Abstract:
The purpose of this research is to study the earning differentials of public and
informal private sector workers with formal private sector workers during the
economic downturn in Sri Lanka with a comparison between the two years of 2017
and 2021. A sample of 28,895 employed in 2021 and 32,608 employed in 2017 used
for the analysis were taken from the secondary data of the Sri Lanka Labour Force
Surveys conducted by the Department of Census and Statistics in Sri Lanka. The study
used the Endogenous Switching Regression Model for analysing the earning
differentials between two groups (between Public and formal private sector workers
and between informal private and formal private sector workers) for two years, while
taking the formal private sector workers as the key comparison group. The paper
found that the years of schooling, age, age square, gender, residential area and
occupation are the key factors related to the earning differentials of workers in the
model. Relying on the gender gap, earnings of informal private sector workers have
increased in 2021 in comparison to formal private sector workers, although the
earning differentials by gender have reduced for other sectors. Shifting employment
from the public sector to the formal private sector reduces the gender specific earning
gap in 2021. The professional and non-professional earning gap was increased
mainly for formal private sector workers. Shifting employment from the informal
private sector to the formal private sector leads to higher earning differentials than
shifting employment and vice versa. Although earning increased for all of the above
sectors during the period from 2017 to 2021, the earning gap has reduced for many
sectors. Structural changes in working culture with working online during the crisis-
affected period reduced disparities in the job market in both aspects of work
involvement and earnings. Possible policy implications to maintain parity in earnings
are proposed as the final contribution of the study.
