17 August, 2022


Liberalization Of The Labor Market: Is The End Of Permanent Employment?

By Sumanasiri Liyanage

Sumanasiri Liyanage

Sumanasiri Liyanage

How do the three main parties in Sri Lanka, United National Front for Good Governance, United Peoples Freedom Front and the Janata Vimukthi Peramuna respond to the increasing demand made by the international financial agencies for labor market liberalization? Do these parties address this issue?

Last weekend I attended two meetings. While the first is organized by the people working on the Free Trade Zone, the second is a meeting of the office-bearers of branch unions of the CMU. The principal focus of the both meetings was manpower agencies and the labor market. The second meeting was more focused as its organizers opted for the title, “Is it the end of permanent employment?” In fact, I borrowed the phrase used by the General Secretary of the CMU, Comrade Sylvester Jayakody’s apt phrase, “manpower contagion” as part of the title of this article.

I have no idea when the manpower agencies entered the Sri Lankan labor market. When Mahaweli Development Project was underway, private agencies entered as intermediaries in bridging the demand for and supply of labor for various project sites. Individual intermediaries also facilitated in finding domestic helpers. Foreign employment agencies have proliferated since the beginning of the outflow of labor first to the countries of West Asia and later to other emerging economies. As far as I know, a very limited studies were done on the subject of the role of these intermediaries. According to the data I possess, these agencies usually charge from the organization that demand labor once and for all payment. When the workers were transferred to said employer, the role of the intermediaries usually comes to an end. The responsibility of the employee would be shifted to the new employer. The manpower agencies are different as they leave the employee rather ‘undefined’ the issue to which I will turn shortly.

There is another novel element. In the past, this service of intermediaries was used only by the private sector. Today, many government and semi-government agencies have also used manpower agencies in meeting the labor demand of those organizations. Lake House, Sri Lanka Telecom has been widely using manpower agencies in ‘recruiting’ people. National Savings Bank once hired around 500 people through manpower agencies. Manpower agencies were very much present in the Free Trade Zones and also in many private sector companies. Comrade Jayakody used the word ‘contagion’ primarily because of the increasing presence of the manpower agencies in the Sri Lankan labor market. The degree of extensity and velocity of the presence of manpower agencies appear to be phenomenal.

The way In which manpower agencies operate is quite simple. When a company needs additional labor, like in good old days it does not advertise calling for application. It contacted manpower agencies some of them were set up by people closer to politicians. Manpower agency sent a list of names to the employer company and the company select the number they want. These employees are neither the employee of the company nor the employee of the manpower agency. Company pay a daily wage which may be a little higher than the wages of its regular employees. In many FTZ situations, if the daily wage of the regular employee is Rs 750, manpower worker gets about 1200- 1300 and out of which about 1000 is paid to the worker and the balance goes to the manpower agency. For the calculation of ETF and EPF, the only payment made to the worker is taken into account. These workers do not enjoy even limited rights of the regular workers. For example, they are entitled for only half day leave per month.

Is the manpower agency modality of labor demand and supply popular among workers? Well, ironically it is and this preference shows the fetishistic character of the commodity ‘labor’. This system provides a new kind of freedom for workers. They can work when they wish to do so; and when they prefer leisure, they can go for that option as well. Similarly, the employers get responsibility-free labor. Labor comes to them without any strings that were developed in the past. Recruiting and sacking can be done through SMS although the words “hiring” and “firing” cannot be applied in this context with rigorous meaning those words have embodied historically. Another interesting development is some regular workers find additional employment in their “free time” to work in different companies. Hence we are entering into a freer labor market condition.

This is what neoliberalism and the international financial institutions have been calling for since the early 1990s. Recently, European Institutions (troika) that includes European Union, European Central bank and the International Monetary Fund demanded the left wing Syriza government should take measures to liberalize the labor market meaning hiring and firing should be made easier. This has been one of the prescriptions suggested by the right wing economists in Sri Lanka. Their argument is that would make the labor market more rational and efficient. While the bourgeois economics called for supply-determined price in the goods market, they call for demand –determined price at the labor market. We have witnessed everywhere and everywhen, this so-called liberalization or flexiblization had led to increasing income inequalities, weakening worker organizations and poor working conditions.

To what extent these developments have affected the human living condition have shown in a recent IMF document. Even IMF has been compelled to accept and to propose that one of the solutions to increasing income and wealth inequalities is unionization of the workers.

I read the election manifesto of the United National Front of Good Governance (UNFGG) that proposes to promote moribund idea of social market economy. The countries that had adopted SME have now abandoned it. The clearest example is Germany which have not only abandoned social market economy, but also played a leading role in enforcing Greece to adopt a policy package that counters to social market economy. Under social market economy, Germany adopted job and employment security making firing more difficult. However, I did not see any suggestion in the UNFGG to face this increasing manpower contagion.

It was a welcome move on the part of the trade unions and worker friendly organizations to commence work and advocacy to flag this issue in the context that none of the main political parties wish to encounter this issue and to find justifiable solution to it. If this issue is put into the backburner, we will find a class of ‘slaves’ in modern factories. Capitalism will not show a hesitancy to revive archaic forms of exploitation if it favors their profitability.

*The writer is the co-coordinator of the Marx School and he wishes to thank Comrade Sylvester Jayakody, The General Secretary, CMU, Sri Lanka. e-mail: sumane_l@yahoo.com

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Latest comments

  • 1

    I doubt if Comrade Sylvester ever picked on 2 key global trends that affected his career.

    The first occurred circa 1972. The “Baby boomer” generation had reached working age. This was the generation where families had upwards of 12 children. These children conceived during WWII bombing raids were looking for work. There were mass global food and fuel shortages. Work was hard to come by.

    Taking advise from Comrade Sylvester, Srima SLFP govt closed down the economy. Food queues ensued. The 2 insurrections started in north and the south of Ceylon.

    Comrade Sylvester has yet again arrived on the closing phase of his first Socialist Marxist cockup.

    The Baby Boomers are retiring. Global changes are taking place yet again. The trends are harder to pick. Although suffice to say it still involves global competition. This time it has become a far greater level playing field thanks to the Internet.

    I hope Comrade Sylvester does not shut things down like the Internet fearing competition this time too.

  • 2

    Srilanka’s manual labour force is 100 % Dalits.

    And they get peanuts in comparison to their comrades working overseas,

    But the products they make specially in the FTZ are sold at the same rate as the products made by people earning Dollars and Euros.

    Only luxury our Dalits who are lucky enough to get a job is the Job Security and the EPF.

    This is more so in the Public and Semi Public entities than the Private Sector,

    Batalanada Ranil’s Yahapalana Economic model is all about culling the Public Sector

    And sell the Semi Public Commercial Entities like the LITRO..to Private Mudalalis both local and Overseas.

    Now they are going a step further and give Labour Hire Companies the right to lease the Dalits to Mudalais ,

    Mudalais now can cull their benefits like the Annual Leave and EPF..

    What I can’t fathom is how our JVP comrades never talk about these issues?.

    Batalanda Ranil went for a crash course in US to learn about how to increase productivity and keep the Mudalalais margins healthy.

    Wonder whether our Red Baby Elephant Anura Kumara also got any coaching by correspondence from Singapore along with the Santhosams from the Yahapalana organizers?.

  • 0

    For a nation to prosper there has to be mobility in Capital, Land and Labour. More savings, FDI and conseciary loans from abroad are necesary. Project Evaluation by the right Evaluer with tha necesary expertize is the most important element.Change begats mobility.Shock should be avoided with structural adjustment.
    The labour market has to be mobile to move towards new needs. Retaining for new jobs can occur with todays internet, technology transfer and an educated and inteligent worki force. mIn many sectors thier is a shortage of labopur. Gong abroad for employment and for othewr reasons including due to cevil strife has caused this situation. A large informal labour sector exists.

    For our country people should obtain new skills and better Pay. Incentives are in order. Severance pay and retraining must be offered. We must have a pride to be a Sri Lankan. We have to make some sacrifice. We should save. Be carefull to curb our wants so that all can hget their needs. Everybodies needs must be a human right.Samudhri caters to many of the informal sector woth political connections. They were a political brigade. Care should be taken in uplifting them with nutrient health package as well as training.

  • 0

    Comrade, Governments cannot create sustainable jobs. Businesses create jobs. It may be painful but it works.

  • 0

    Well capitalist development is uneven ,the US, Europe and Japan are exploit and plunder wealth of hundred of countries ,but each produced comparable amount of wealth over the long term. All these countries regulations that cover their labor market, corporate governance,
    anti-trust, social protection, and even banking and have differed considerably.

    The model and path of capitalist development one each decade as the great success for all to emulate by Imperialist countries which that exploited all resources and become wealthy nation in the Globe.

    In 1970 Scandinavia was everyone’s favorite. Japan become the country to copy in the 1980s, and US was the undisputed king of the 1990s.
    Such fads should not blind us to the reality that none of theses models can deemed a clear winner in contest of so-called “capitalism”.
    It is unlikely that modern societies have managed to exhaust all the useful capitalist institutional variation that could underpin healthy and vibrant economics.

    There is lack of knowledge of so-called Trotskyist of anti- Marxist that the benefit of capitalist open economics and gains from upholding domestic regulations both receive a proper hearing in national political debate.

    What does the many issues of economic and scientific say on all these questions?

  • 2

    This free-labor-market-condition (of what neoliberalism and the international financial institutions have been sincerely calling for since the early 1990s) will be idyllic if money stayed in-country.
    However, as soon as profits are made, profiteers vanish asap to the West. Children are sent to the West to study and/or start business in the West – richer ones who exploited the workers most, buying up their positions in foreign conglomerates.The money eventually trickles back to Sri Lanka through IMF-loans (of which came about by West taking foreign profiteers’ money and creating more from it). In the end it is national localized free-labor-market-condition vs. global free-labor-market-condition

  • 0

    Prof. Liyanage, the term “manpower contagion” is misleading. It is more a manpower glut because the country has too many low skilled people. And because the supply of such low skilled workers outweighs the jobs available the resulting situation is tragic. (By low skilled I mean waiters, factory workers, labourers, housemaids etc.).

    If the sum total of labour policy is to lift productivity while protecting employers and employees, we will never be able to come together to achieve these ends. But there is a solution.

    Train our people to compete for highly skilled jobs abroad. Highly skilled meaning technicians at microprocessor plants, airline engine mechanics, underwater welders etc. Notice the focus is on skill sets that make one gainfully employable anywhere.

    Most Sri Lankans demonstrate an admirable work ethic abroad, which is for a variety of reasons stifled when they remain in the country.

  • 0

    Any body suggesting that the Labour market should stand still is living in cloud coo ku land. Labour is subjected to massive competition all over the world. Cost effectiveness and flexibility is the name of the game. We has a country exist on borrowed money. We spend eight times more than we earn. The trade deficit is widening. We are borrowing in the open market for our expenditure and projects which has not delivered any income. Almost 70% of our people are employed by the state. A report claims that the benefit system is rigged and needs the introduction of a Biometric identification process as in some cases pension is being paid to people who have died long time ago. The state expenditure must be cut back and greater efficiency in the public sector must be the norm through competition. These massive public utilities must be privatised for cost effectiveness and investment to modernise. The Employers who invest their money and take risk must be encouraged by a flexible labour market with a minimum wage set by the state on the basis of affordability. If we do not embark on a radical change of labour culture we will be isolated by investors. You should get real and live in the real world.

    • 0

      We spend more than we earn because money goes out of the country at huge amounts each and every year because Lankan employers who invest do not put their profits back into the economy. Other than foreign investors who pay some kind of Lankan capital gains tax, Lankan investors use their profits to indulge themselves in the West. Indeed if they don’t go to the West, they have nothing to show off in their circles. This might have nothing to do with the old regime’s investment in foreign enterprise with set plan, hopefully to make more money for Sri Lanka; I am talking about the average Lankan’s mindset.

      Take Singapore and Malaysia. They scorn those who migrate. If their former nationals try to go back, they encounter hostility and ridicule. Students who were sent by the governments to study in the West and do not return, have their families’ assets confiscated. Students who study in the West do so only on government scholarship for worthy students who can best benefit the country. The average citizen does not use their private money to send their children to study overseas even if they do come back. They feel that their money is better spent on contribution to the national economy, and if their children are bright, they go to local universities. Even in the midst of huge surpluses in these countries, this attitude still persists.

      Massive competition all over the world involves Nationals being patriotic to their own country and people.

      • 0

        Your examples about Malaysia and Singapore are apt, but you need to bear in mind that it took two, perhaps three generations to instill this sense of patriotism. Better to focus our efforts in getting locals to compete for skilled jobs abroad while we work earnestly towards fixing the labour market.

        But I am intrigued about this comment of yours: “We spend more than we earn because money goes out of the country at huge amounts each and every year because Lankan employers who invest do not put their profits back into the economy”.

        I am genuinely curious about this. On what basis? Can you estimate it as a percentage? Again, I am genuinely curious about this and would like to know more so some direction would be welcome!

        • 0

          Maybe in Singapore, did they take two or three generations to instill the sense of patriotism – they are a new country after all. But Malaysian hierarchy set the example from the very beginning. They rarely goes overseas to settle- many won’t even go to a White man’s country to visit. With their money(they do have some oil), they make sure they invest in their nationals.

          Getting their locals to compete for jobs overseas while working earnestly to fix the labor market is something these countries would consider a contradiction, because they would not be developing their own country with their own capabilities and interests. They would forever be losing the edge on their own people and development in following the systems of other countries. It comes very naturally to them and their mindset is one of collectivism. They let their part of the island of Borneo remain for jungle dwellers, and in fact their villages are given big grants from the government to remain villages and indigenous lifestyles are left alone.

          A better example would be Burma, as they have no oil. They are plentiful in natural riches that the West and China desire, but they stay true to their Buddhist principles. They are opening up only cautiously to foreign interests due to pressure from foreign powers.

          I say “We spend more than we earn because money goes out of the country at huge amounts each and every year because Lankan employers who invest do not put their profits back into the economy” as this is what I see in observation of, and interactions with the Lankans here in the US and other places, vis-à-vis other country nationals. The only other place that beats us is India. I think it is to do with Hindu caste systems and survival of the fittest mentalities that lead to selfish individualism. How many Sri Lankans are enamored with the “learning for the sake of higher-thought, and “reaching for the utmost,” and then go automatically to the Western system, rather than trying to develop their own.

          I would put the money that goes out of Sri Lanka for individualistic-aspirations as an estimate that starts at 6-billion dollars per annum (and counting), because this is what the maids in the Middle East are forced to earn top up ever diminishing country reserves.

          • 1

            Very interesting, particularly the basis of the 6 billion USD estimate. Thankyou!

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