Sri Lanka’s unwieldy state sector: A growing burden?

Originally appeared on The Morning

By Dhananath Fernando

Recently a minister proudly proclaimed that the Government, for the last two years, has recruited approximately 45,000 new civil servants who have failed their Ordinary Level (O/L) examinations (of those who have studied up to the O/Ls). Comparing this to government recruitment of about 22,145 workers during the 2015-2019 Yahapalanaya regime, he explained that the present Government has recruited about 60,000 new workers for the state sector. 

While most ministers and parliamentarians see the recruitment numbers for the Government as an achievement from a business and economic point of view, the tail-heavy government cadre is one of the key reasons for Sri Lanka’s poor economic performance. 

We have more than 1.5 million state sector employees – a figure which has doubled since 2005. Their burden on the taxpayer is not a one-off expense, but one that is long term, as their pensions accumulate throughout the state sector and sometimes are even transferable to their spouses. 

The reasoning for increasing the size of the government cadre is part of a popular yet vicious cycle. For most politicians and political parties, job offers in the state sector are one way of establishing their political brand image for the next election – a priority over effectively managing taxpayer money. On the flip-side, for most of the unqualified voters the carrot for supporting the uneducated politicians is a government job opportunity with low work/productivity requirements and a tidy pension. 

When looking at the structure of the cadre, it is mostly chauffeurs, clerks, office assistants, and other unskilled/menial workers who have been recruited. Skilled jobs are very limited in the Government. As a result of high expenditure on the bottom-heavy structure of the Government, skilled job openings at the top cannot offer competitive salaries compared to the private sector. The outcome of this is that top-level jobs in the state are occupied by poorly skilled officers with low intellectual capacity. Furthermore, as a result of poor pay, top-level public officers have a significant incentive to engage in corrupt practices to remunerate themselves. One of the main reasons for white collar corruption across all ministries is the twin problem of offering non-competitive salaries and their natural result: poor leaders in top positions. Many ministry secretaries earn a salary that amounts to less than Rs. 100,000 per month. By contrast, it is likely that a high-skilled junior executive with an undergraduate degree would earn a better salary and enjoy a better work-life balance in the private sector. 

The recent statement by one of the ministers of the Government proves that the view inside the Government on state sector employment is divided. The Minister of Finance has stated that the state sector is becoming a significant burden for the Government (particularly due to mounting debt repayment concerns), and went on to propose an increase of the retirement age in the state sector to 65. 

Over-staffing of state workers is not inherent to one government. A viral social media video released during the last regime drew great controversy for that government, as it showed the then Minister of Housing (now Leader of the Opposition) interviewing candidates and directing his subordinates to choose workers for security and labourer jobs based on height. The aforementioned statement by a present minister about the Government hiring 45,000 candidates who failed their O/L examinations is purely an indicator that all governments subscribe to the same, flawed ideology – that expanding the state sector is a pathway to development. 

The salary scale for unskilled staff in government offices are in the range of Rs. 30,000-45,000 per month; as a result many of them simply stay in their offices needlessly (burning electricity generated on imported fuel) to claim a very high overtime income. Once, a chairman of a state authority mentioned (during a personal conversation) that he has to approve overtime pay for many drivers that is higher than the entire take-home salary package of the Chairman himself.

The situation is similar in many government institutions. Executive level state workers – who are not entitled to overtime pay – simply block every file and proposal and try to extort money out of the applicants. Alternatively, they may try to claim bills which are not spent on their other perks (e.g. travel expenses, fuel, etc.) and earn some extra money. 

This has always been the vicious cycle of state jobs. Now, the situation has deteriorated to the point that the Government is finding it difficult to keep even extremely important employees such as the directors and chairman of the Board of Investments (BOI), due to the pressure mounting from unskilled workers and trade unions over the salary hikes of the board. When the employment structure is unbalanced and too bottom-heavy, the final outcome is that the tail end takes control – with trade union activities and strikes completely disrupting all activities of citizens and the government alike. 

Attracting billion dollar investments is a highly skilled job which requires a specific sales mindset, credibility, intellectual power, and a business network to perform. Throughout the world, the work of investment bankers and high-level sales executives is very well compensated. Hence, it is doubtless that for investment promotions, Sri Lanka will require very highly skilled individuals. However, investors will not be attracted to Sri Lanka by merit of our talent alone; a regulatory framework that is conducive to business activities is also necessary to attract foreign direct investment inflows. In a bottom-heavy organisational structure, when salary increments are taken by the senior level staff or when top executives are recruited, bottom-level employees get concerned that their salaries will be affected by higher resource absorption by the senior level. This is the case in many institutions and public enterprises in Sri Lanka.  

Sri Lanka’s state sector is, without a doubt, too large and expensive for us to maintain. It’s exploding to a level beyond our control. If we fail to implement reforms as fast as possible, the situation would be disastrous for both the state sector as well as the private sector. The best solution for our current problems is economic reforms. The idea that the state can maintain its public capital by simply hiring more workers is a myth. Without reform, we will soon lose both our solvent economy and our politicians’ credibility and political capital. 

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.