📈 Study Highlights Trade Policy Impact on Sri Lanka's Workforce

A new study by Nilupulee Rathnayake (Neelan Tiruchelvam Trust) reveals how trade policies directly shape labour informality in Sri Lanka's manufacturing sector between 2014 and 2021. • Overall Reality: Nearly 70% of Sri Lanka's total workforce remains trapped in informal employment, lacking legal contracts, social security, and reliable protections. • Tariffs & Imports: Higher tariffs shield domestic industries from global competition but increase informal jobs, as protected firms cut costs via casual labour. Conversely, lower tariffs and higher imports drive formalisation by forcing local firms to boost efficiency and labor standards. • Export Sector Anomaly: Contrary to global trends, expanding exports correlate with higher levels of informal work in Sri Lanka. Flagship industries like apparel & textiles rely heavily on precarious subcontracting and casual labor to maintain low-cost flexibility. • Socioeconomic Disparities: Women, rural/provincial laborers, and workers with lower education levels bear the brunt of informal employment, worsening gender and regional inequalities. The 2020–21 COVID-19 pandemic further shattered standard market patterns, aggressively pushing vulnerable workers into precarious roles. • Recommendations: The study stresses that trade liberalisation alone cannot guarantee decent work. It urges policymakers to tie trade reforms with strict enforcement of fair labor contracts, strengthen social safety nets (pensions, health coverage), and targeted oversight within apparel subcontracting chains to transition small producers into formal operations.