1. The Structure and Quality of the Workforce

Our discussion of the educational attainment of the population in the VHHD category takes us to the structure and quality of their workforce. One set of key indicators that define the VHHD condition are those related to the special characteristics of the VHHD workforce. It is the highly educated, globally competitive workforce that enables the countries in the VVHD category to reach and sustain the state of very high human development. The high educational attainment of the population is reflected in the equally high educational levels of the workforce. – On average, the percentage of the working population with tertiary education in the VHHD countries is above 30%. The data available for Sri Lanka shows that the share of the workforce with GCE A ‘level and above is  19% (2014) A large scale expansion of tertiary education as mentioned in the preceding section is needed to produce the workforce needed to reach the higher productivity and per-capita income needed for the VHHD condition.

Table 6  in the Annexe provides data on the characteristics of the workforce in these countries. They indicate how these societies organize themselves for economic activity and balance their work with personal life and with leisure.

The rate of participation in the workforce is on the average over 70% for most countries in the VHHD category. Their working population is therefore significantly larger as a proportion of the population than in Sri Lanka which has a total participation rate of only 59%. The larger participation rate by itself would result in larger per capita output in the VHHD countries. One very important reason for the difference is the high rate of participation of the female population which again ranges from about 68% (US 68.4 Germany 70 .8 %.) to 76 %. (Denmark 76.4%, Sweden 76.7%)  of the working-age population in the VHHD countries, However, in the South of Europe,  Spain, Italy, Greece have rates of female participation which are much lower ranging from 51.1%  to 65.9%. South Korea while ranking 15th in the VHHD category has a total participation rate of 65.8% and a female participation rate of 54.5%. Sri Lanka has a female participation rate which is substantially lower – around 39%.

Another key indicator relating to the organization and the nature of work in VHHD countries is the structure of employment. The predominant share of the workforce in the VHHD countries is in wage employment in the private and public sectors. The segment in self-employment and in the informal micro-enterprise sector is quite small. The structure of employment indicates that in these countries in the VHHD category, the share of wage employment is uniformly high ranging between 75% (Italy) and 92% (Germany). Correspondingly, the self-employed and informally employed are a tiny segment. In contrast, the data for Sri Lanka’s workforce show some significant differences in the key indicators. Wage employment is 56% and self-employed in farming and nonagricultural micro-enterprises account for the balance 44%.

These indicators regarding employment structure and participation raise some far-reaching issues concerning the constraints that Sri Lanka faces and the choices that it may need to make in regard to the organization of economic activity on the one hand and the quality of life on the other. In the VHHD countries, the “formalization” of the economy and the high level of wage employment have facilitated the mobilization of resources for the social arrangements they have succeeded in making – the high levels of government revenue and social welfare programmes for most of these countries or the mandatory savings programme of Singapore. As a result, these countries have been able to achieve universal coverage for their schemes of social protection. At the same time, the high levels of female participation in these countries have had a far-reaching impact on gender relations and the institution of the family and its capacity for the care of children and the aged-an impact which has had both positive and negative elements.

Does Sri Lanka have to travel in the direction of the structures of employment and organization of economic activity as have evolved in the VHHD countries? Does the technology that is currently available present different alternatives? For example, the economies of scale and location do not apply to the new technologies in the same manner as they did in the past. Micro enterprises can operate at very high levels of technology producing high levels of per-capita output and income. This would be particularly true of the service sector which dominates the post-industrial economy. The low level of female participation in the workforce implies that Sri Lanka has a labour reserve that may work to its advantage as the labour market tightens. But is female participation at the high levels we observe in the VHHD countries desirable if other alternative social arrangements and patterns of economic activity that promote the status and rights of women are available? For example, in Sri Lanka, women are making an important contribution to the micro and small scale non-agricultural sector. In the concluding section, some of these issues will be revisited in reviewing the choices and options that are available for Sri Lanka on its path to the VHHD condition. 

  1. The Population Dynamics of VHHD

Many of the indicators that have been discussed are organically linked to the population dynamics of the VHHD condition. Almost all VHHD countries have ageing populations with near-zero rates of population growth.  The relevant data are given in Table 7 In all these countries the proportion of the population over 65 years ranges from 18% to 25%. The trends for ageing in Japan prefigure the typical age composition that could be expected as countries move into the VHHD condition. In this context, the conventional calculations of the burden of dependence, on the basis that the population below 15 years and over 65 years are dependent on the working population between 15 and 65 need radical revision. Increasing proportions of the population between 15 and 29 (estimated at an average of 48% for OECD countries) continue in tertiary education and a significant proportion of people over 65 continue in the workforce.

The final outcome of the VHHD condition as it has evolved at present is one in which societies educate and train a large proportion of their young population up to the age of about 29 to produce a highly skilled and educated workforce which in turn should produce an output sufficient to support a large population at the two ends of the life span What demographers term the income deficit at the two ends has to be met with the high income-earning capacity in the middle. (The World Bank examines these shifts of intergenerational transfers and their implications in its study “Sri Lanka Demographic Transition) The most successful VHHD societies have succeeded in developing a value system that accepts and fulfils the inter-generational obligations that this distribution of income demands.

With an average life expectancy of 75 years and with 13% of its population over 65 years of age Sri Lanka is already advancing into the stage of an ageing society. By 2025 it would have already arrived where many of the VHHD countries are at present and by 2035 it would be in a stage similar to that of Japan. Sri Lanka’s capacity to manage these processes successfully would depend not only on a steady and relatively high rate of growth as has been projected in Table 1 but also on two other concomitants – it’s capacity to mobilize resources and allocate them to the development of a highly educated workforce on the one hand and the social protection of its ageing population on the other. The issues that arose in the preceding three sections on the role of government, the distribution of income and the structure of employment assume critical importance in this context.

Another key indicator of VHHD is the process of urbanization and the share of the urban population in the total population. For the large majority of these countries, the share of the urban population is in the range between 70% and 90% of the total population. A high level of urbanization appears to be an important indicator of VHHD. The spatial distribution of the population and their concentration in locations with high density has been an invariable and essential feature of the process of industrialization in VHHD countries. This distribution of population has also facilitated the provision of public goods and services on an efficient and economic scale. Urbanization also determines the quality of life in various ways. The location of workplace and residence, the amount of time consumed in travel the balance between work and home-life rest and recreation are all governed by the man-made environment. Here, the VHHD countries have some negative outcomes in terms of ecological criteria and the quality of life.

Sri Lanka presents a very intriguing and unusual case with respect to urbanization. According to the statistics that are available, the proportion of the urban population is only round 18%-one of the lowest in the world. This low figure may be due partly to the fact that the estimate depends on the administrative classification of areas as “urban”. Consequently, “urban” as defined in Sri Lanka may not include areas which are not so classified administratively but yet have urban characteristics of population density and enjoy a wide range of urban amenities. But even if adjustments are made for such areas and the estimate of the urban population raised to 30%, the level of urbanization remains very low. This seeming lag in urbanization would imply that Sri Lanka has a major demographic constraint that it must overcome. It would seem that Sri Lanka would have to undertake a rapid and large scale programme of urban development to reach the condition of VHHD.

But these conclusions that are drawn from Sri Lanka’s low level of urbanization may not be valid in the Sri Lankan context. They need to be examined closely and critically. It should be noted that despite this low level of urbanization Sri Lanka has sustained a high rate of economic growth and reached a state of high human development. The provisions of public goods and services – health care education and a wide range of government programmes have reached every part of the country. The social welfare programmes which were implemented from the pre-independence period resulted in the development of townships and a thin layer of urbanization that was spread widely throughout the country. The housing stock was upgraded and permanent structures replaced the semi-permanent rural housing. Electricity has been provided to more than 90% of the households.

The rural roads have been improved and connected to the main transport system. Mobile telecommunication is available to the large majority of rural households. Access to the Internet and global centres of information and knowledge is expanding rapidly. In this process, the rural to urban migration that is normally associated with modern development has been mitigated and controlled. The steady expansion of the economy and the economic activities that sustained high economic growth in Sri Lanka did not require the agglomeration of the population in mega-cities. The country’s relatively small manufacturing sector which has been limited to light industries contributed to this pattern of moderate urbanization. Therefore in planning the urban development for the next phase we need to examine whether the pattern of urbanization we have in Sri Lanka offers a more eco-friendly,  community-centred alternative to what has taken place in the VHHD countries. What may be required would be the improvement of the small towns and urban centres that are widely distributed at the different sub-national levels and the provision of urban-type amenities and facilities to the human settlements as they are. This would be very different from the urbanization process as it took place in the VHHD countries where there were large movements of population leading to unevenly distributed high-density population centres with all their concomitant problems. The alternative pattern of urbanization that has developed in Sri Lanka is also made possible by the technological revolution in which, as stated earlier, the economies of location and scale have diminishing value and application.

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