LABOUR MARKET

_{TURNING HUMAN CAPITALINTO OPPORTUNITY}        

Suresh Ginige calls for closing the skills gap, retaining talent and expanding workforce participation to sustain long-term economic growth

A country’s human capital is often identified as the most critical factor in its advancement. As Singapore’s founding father Lee Kuan Yew once noted, “the quality of a nation’s manpower resources is the single most important factor determining national competitiveness.”

However, Sri Lanka’s economic recovery is increasingly running into a critical constraint: a shortage of people with the skills needed to power the next phase of growth.

And the paradox is striking… 

Employers continue to struggle to find suitably skilled workers while thousands of young people remain unemployed, underemployed or unable to find jobs that match their qualifications. 

Therefore, vacancies and unemployment coexist, pointing to a widening mismatch between the capabilities available in the workforce and those demanded by a changing economy.

A recent IMF article highlighted the severity of the challenge, placing Sri Lanka among South Asian countries with high graduate unemployment rates at around 43 percent. 

It points to a widening disconnect between education and labour market requirements, while warning that AI and technological change could deepen the mismatch – unless education and skills development become more responsive to changing demand.

It is evident that the nation must rethink how it develops human capital. Education cannot operate in isolation from the economy. 

Universities, vocational institutions and training centres require much closer links with employers, to ensure that curricula reflect workplace requirements and the capabilities demanded by emerging industries. 

And institutions need modern equipment, updated content and instructors who understand current industry practices.

This is particularly important for technical and vocational education. Skilled trades should not be treated as second tier alternatives to university education. Electricians, welders, machinists, refrigeration technicians, automotive specialists, construction professionals and other skilled workers are fundamental to a productive economy.

Apprenticeships and workplace based training can provide an important bridge between education and employment, providing young people with practical experience while allowing businesses to help shape the skills pipeline.

Sri Lanka has long struggled with a mismatch between graduate skills and the evolving needs of modern businesses.

Employers frequently point to gaps in analytical and critical thinking, creativity, communication, English proficiency and other essential workplace skills. These are not minor deficiencies; they directly influence productivity, employability and the ability of businesses to compete in an increasingly tech driven global economy.

AI, automation and digitalisation are transforming workplaces, and altering the skills that businesses require. This makes digital literacy, data skills, problem solving, adaptability and continuous learning increasingly important. 

The responsibility rests not only with the education system but with employers too. 

Businesses cannot expect universities and training institutions to produce fully job ready workers without investing in workforce development themselves. Stronger partnerships between companies and education providers could help align curricula, apprenticeships, internships and reskilling programmes with actual commercial requirements.

More importantly, skills development needs to become a continuous process rather than a stage completed at the beginning of a career. Workers need opportunities to upgrade their capabilities, while companies need stronger incentives to invest in training and lifelong learning.

There is also a wider labour market issue that can no longer be overlooked… 

Sri Lanka actively encourages its citizens to seek employment overseas, recognising the importance of migrant workers and remittances to the economy. At the same time, the government has approved the formulation of an inbound labour migration policy to address worker shortages in the island.

Sri Lanka cannot afford a situation in which businesses are searching for skills while capable people remain on the sidelines

The contradiction is difficult to ignore. 

Sri Lanka is encouraging its workforce to leave to fill shortages in other economies while considering bringing down foreign workers to fill the shortages at home. The concern becomes greater as some highly skilled and experienced individuals leave in search of better opportunities, depleting valuable human capital when it is needed the most.

There is another side to this equation: a substantial pool of talent remains underutilised. Increasing female participation in the workforce will be critical to expanding the productive labour force and unlocking a significant source of economic value. 

Bringing more women into formal employment is not merely a social objective; it is an economic imperative for a country facing a shrinking and increasingly mobile workforce. The skills shortage is not simply an education problem; it is a growth problem as well.

Labour shortages can constrain investment, raise costs and limit productivity, precisely when businesses need to expand and move into higher value activities. Addressing these pressures calls for a more coherent approach linking education, vocational training, business needs, technology, workforce participation and migration.

Sri Lanka cannot afford a situation in which businesses are searching for skills while capable people remain on the sidelines. Nor can it afford to lose its most valuable human capital faster than it can develop new talent.

The recovery was built on stabilising the economy. The next challenge is turning the country’s greatest resource – its people – into the engine of its growth.