Sri Lanka needs labour reform. Businesses need room to hire, restructure and sometimes close. Workers need rules that protect them when things go wrong. Getting that balance right matters far more than simply making it easier to hire and fire.
That is why the proposal to use Colombo Port City as a sandbox for labour reform needs caution.
The argument from Port City is clear. Its Director General Revan Wickramasuriya has said rigid hiring and firing rules hold back entrepreneurship and investment, and that the zone could test change before reforms spread elsewhere. Testing before legislating across the country makes sense. But a sandbox must test what happens to workers as carefully as it measures what businesses gain.
Sri Lanka should first ask what labour flexibility means today.
For many people at the lower end of the wage scale, flexibility already exists, mainly for the employer. Casual, temporary and outsourced work can leave people working for years without the security that normally comes with a lasting job. A worker who needs next month’s wage to pay the rent does not bargain on equal terms with the company that pays it.
This matters when collective bargaining has already weakened across much of Sri Lanka’s private sector. Rights may remain in law, but the ability of workers to organise and bargain at the workplace is another matter. Casual and short-term contracts can weaken that power further.
Capitalism did not flourish by giving employers unlimited power. It learnt to survive by placing limits on that power.
Labour movements fought for limits on working hours, wages, workplace protection and collective bargaining. Governments eventually stepped in. Those changes forced businesses to share more of the gains from growth with the people producing them.
America offers a lesson. Labour reform during the New Deal years strengthened workers at a time when economic power had moved heavily towards capital. Business resisted. Capitalism survived. Indeed, rising wages helped workers consume what businesses produced. Labour gained purchasing power and companies gained customers. But the weakening of organised labour in recent decades has reopened the argument over how the gains from growth are divided.
Sri Lanka should therefore resist the easy claim that worker protection and investment sit on opposite sides of the table.
Employers do need room to act. A business cannot guarantee every job forever. Technology changes work. Orders disappear. Companies lose money. Some fail. Keeping people in jobs that no longer produce enough value eventually destroys capital and jobs together.
But making dismissal easier without building protection around workers merely moves the cost of failure downwards.
If Port City tests easier termination, it should also test faster compensation, unemployment support, retraining, portable benefits and quicker dispute settlement. It should track what happens to people after they lose jobs, not merely how quickly companies replace them.
And the results should be published. Did companies hire more? Did wages rise? Did investment grow? How many people lost jobs? How quickly did they find work? Above all, did productivity rise?
That last question should drive the debate.
Sri Lanka does not merely have a labour law problem. It has a productivity problem. Parts of business have long sought tax breaks, protection, cheap finance and Government support while demanding that workers face the market. Parts of organised labour, especially where bargaining power remains strong, have defended jobs and benefits while resisting attempts to link rewards more closely to output.
Neither can demand reform only from the other. Entrepreneurs who expect protection from competition and unions that expect protection from performance are defending the same culture of entitlement.
They are two sides of the same coin.