Welfare scheme triggers male labour force decline: IPS

Aswesuam is better focussed on poverty alleviation than previous schemes but could lead to a decline in male labour force participation, raising concerns about long-term fiscal sustainability and disincentives to work, according to a study conducted by the Institute of Policy Studies.

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Results show that with the new Aswesuma, food insecurity decreased, but it also negatively affected the labour force participation, with a much greater reduction in labour force participation seen for males, IPS said.

Male labour force participation is projected to fall by 5.4 percentage points under the revised scheme (up from 4.2 points under the original), according to IPS' Recalibrating Aswesuma: A Move Towards a Dynamic and Adaptive Social Registry in Sri Lanka by Pulasthi Amarasinghe.

"Labour force participation, especially among men, is expected to decline more sharply with the revised benefits.

For women, the reduction is more minor, at 1.3 percentage points.

"As economic theory predicts, non-labour income can reduce incentives to engage in paid work, particularly in informal sectors where wages are low and opportunity costs are minimal.

"These trends highlight the importance of combining cash transfers with activation policies to promote employment, skills development, and labour market reintegration."