: Despite strong growth job creation remains weak and is often of poor quality.
Sri Lanka grew at an average rate of 5.8 percent from 2010-2017 but the growth of new job opportunities is below what many had hoped for. .
Meanwhile, trade in goods as a share of the economy is much lower than in other regions. The trends in Sri Lanka and much of South Asia differ from other regions, where trade, growth and jobs are directly connected and go hand in hand. This South Asian paradox raises the question of how governments can boost job growth, and how to raise the quality of new jobs so that economic development brings more shared prosperity.
Titled “Exports to Jobs: Realizing the Gains from Trade,” the report shows how higher exports can translate into benefits for workers across the country, and it therefore recommends policies to expand exports together with policies that help sharing these benefits more widely, for example through measures that help workers get the skills needed to compete for new formal-sector jobs.
Traditionally, economic research on the relationship between globalization and labor markets has focused on the impact of falling tariffs or rising imports, with few studies examining the growth of local labor market opportunities and challenges that follow from increased exports.
The new World Bank-ILO report takes a novel analytical approach by combining household-level or worker-level surveys with trade data to construct a unique dataset that bolsters our understanding of how big changes in trade can impact local labor markets. It builds on a new literature that credibly assesses the response of employment and wages to a greater exposure to trade.
In short, . It finds that increasing exports per worker could lead to higher wages and better jobs, including more formal-sector jobs for women. It also shows that the impacts of trade are geographically localized, and the effects do not easily disseminate across all regions and all groups of workers.
, which could be beneficial for Sri Lanka given that the majority of Sri Lankan workers are in the informal sector.
. This would require reducing economic and social obstacles to women joining the workforce in Sri Lanka, such as changing potentially discriminatory regulations now in place.
Boosting exports in labor-intensive industries, which is a comparative advantage for South Asia, also could significantly lower informal-sector employment, particularly for rural and less-educated workers.
Other steps to extend labor market gains more widely include investing in infrastructure, removing trade barriers, and increasing the ability of workers to move to areas and into occupations where new jobs are being created.
Regional challenges also must be addressed. Intra-regional trade accounts for just over five percent of South Asia’s total, compared with 50 percent in East Asia.