📉 Sri Lanka's Headline Unemployment Recovery Masks Deeper Labour Market Damage: IPS

While Sri Lanka’s unemployment rate returned to its pre-crisis level of 4.4% in 2024, the Institute of Policy Studies (IPS) highlights that overall economic stabilization has failed to deliver productive, stable, and well-paid employment. • Overall Labour Indicators (2019–2024) - Labour Force Participation: Declined by ~5%. - Employment-to-Population Ratio: Down by ~4.5%. - Real Wages: Salaried workers' earnings remain lower than in 2019 due to inflation and lost purchasing power. - Labour Productivity: Dropped 0.5% overall despite intra-sector gains, driven by movement into lower-output sectors. - Out-Migration: Around 300,000 workers left Sri Lanka in 2022 amid scarce domestic opportunities. • Demographic & Sector Breaddown - Youth Unemployment: Persists at a high 22%. - Female Participation: Dropped from 34.5% (2019) to 29.8% (2024). - Skills Mismatch: Qualified workers (A-Level or higher) in lower-tier job roles rose from 32.8% to 34.9%, reflecting underemployment. - Agriculture & Fisheries: ~2 Mn climate-vulnerable workers face gaps in safety nets, with landless tenant farmers often excluded from compensation. • Informality & Wage Disparities - Informal Sector: Accounts for 66.5% of total employed (~5.3 Mn workers); 90% lack written contracts and 59% work in micro-enterprises (<5 employees). - Earnings Gap: Formal wage employees average Rs. 63,000/month vs. Rs. 35,000/month for informal workers. • Key Priorities for Reform - IPS urges better demand-driven skills matching, simplified regulatory environments for business formalization, and enhanced social security/income protections for informal workers.