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Informal sector layoffs to boost unemployment

30 Oct 2022

  • Biz community warns of looming unemployment crisis
  • Only 10-15% of construction projects still active
  • Census Dept. says Q1 data does not capture econ. crisis developments 
  • Colombo Chamber notes higher tax will increase layoffs
Sri Lanka may soon face an unemployment crisis as increasing layoffs are being reported across the island, particularly from the informal sector, in the face of the ongoing economic crisis, the local business community warns. Speaking to The Sunday Morning Business, former President of the Chamber of Construction Industry of Sri Lanka (CCI) Eng. Maj. Gen. (Retd) Ranjith Gunatilleke stated that due to the current economic crisis most construction projects had come to a standstill and that only around 10-15% of projects were still active. As a consequence, he claimed that currently there were around one million persons directly and indirectly linked to the construction industry who found themselves without employment. “Due to the current situation, the entire industry is looking at thinning out its workforce from higher managerial levels to executive levels and lower unskilled workmen. Casual labourers are paid only based on the work done, so they are no longer called in. In the case of other workers, they are offered around 1-3 months’ salary payment until the project restarts,” he explained. Speaking to The Sunday Morning Business, Commissioner General of Labour B.K. Prabath Chandrakeerthi stated that over 60% of all employment in Sri Lanka was in the informal sector and that this sector had felt a disproportionate burden of the present economic crisis. However, since the Commissioner General of Labour does not have any authority over the informal sector, he was unable to quantify the severity of the issue. “An application under Section 2 of the Termination of Employment of Workmen Act can be made to us only by employees employed in the formal sector. So far we have not observed a drastic increase in layoffs from the formal sector. However, it is the informal sector that employs a majority of workmen in Sri Lanka, accounting for around 60% of all employees. It is the informal sector which has suffered the most in the current economic crisis, particularly the construction industry. However, the informal sector and its employees do not come under my purview, nor can they make an application to me upon being terminated,” he explained. Similarly, Department of Census and Statistics Additional Director General K.M.D.S.D. Karunaratne told The Sunday Morning Business that the most recent unemployment data compiled by the Department of Census and Statistics was for Q1 2022, which did not adequately represent the recent developments as a larger portion of the present economic crisis took place from Q2 2022 onwards. Colombo Chamber of Commerce (CCC) President Saranga Wijeyarathne warned that the increased taxation would lead to increased layoffs among Small- and Micro-sized Enterprises  because not all businesses would have the capacity to accept the increased costs associated with high taxation. “Large- and medium-sized companies will be able to bear the burden. However, small- and micro-sized companies will be particularly vulnerable,” he noted. Wijeyarathne further stated: “There are people who know how to make the correct decisions in situations like this. However, there will be people who will be highly vulnerable and will not know what to do; it will depend upon their level of exposure and experience and the resources they have to support their business. Therefore, while large businesses will bear a larger burden, they will be able to digest it. However, a micro-level entrepreneur will not know what to do and will not be exposed to the necessary information to understand what will happen in the future. These people are facing a lot of uncertainty right now. Their normal business will be significantly impacted because they do not know how to adapt.” – By Shenal Fernando   


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