Worker attitudes and unemployment

Sajith de MEL

UNEMPLOYMENT: A plethora of explanations and hypothesizes, both empirically tested and otherwise, competes to profess the unemployment phenomena in Sri Lanka.

The hypothesis of “Skills mismatch” is one such explanation standing tall amongst the others.

Diverse schools of thought exist; while one being adamant on its existence and predominance in Sri Lanka, while the other vehemently negates the hypothesis.

Proponents of skills mismatch habitually accuse the education system incapable of matching the aspirations of the employer community. However one may even be quite cynical as to whether the worker attitudes, more theoretically fˆted as the “queuing hypothesis” has a more say on the Sri Lanka’s unemployment.

Negative attitude of workers to work is something which aggravates unemployment and thus eventually creates joblessness.

Research unearths that part of the unemployment dilemma in Sri Lanka is owing to the “waiting” nature of workers as opposed to the extensively conventional skills mismatch hypothesis.

The unemployed are not fervent to seize vacant jobs and they prefer to wait for “better” jobs.

Hence we ascertain that unemployment in Sri Lanka is to a large extent, voluntary. Studies on labour markets and education system discover that education slightly augments the probability that the jobless become more “choosey” in their job hunt, concerning the characteristics of their future jobs, resulting in a prolonged search for employment.

The bulk of the unemployed are young, relatively educated individuals who live with their parents and benefit from family support to perform an extended job search.

The aspiration of this search is not just to find a job, but a relatively good job, either in the public sector or in private sector activities, characterized by substantial protection stemming from product and labour market regulations.

Voluntary unemployment is compatible with frustration, as years of job seeking may fail to give access to one of these good jobs.

It is a widely known fact that there is a mismatch between existing labour skills and the needs of the employers, as well as between aspirations of those waiting for jobs and employment opportunities that are available.

The studies find that the labour market mismatch in agriculture and fisheries sector occupations, clerical jobs and elementary occupations is particularly striking.

The more educated a job aspirant is, the less he/she desires agricultural and manual jobs and instead desires administrative jobs.

Those who are looking for jobs, particularly the educated youth, must be aware of where they may be able to find work for a living; yet they are not interested in jobs in agriculture and fishing and other elementary occupations.

Therefore there is a large gap between those employed and those who aspire to be employed with respect to these occupations.

This demonstrates the existing mismatch in the labour market between what is aspired and what is available. Job preferences are towards white-collar jobs, which are not available.

One of the solutions to the ‘waiting’ nature of educated youth is the attempt by the Sri Lankan government to artificially create ‘good’ jobs within the government itself.

This attempt to absorb the unemployed youth into the public sector is not a practical solution as it places a burden on the rest of the economy through additional taxes and distortion regulations, thus making ‘bad’ jobs even worse.

Some of the policies usually recommended to deal with unemployment elsewhere, and especially in industrial countries, would also be ineffective.

For example, an unemployment insurance scheme would not be adequate, because roughly two thirds of the unemployed have never been employed.

Income support mechanisms for the unemployed would not mitigate the problem either and in most cases would lead to an even further extended job search.

More training programs should not be expected to make a substantial difference given that joblessness does not reflect a failure of the education system.

Efforts should be aimed at reducing the gap between good and bad jobs by making product markets more competitive, reducing excessive job security and reforming the employment and pay policies of the government rather than interpreting the problem of unemployment in Sri Lanka as a skills mismatch phenomena.

Worker attitudes are related to high levels of expectations regarding their market value; this is especially evident amongst new comers to the market. A further point that needs to be made is that unemployment may serve to reduce the reservation wage.

That is the unemployed begin their job search with an inflated notion of what they are worth to an employer but revise the estimate downwards through time, or possibly quit the labour force altogether.

The surveys ask the unemployed respondents what wage they would be prepared to work for.

The answer is usually somewhat above the average wage paid to those with the same age and education at lower levels of education but below it at higher levels of education.

However, even if jobseekers all have perfectly reasonable wage expectations, the labour market would not necessarily clear immediately.

Employers do not view skills and education levels as substitutes and the demand for workers with certain education levels is not sufficiently strong to absorb them all.

Some research conducted finds that there is little evidence of a theoretical skills mismatch to explain Sri Lanka’s unemployment rate, i.e. education is not equipping job seekers with the wrong skills.

As such, if the unemployment in Sri Lanka has nothing to do with the education system, then it poses a reasonable argument as to whether it is related to negative worker attitudes.

Unemployment in Sri Lanka, which partially reflects the attitudes of workers, is focused on public sector employment and pay policies as opposed to the skills mismatch hypothesis.

In Sri Lanka, public sector employment is characterized by more stability, higher benefits, lower effort and more prestige than private sector jobs thereby providing the labour market entrants with an incentive to wait for job openings in the public sector.

Some of them would rather remain inactive than take the available jobs in the private sector. Others would be willing to take a “bad” job while waiting for a “good” one if it was not for the perceived Government preference for hiring the unemployed.

The recurring tendency of the Government to provide employment opportunities to the unemployed is seen as the main reason for job seekers to remain inactive. Sri Lankan public sector jobs are created with the deliberate purpose of alleviating the unemployment problem.

It is evident that the public sector jobs are one of the causes of unemployment and therefore, based on this explanation, a credible reform of public sector recruitment and pay policies would be the most effective way to reduce unemployment, because it would discourage the “queuing” attitude.