An econometric study of labor market in Sri Lanka with special reference to demographic characteristics of labor

Abstract

The wage in labor market has drastically changed during the past centuryand gone through different stages and changed with socioeconomic determinants. Among the concepts of labor, demand and supply of labor are very important in practical sense. The determination of wages in a free market simply depends on the socioeconomic characteristics of the labor force. Therefore, an attempt is made to explore the relationships between the wage rates and demographic characteristics of labor force using econometric methods. The required data are obtained from the records of Labor Force and Socioeconomic Survey conducted by the Department of Census and Statistics. An econometric model for wage rates using the demographic characteristics as independent variables is fitted and verified. The study reveals that age, gender, civil status, ethnicity etc. have significant influences in determining the wages. Hence, it is emphasized that the demographic characteristics should be taken into consideration whendetermining the wages of aparticular labor force inherited in the respective areas of the country. This study specifically reports that the general effect of hourly wage rate in Sri Lanka is 2.566 when ignoring the socio-demographic characteristics of labor force and the average hourly wage rate difference by gender is 0.294 and difference by marital status is 0.162. Further, the average hourly wage rate differences in the three ethnic groups Sinhalese, Sri Lankan Tamil, and Indian Tamil were individually found to be 0.034, 0.008, and 0.352 discriminated from rest of the ethnic groups. Similar hourly wage rate differences for employees of the Government sector and Semigovernment sector were found to be 0.28.and 0.19. The effects or differences in hourly wage rates due to educational levels and literacy rates of the employees in Sri Lankan labor market are also reported in this study.