Trade union rights, although recognised in a democratic system, stand as a controversial and often misunderstood concept in Sri Lanka.
Labour standards impact a country’s economic and political efficiency, leading to a beneficial sociopolitical atmosphere. Both labour standards and the broader economic implications of labour demands are being extensively discussed in the light of recent trade union protests.
Speaking to The Sunday Morning, Ceylon Teachers’ Union (CTU) General Secretary Joseph Stalin highlighted their demands in the education sector.
“We are asking for the fulfilment of our demands in the education sector, relating to the elimination of the salary anomaly issue affecting teachers and principals. We have noticed a wage disparity in the education sector since 1997. In order to resolve this issue, we have established a committee and introduced a proposal. Thus far, we have received only one-third of what we requested since 2022. We are demanding the rest,” he stated.
He further explained that these demands extended beyond mere salary adjustments as there was a call for the Government to alleviate the financial burden on parents in education, address operational challenges in schools, and ensure that trade union actions were not met with repression.
According to union members, the Government’s refusal to engage with these demands is viewed as a strategic choice rather than a financial necessity, especially considering reports of uncollected taxes amounting to Rs. 1,066 billion and tax relief totalling Rs. 976 billion. Stalin explained that the Government’s avoidance of these suggested to unions that the necessary funding existed but was not being allocated to meet their demands.
Addressing the recent Government action to repress the protests, the CTU General Secretary stated that the union viewed offering salary increments to workers who reported to work while disregarding their demands as completely unacceptable and emphasised they would collectively protest that decision.
“We are going to gather together and make a collective effort to win our demands, we don’t see any other option,” he added.
Estate workers
Sharing a similar perspective regarding trade union action, Ceylon Estate Workers’ Union Secretary J.M.A. Premaratne said that they had issued their demands as the Government had been providing salary increments for several high-end professions such as doctors and university lecturers as well as the administrative sector. He emphasised their frustration with the Government’s responses about the lack of revenue.
“If the Government doesn’t have enough money to provide incentives, how do you explain the increments made to the administrative sector? There’s no need to increase the Value-Added Tax (VAT) because that will put the public in an extremely difficult situation.
“The higher authorities should get rid of exorbitant expenditure habits and curb the luxurious lives they spend. Then they will be able to accommodate the needs of the people,” he said.
Premaratne further asserted that the responsibility lay with the Government to address these challenges and meet the financial needs of its citizens, emphasising the need for accountability from the authorities.
Grama Niladhari officers
Speaking to The Sunday Morning, All-Ceylon Grama Niladhari Officers’ Association General Secretary Jagath Chandralal highlighted the specific outcomes that they wished to achieve, expressing concern regarding the Government’s handling of service minutes and allowances.
“They have not shown us the service minutes sent to the Public Service Commission yet. We have included four requests in it, including four salary increments that should reach all public servants in the Grama Niladhari sector. They’re not even willing to fulfil these minimal requests. Therefore, we do not agree with the measures taken in relation to the submission of service minutes,” he said.
Chandralal also expressed frustration over delays in implementing allowances, claiming that although Cabinet approval had been granted for the provision of 20 litres of petrol, it was pending inclusion in the next National Budget. He further explained that they had only received Rs. 5,000 annually for uniforms, which was insufficient, and therefore requested this to be increased to Rs. 15,000. He questioned how the Government could provide salary increments for the administrative sector from 1 July but was unable to accommodate their reasonable requests.
Responding to the economic implications of the strike, Chandralal highlighted the potential impact on the general public.
“There is an economic impact, but we try our best not to cause an economic cost to the country. If we cease the National Identity Card issuance process or stop issuing licences, it will affect the Government negatively. Therefore, we try to conduct trade union action without an interruption in our service and without inconveniencing the public.
“We are still trying to coordinate and do not wish to inconvenience the Government or the public. However, if we are left with no other choice, we might have to resort to such measures,” he added.
Principals
Elaborating further on the demands of the education sector, Ceylon Principals’ Union (CPU) Secretary Piyasiri Fernando stated that they were merely requesting a solution to the salary anomaly.
“Our demands are centred on obtaining allowances equivalent to those received by other staff services for Grades 1, 2, and 3 of the Sri Lanka Principals’ Service that span 10,096 schools across the country. Despite being identified under the staff service, we are yet to receive staff service privileges.”
Fernando highlighted that a Cabinet paper had been passed to increase allowances for graduates of the Sri Lanka Principals’ Service from Rs. 6,000 to Rs. 9,000. Additionally, there is a push for an amendment to the service minute to address issues where salary progression halts at the highest pay scales in the principal service, leading to reductions when moving from Grade 2 to Grade 1. The union seeks economic justice and solutions to these longstanding issues.
Responding to the economic implications of the trade union action on the people, he stated that their request was minor.
“We are simply asking for a resolution of salary anomalies which date back to the National Pay Commission of 1994. While other staff services at the officer level have received allowances of Rs. 25,000, we have been neglected despite our role in shaping the education of 4.3 million children,” he said.
Economic disruption
While the specific reasons for trade union action may vary, their demands for better pay amidst the economic crisis should not be disregarded. However, persistent striking could derail the productivity and economy of the country.
It is estimated that the strikes, which are already causing the loss of a significant number of man-days, will impact various facets of the nation’s economy, highlighting their detrimental effects on productivity. Such disruptions can also have a negative impact on investments, hindering economic growth.
Prolonged strikes by 14,600 university non-academic staff for nearly 70 days have affected the lives of approximately 250,000 undergraduates. State Minister of Higher Education Dr. Suren Raghavan has stated that these strikes have caused a direct financial loss estimated at around Rs. 150 million and wasted approximately 1.8 million human hours, severely disrupting the operations of 17 universities and 19 joint postgraduate institutions.
Speaking to The Sunday Morning, State Minister of Finance Shehan Semasinghe provided insights into the Government’s stance on the current trade union action and demands. Responding to concerns regarding the economic implications of the trade union action, he emphasised that every strike had negative economic consequences.
However, he claimed that the Government had already implemented a Rs. 10,000 salary increase this year. Furthermore, the President has committed to another salary increase in 2025 based on the reports submitted by the committee headed by a former president’s secretary on the existing wage categories.
Highlighting Sri Lanka’s economic challenges, the State Minister contextualised them within global economic crises, stating that Sri Lanka was not alone in facing crises of this nature. Greece, for instance, had to make severe cuts to its public sector and pension funds during its crisis. He emphasised the Sri Lankan Government’s commitment to fiscal responsibility and economic reforms.
“In Sri Lanka, despite all the crises we went through, the Government has ensured that we don’t lay off people and also pays the salaries on time. Since we are emerging from the crisis, we can’t return to the previous system where the Treasury and the Government depended heavily on Central Bank financing. We cannot go back to that option again or reverse all other reforms, because the reforms have started bearing fruit,” he said.
Semasinghe pointed out that the salary increase being requested amounted to about Rs. 275-300 billion annually, which was approximately 1% of the Gross Domestic Product (GDP). To fund this, options include raising revenue or reducing the size of the Government. However, he stated that downsizing the public sector was not feasible as it could lead to unemployment.
“This can only be done by increasing VAT to 22%. It could even have a further cascading effect even if you increase it to 22%. The other option would be to increase the corporate taxes from 30% to 42%. Is Sri Lanka ready to absorb the burden of this increase? Can a government or the public accept this type of additional burden placed on them?” he questioned.
The road ahead
The State Minister further said that the country was on the right economic path, the reforms had been completed, and the Government had addressed Sri Lanka’s corruption vulnerability by adopting globally accepted good practices to combat corruption.
“I think it is a matter in which we need to remain resilient, especially in the public sector, for a further couple of months, perhaps until 2025. The President has already delivered on what they have insisted on at every occasion.”
He concluded by explaining that Sri Lanka was moving towards a sustainable economy, which was crucial for long-term stability and prosperity, adding that any deviation from this path risked returning to past economic challenges.
Understanding the economic landscape of the country and the conditions of workers is crucial as it helps navigate potential solutions and outcomes.
Communication and awareness
Speaking to The Sunday Morning, First Capital Chief Research and Strategy Officer Dimantha Mathew shed light on the broader economic aspects of the SOE trade union strikes by connecting it to the International Monetary Fund (IMF) programme. He highlighted that SOE restructuring was part of the IMF agreement, stating that there was little choice but to either restructure or privatise these institutions.
He further stated that the current protests may potentially delay this process, which could lead to economic uncertainty and slow business activity. He added that such delays could indirectly impact GDP growth and cause fiscal challenges. Discussing the potential solutions that could address both workers’ demands and the economic implications, he focused on the crucial role that communication could play.
“The economy could face multiple hits if the strikes continue to intensify, whereas communication and a win-win situation for all parties can bring about a better result. A lack of communication and awareness can sometimes cause many issues. For example, there’s much talk about the Ceylon Electricity Board (CEB) restructure and employees know what’s going to happen. There’s a lot of communication happening both ways and assessment of what needs to be done. That sort of communication in other areas could help.”
Fixing structural issues
Offering further economic analysis, Advocata Institute Chief Executive Officer (CEO) Dhananath Fernando framed the worker demands within the context of economic challenges and pressures faced by Government employees.
He stated that many Government workers, including teachers and principals, earned wages close to or just above the national poverty line. For instance, a teacher or principal may earn Rs. 60,000-70,000 per month, while an office assistant typically earns around Rs. 45,000-50,000. These salaries, when serving as the sole income for a family, barely meet essential needs.
However, Fernando also emphasised that a simple salary increment was not the solution to the broader economic crisis of the country, stating that there was no magic formula to earn the revenue needed to increase salaries. He elaborated on the options and their limitations, stating that options like raising VAT to 20-21% or increasing corporate taxes to 40-45% were impractical due to their potential negative impacts on living costs.
While highlighting that the current salary scales that Government workers received were not justifiable, he also emphasised structural issues within the Government cadre as it was tail-heavy, often filled based on political patronage rather than merit. This results in inefficiencies and unproductivity, where lower-level employees struggle to make ends meet while senior decision-makers are underpaid given their seniority.
“We cannot attract the right talent to make important decisions. We have a system where you cannot attract the right people to the top, as we have a very poor, diluted bureaucracy at the top level, and at the same time, there is a massive unproductive sector at the bottom,” he noted.
Fernando suggested that the public sector needed comprehensive restructuring which could potentially save costs and allow for better compensation at higher levels as well. He further added that simply borrowing to fund salary increases was not viable as it would escalate interest costs and strain the economy.
Instead, a phased reduction in Government workforce size, economic growth to absorb them back to the market, and strategic reforms are essential to sustainably manage the salary issues and border economic implications.
Impact of strikes and solutions
Sharing additional insights on the economic challenges with The Sunday Morning, Frontier Research Senior Research Analyst Arshad Ismail stated that the strike had led to delays in administrative tasks and had the potential to halt various Government-sponsored programmes.
“The primary demand of these unions is an increase in salaries to counter the high cost of living and the increased taxes and electricity charges imposed as part of the Government’s austerity measures linked to the IMF bailout package,” he said.
Commenting on the economic cost, he addressed the disruption of general productivity of the country and children’s future.
“These strikes don’t just stop Government work, they also create a huge backlog of activities. When Government offices are shut, it causes delays that will take much longer to clear up. This isn’t just a waste of time, it costs money too, as businesses and individuals lose productivity and face additional expenses.”
Evaluating potential solutions, Ismail highlighted the need for addressing workers’ demands through negotiations. He explained that as the Government had already increased public sector salaries earlier this year, financed by raising VAT to 18%, another salary increase at present would likely necessitate yet another tax hike, which was not feasible given the economic strain currently placed on the public.
“A possible solution could be to enter into negotiations with the unions to reach a future promise for salary adjustments. This could involve agreeing on a timeline for incremental raises once the economic situation improves. By setting clear expectations and timelines, the Government can provide some assurance to workers without immediate fiscal pressure.
“The Government does have plans of amending certain taxes and even introducing taxes like the imputed rental income tax by next year. Once these changes materialise, a part of its revenue could be used for future pay raises.”