Unemployment is more than a statistic. It’s a deeply personal struggle for families, a challenge for policymakers, and a signal of broader economic health. As Sri Lanka works to recover from crisis, understanding its unemployment problem is critical.
Current Unemployment Levels
As of early 2025, the Department of Census and Statistics estimates Sri Lanka’s national unemployment rate at approximately 4.5–5%.
On paper, that’s not catastrophic. It’s comparable to many middle-income countries. But the real story is more complex:
- Youth unemployment (ages 15–24) remains stubbornly high, around 17–20%.
- Graduate unemployment continues to hover at 20%+, with many degree-holders underemployed in low-skill or informal jobs.
- Female unemployment consistently exceeds male unemployment by 1–2 percentage points.
These figures underscore that who is unemployed matters as much as how many are unemployed.
Why Is Unemployment Still High?
Structural Mismatch
Many graduates lack the skills demanded by the modern economy. This skills mismatch has grown worse with rapid changes in technology, services, and even agriculture. Employers want digital, language, and problem-solving capabilities—but curricula often lag behind.
Economic Instability
The aftermath of Sri Lanka’s 2022–23 economic crisis is still felt. High inflation, interest rates, and fiscal tightening have slowed private investment. Businesses have been cautious about expanding or hiring.
Informal Sector Dominance
A large share of Sri Lanka’s workforce (over 50%) works informally—without contracts, protections, or benefits. Many who are “employed” are actually underemployed or earning barely enough to survive.
Regional Disparities
Unemployment isn’t evenly spread. Northern and Eastern provinces face higher joblessness, partly due to underinvestment and lingering effects of conflict. Rural youth migrate to cities in search of work, adding to urban competition.
The Hidden Problem: Underemployment
Sri Lanka’s official unemployment rate masks the severe underemployment issue. Even among those with jobs:
- Many work part-time involuntarily.
- Wages often fail to meet living costs.
- Skilled workers accept unskilled jobs.
This is why policy experts argue that focusing solely on the “headline” unemployment number is misleading.
The Cost of Unemployment
High and persistent unemployment isn’t just an economic problem—it’s a social one:
It fuels emigration. Young, skilled Sri Lankans seek work abroad, leading to brain drain.
It strains families. Parents struggle to support unemployed adult children.
It undermines social stability. Frustration and hopelessness can breed unrest.
It slows economic recovery. Consumer demand weakens when people have no money to spend.
What Can Be Done?
While there’s no silver bullet, a mix of short- and long-term solutions is essential.
1. Education Reform
Curriculum modernisation is critical. Universities and training institutes must deliver industry-relevant skills. Public-private partnerships can help design practical, employment-oriented courses.
2. Vocational Training Expansion
Not everyone needs a university degree. Quality vocational training, linked to real market demand (ICT, tourism, logistics, green energy), can reduce youth unemployment significantly.
3. Incentives for Private Sector Hiring
Tax breaks or wage subsidies can encourage businesses to hire young and inexperienced workers. This approach has worked in many other economies.
4. Support for SMEs
Small and Medium Enterprises are Sri Lanka’s biggest employers. Easier access to credit, simplified regulations, and better infrastructure would help them grow and create jobs.
5. Regional Investment
Reducing unemployment in the North, East, and rural districts requires targeted investment—industrial zones, tourism development, agricultural modernisation.
6. Strengthening the Social Safety Net
A better unemployment insurance scheme, reskilling support, and stronger worker protections can help people transition to new jobs.
A Note of Realism
Let’s be honest: Sri Lanka cannot fix unemployment overnight. Even with IMF-backed reforms and stabilisation, growth will be slow.
But there’s hope. The country’s young workforce is a potential asset if given the right skills and opportunities. Tourism, agriculture, manufacturing, and ICT all offer room for growth if policy is focused and consistent.
Call to Action
Reducing unemployment is everyone’s business. Policymakers must prioritise job creation, educators must adapt to demand, and businesses must invest in talent.
Sri Lanka’s youth deserve more than survival—they deserve opportunity
Unemployment in Sri Lanka is a nuanced challenge. The official rate of ~5% hides deeper issues like youth unemployment, underemployment, and skills gaps. Meaningful reform will take time and courage. But ignoring the problem would be far costlier.
By tackling education, supporting SMEs, incentivising hiring, and investing in regions, Sri Lanka can build a more resilient, equitable economy. It’s not just about jobs—it’s about dignity, stability, and the future.
