Daily Mirror: 26/05/2005" By Prof. J.A. Karunaratne
It should, perhaps, be appropriate to start this essay with a simple quiz. Therefore, let me request the reader to visualise, first, of a country like Sri Lanka where the demand for goods and services is so high that even the prices of the basic consumer essentials are rising fast and has already risen to yield double digit inflation.
Imagine, then, that, in the same country, there are scores of young graduates desperately seeking remunerative opportunities, which they find hard to come by. For a graduate to be able to secure a job opportunity in his/her respective field of studies is like being able to find water in the Sahara. Consequently, of course, the rate of graduate unemployment in the country runs significantly high.
This state of affairs may pose the reader a major conundrum. How is it possible, the reader may ask, that a high level of graduate unemployment coexists with a market that experiences a high demand for goods and services. To pose an analogy, could infants go hungry, when their mothers are struggling with breasts heavily laden with milk.
The fact that the graduates consider themselves high-skilled workers, one may presume that they should be most attractive to the labour market and hence finding employment opportunities should not be difficult.
The well versed in rational theory may ask how this anomaly is possible? They may ask why Keynesian conditions fail to prevail? They may ask why demand for labour has not been stimulated by the growth in the price of goods and services?
In their attempt to clarify the prevailing situation, some, from various marginal groups of society, venture to suggest that the graduates of Sri Lanka are irrational in their conduct and/or are downright lazy.
Then, there are some, who seem to believe, that the task of providing graduates with remunerative opportunities, rests with the government. They say that graduate unemployment is a sign of failure of the incumbent government, in absorbing them into the economy.
Consequently, there are legislators who run about propagating to the left and to the right of their wish to absorb the unemployed graduates to the public sector of the economy.
But the graduates know that the 'crown is not the cure for the headache'. They know that if the 'crown' (government) is to pursue such policies, it is going to further aggravate inflation and consequently, through falling investment, even private sector employment. They know that one must go beyond the 'crown' to find substantial and sustainable solutions to the issue of graduate unemployment.
First, one must try to eliminate the impediments that contribute to enhancing graduate unemployment.
Two among them are most prominent: (1) the structural causes pertaining to the graduate labour market (2) institutional causes pertaining to the economy.
The structural causes pertaining to the graduate labour market are:
A significant lacunae in vocational skills and subject competence amongst graduates of today is the first;
It has been stated by various major corporation managers that although the Sri Lankan graduates may be highly skilled in their narrow stream of discipline, they often lack the necessary competence in related fields of disciplines and in organisational and managerial skills. Inadequacy in international languages has been suggested as one main lacuna.
Inability of engineering graduates in methods of cost calculation, organisational formulae, and modern marketing strategies have been cited as other major shortcomings.
The inability of social scientists (particularly the economists and marketers), in subjects such as logistics and production management has also been suggested as major impediments in resurrecting graduate labour market. Further, the lack of leadership and managerial skills have also been suggested as a significant shortcoming.
Graduates lacking initiative in starting up their own entrepreneurial projects may be the second structural cause pertaining to the graduate labour market. Viewed from a theoretical angle one may argue that there must be ample opportunities for small groups of graduates from several disciplines to get-together and start entrepreneurial projects . However, most probably due to sociological and institutional reasons such initiatives are not easily forthcoming amongst Sri Lankan graduates.
Then, there are several institutional causes that also contribute to graduate unemployment in Sri Lanka. One of the most significant is the thinning out of the medium enterprises in Sri Lanka.
Therefore, let us survey, first, what constitute medium enterprises in Sri Lanka and, how and why, they are declining.
The large enterprises of Sri Lanka that employ more than 200 workers seem to experience lukewarm growth. This category of enterprises include most of the foreign and a few of the local enterprises that produce goods, mainly for export. The apparel industry belongs to this category.
Then, there are those small enterprises that too seem to flourish. At least the numbers of small enterprises seem to keep growing. These are, basically, the family-owned small enterprises that produce goods and services, mainly for local consumption. The roadside tea/coffee shops and restaurants and barber shops belong to this category.
The medium enterprises, thus, are those that are larger than small enterprise family firms but, smaller than large enterprises that employ 200 workers. These include tile, brick manufacturing enterprises, coir and coir products manufacturing enterprises and the like.
However, in Sri Lanka, the number of medium enterprises are not growing as much as small enterprises do. As a matter of fact, their number is declining in some districts of Sri Lanka. For example, the number of coir mills and coir products manufacturing firms has, over the past decade or so, declined in the Kurunegala, Kegalle, Gampaha and Puttalam districts. This is true also for the furniture manufacturing enterprises from those districts.
There are many reasons for this downturn. Difficulty in obtaining investment capital at rates of interest that the potential entrepreneurs could afford, is the biggest hindrance. The prevailing bank interest rate of over 20% is too high for most potential entrepreneurs.
The fact that the large enterprises are generally labour-intensive by character (which mostly employ unskilled workers) and produce textiles and apparels for export, the number of graduates that these firms are ready to employ are extremely small.
In the same way, small family-owned enterprises, that employ family labour, are incapable of employing graduates. First of all, the small family firms do not employ outside labour by definition. Secondly, they neither have the necessary finances nor, the need, to employ graduate labour. For example, one does not require graduates to run a barber shop or a tea/coffee kiosk.
Thus, it is the medium firms that have the financial capacity and other requirements to employ graduates. It is such firms in Moratuwa, for example, that manufacture furniture for export. Again, it is such firms, that manufacture jewellery and gem products for export.
Thus, if remunerative opportunities for graduates are to be promoted, opportunities for the growth of medium enterprises must necessarily be encouraged. In this process, legislators must ensure that medium enterprises are able to secure capital at reasonable rates.
As it is today, the biggest hindrance for maintaining reasonably lower rates of interest, is inflation. (As per the Fisher hypothesis, inflation pushes up interest rates.) At prevailing rates of interest, the small enterprises are unable to operate. Consequently, they would be crowded-out by public sector activities.
Thus, in remedying the problem of graduate unemployment one requires to seek various solutions for different types of problems. Some may only be long-term solutions whilst others, short-term solutions.
Long-term solutions include promoting graduates that modern economies require. In doing so, the universities require to restructure and to upgrade their syllabi and subject curricula.
It is through new syllabi and new subject curricular that graduates could be provided with interdisciplinary skills required by today's labour market. Then, such syllabi and curricular restructuring programmes must aim to promote knowledge in key subjects that must be buttressed with knowledge in other essential subjects, including the major languages of international communication. Finally, the students must be provided with the leadership and organisational skills that their field of study requires.
Then, there must be programmes within each university to promote groups of students from different disciplines pooling their knowledge for the purpose of developing and launching entrepreneurial projects, which they can continue with after they have completed their formal studies. Universities, through programmes of Entrepreneurial Villages may be able to help students develop entrepreneurial projects to produce goods (or services) for marketing. Universities should be able to help and guide the students in such enterprises through programmes of University Entrepreneurial Villages.
There must be ample lessons, that the universities of Sri Lanka may learn from the experiences of the Tampere University project of cooperation with Nokia the telephone giant of Finland, the IT University (Stockholm University) project of cooperation with Ericsson, the telephone giant of Sweden, Bangalore and Shanghai Universitys’ cooperation projects with IT sector industries of their respective countries, all of which have been very successful in promoting graduate employment in the high-skill sectors of the respective countries.
It should, perhaps, be appropriate to start this essay with a simple quiz. Therefore, let me request the reader to visualise, first, of a country like Sri Lanka where the demand for goods and services is so high that even the prices of the basic consumer essentials are rising fast and has already risen to yield double digit inflation.
Imagine, then, that, in the same country, there are scores of young graduates desperately seeking remunerative opportunities, which they find hard to come by. For a graduate to be able to secure a job opportunity in his/her respective field of studies is like being able to find water in the Sahara. Consequently, of course, the rate of graduate unemployment in the country runs significantly high.
This state of affairs may pose the reader a major conundrum. How is it possible, the reader may ask, that a high level of graduate unemployment coexists with a market that experiences a high demand for goods and services. To pose an analogy, could infants go hungry, when their mothers are struggling with breasts heavily laden with milk.
The fact that the graduates consider themselves high-skilled workers, one may presume that they should be most attractive to the labour market and hence finding employment opportunities should not be difficult.
The well versed in rational theory may ask how this anomaly is possible? They may ask why Keynesian conditions fail to prevail? They may ask why demand for labour has not been stimulated by the growth in the price of goods and services?
In their attempt to clarify the prevailing situation, some, from various marginal groups of society, venture to suggest that the graduates of Sri Lanka are irrational in their conduct and/or are downright lazy.
Then, there are some, who seem to believe, that the task of providing graduates with remunerative opportunities, rests with the government. They say that graduate unemployment is a sign of failure of the incumbent government, in absorbing them into the economy.
Consequently, there are legislators who run about propagating to the left and to the right of their wish to absorb the unemployed graduates to the public sector of the economy.
But the graduates know that the 'crown is not the cure for the headache'. They know that if the 'crown' (government) is to pursue such policies, it is going to further aggravate inflation and consequently, through falling investment, even private sector employment. They know that one must go beyond the 'crown' to find substantial and sustainable solutions to the issue of graduate unemployment.
First, one must try to eliminate the impediments that contribute to enhancing graduate unemployment.
Two among them are most prominent: (1) the structural causes pertaining to the graduate labour market (2) institutional causes pertaining to the economy.
The structural causes pertaining to the graduate labour market are:
A significant lacunae in vocational skills and subject competence amongst graduates of today is the first;
It has been stated by various major corporation managers that although the Sri Lankan graduates may be highly skilled in their narrow stream of discipline, they often lack the necessary competence in related fields of disciplines and in organisational and managerial skills. Inadequacy in international languages has been suggested as one main lacuna.
Inability of engineering graduates in methods of cost calculation, organisational formulae, and modern marketing strategies have been cited as other major shortcomings.
The inability of social scientists (particularly the economists and marketers), in subjects such as logistics and production management has also been suggested as major impediments in resurrecting graduate labour market. Further, the lack of leadership and managerial skills have also been suggested as a significant shortcoming.
Graduates lacking initiative in starting up their own entrepreneurial projects may be the second structural cause pertaining to the graduate labour market. Viewed from a theoretical angle one may argue that there must be ample opportunities for small groups of graduates from several disciplines to get-together and start entrepreneurial projects . However, most probably due to sociological and institutional reasons such initiatives are not easily forthcoming amongst Sri Lankan graduates.
Then, there are several institutional causes that also contribute to graduate unemployment in Sri Lanka. One of the most significant is the thinning out of the medium enterprises in Sri Lanka.
Therefore, let us survey, first, what constitute medium enterprises in Sri Lanka and, how and why, they are declining.
The large enterprises of Sri Lanka that employ more than 200 workers seem to experience lukewarm growth. This category of enterprises include most of the foreign and a few of the local enterprises that produce goods, mainly for export. The apparel industry belongs to this category.
Then, there are those small enterprises that too seem to flourish. At least the numbers of small enterprises seem to keep growing. These are, basically, the family-owned small enterprises that produce goods and services, mainly for local consumption. The roadside tea/coffee shops and restaurants and barber shops belong to this category.
The medium enterprises, thus, are those that are larger than small enterprise family firms but, smaller than large enterprises that employ 200 workers. These include tile, brick manufacturing enterprises, coir and coir products manufacturing enterprises and the like.
However, in Sri Lanka, the number of medium enterprises are not growing as much as small enterprises do. As a matter of fact, their number is declining in some districts of Sri Lanka. For example, the number of coir mills and coir products manufacturing firms has, over the past decade or so, declined in the Kurunegala, Kegalle, Gampaha and Puttalam districts. This is true also for the furniture manufacturing enterprises from those districts.
There are many reasons for this downturn. Difficulty in obtaining investment capital at rates of interest that the potential entrepreneurs could afford, is the biggest hindrance. The prevailing bank interest rate of over 20% is too high for most potential entrepreneurs.
The fact that the large enterprises are generally labour-intensive by character (which mostly employ unskilled workers) and produce textiles and apparels for export, the number of graduates that these firms are ready to employ are extremely small.
In the same way, small family-owned enterprises, that employ family labour, are incapable of employing graduates. First of all, the small family firms do not employ outside labour by definition. Secondly, they neither have the necessary finances nor, the need, to employ graduate labour. For example, one does not require graduates to run a barber shop or a tea/coffee kiosk.
Thus, it is the medium firms that have the financial capacity and other requirements to employ graduates. It is such firms in Moratuwa, for example, that manufacture furniture for export. Again, it is such firms, that manufacture jewellery and gem products for export.
Thus, if remunerative opportunities for graduates are to be promoted, opportunities for the growth of medium enterprises must necessarily be encouraged. In this process, legislators must ensure that medium enterprises are able to secure capital at reasonable rates.
As it is today, the biggest hindrance for maintaining reasonably lower rates of interest, is inflation. (As per the Fisher hypothesis, inflation pushes up interest rates.) At prevailing rates of interest, the small enterprises are unable to operate. Consequently, they would be crowded-out by public sector activities.
Thus, in remedying the problem of graduate unemployment one requires to seek various solutions for different types of problems. Some may only be long-term solutions whilst others, short-term solutions.
Long-term solutions include promoting graduates that modern economies require. In doing so, the universities require to restructure and to upgrade their syllabi and subject curricula.
It is through new syllabi and new subject curricular that graduates could be provided with interdisciplinary skills required by today's labour market. Then, such syllabi and curricular restructuring programmes must aim to promote knowledge in key subjects that must be buttressed with knowledge in other essential subjects, including the major languages of international communication. Finally, the students must be provided with the leadership and organisational skills that their field of study requires.
Then, there must be programmes within each university to promote groups of students from different disciplines pooling their knowledge for the purpose of developing and launching entrepreneurial projects, which they can continue with after they have completed their formal studies. Universities, through programmes of Entrepreneurial Villages may be able to help students develop entrepreneurial projects to produce goods (or services) for marketing. Universities should be able to help and guide the students in such enterprises through programmes of University Entrepreneurial Villages.
There must be ample lessons, that the universities of Sri Lanka may learn from the experiences of the Tampere University project of cooperation with Nokia the telephone giant of Finland, the IT University (Stockholm University) project of cooperation with Ericsson, the telephone giant of Sweden, Bangalore and Shanghai Universitys’ cooperation projects with IT sector industries of their respective countries, all of which have been very successful in promoting graduate employment in the high-skill sectors of the respective countries.
said...
interesting article, but should universities be interested in promoting employment? isn't it a matter beyond the concern of the university?