Income, wealth, employment and occupational distribution EXTERNAL BUSINESS ENVIRONMENT Income, wealth, employment and occupational distribution

Learning outcomes Income, wealth, employment distribution: structure and composition of business and services industry; patterns of demand for business and services;

Income Distribution in Sri Lanka “The stubborn income inequality in Sri Lanka poses a serious question about the ultimate goal of the country’s growth efforts. The country’s rich have been able to maintain their relative position undiminished while the poor have been worse-off. The middle class, on the contrary, has fattened itself. The high income inequality, as noted by many economists, threatens the social and political instability of the country. ….

Income Distribution in Sri Lanka …Thomas Piketty described it as ‘terrifying’ and urged world nations to take immediate action to reduce the global income gaps. Pursuing a goal of doubling PCI and increasing the size of the economy to $ 100 billion will become purposeless when the income gap stubbornly refuses to yield to be moderated. It is therefore time for Sri Lanka’s policy authorities to take this message seriously” Daily FT May 2014

Income Distribution Gini index measures the extent to which the distribution of income within an economy deviates from a perfectly equal distribution. The Gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality.

Income Distribution

Wealth Inequality The figure compares the income distribution within France, Brazil, Sri Lanka, and Rural Indonesia. The graph shows that the poorest 5% of France are richer than the top 5% rural Indonesians. The poorest 5% rural Indonesian are richer than the poorest 5% of Brzil, but the richest 5% of Brazil are as rich as the top 5% of France. Video https://www.youtube.com/watch?v=DJtOhfpGlZ8

Wealth Inequality

Employment distribution

Composition of businesses and services In the economic structure of the country, agriculture, though declining in share of GDP, remains critical as over a third of workforce is employed in agriculture and has externalities associated with manufacturing and services. The main agriculture crop is rice that accounts for one fifth of total agriculture output. The growth in agriculture is low compared to industry and services (average real growth rate 2.8% in 2003-07) The plantation sector produces three export crops, tea, rubber and coconut and accounts for approximately 20% of export revenue. Agriculture, including plantation, is concentrated in southern, central, north-western and Sabaragamuwa province, accounting for approximately 60% of output.

Composition of businesses and services The industrial sector is export oriented and dominated by manufacturing which has more than 60% share in industrial output. Three activities generate nearly 90% of outputs by value: textile and garments (21.7%), food, beverages and tobacco (46.7%) and chemicals, petroleum rubber and plastic products (18.6%). The service sector has more than 50% share in GDP (58% share in GDP during 2003-07) and is the main driver of growth with average 7.1 % a year in 2003-07. Telecommunication, trading, port and financial services are main contributors to the growth. Geographically, industry and services are concentrated in the western province, accounting for 50% of GDP, 55% of industrial and 57% of services output.

Composition of businesses and services Exports and imports The share of imports and exports in GDP averaged 41.3% and 32.3% respectively in 2003-07. The main exports are garments and textile, tea, precious and semi-precious gems and petroleum products. Main imports consist of inputs and capital goods for the manufacturing industry (80% of imports). Demand from United States (US) and the European Union (EU) together accounts for 60% of Sri Lanka’s merchandise exports and 90% of its garments, making the country heavily dependent on their demand and vulnerable to trends in world trade. Main importing partners are India, China and Singapore. Due to its large propensity to import, Sri Lanka’s trade deficit has been lingering over the years.

Demand patterns Seasonality is one of the most distinctive features of tourism in many parts of the world, and is generally accepted as a serious challenge facing the industry. It is viewed as a concern in many areas and in the hospitality industry because it results in uneven loading on facilities.

Demand patterns Types of Seasonality Seasonality can be categorized into two primary types: natural and institutional. Natural seasonality is caused by temporal changes on an annual basis around the world, such as the four seasons (summer, autumn, winter and spring), and associated changes in temperature, wind, rain, snow, sunshine including hours of daylight. countries such as Sri Lanka, located close to the equator face mainly two seasons. A spell of relatively hot and dry weather, termed insofar as the tourism sector is concerned, as the ‘season’ and another spell of wet and rainy months that heralds the island’s ‘off-season’.

Demand patterns Types of Seasonality The second form of seasonality in tourism, which is institutional, is caused by human decisions. The most common form of institutionalized seasonality is the formal holiday. The two major ones are school holidays and the long holidays now enshrined in the concept of holidays with pay. There are other less significant forms of seasonality in tourism. Seasons relating to sporting activities are now more common and reflect to a degree of climatic and related conditions which may be a requirement of the specific activity, such as cricket. A great deal of the seasonal pattern of tourism can be explained by inertia and tradition. People take holidays at specific times because that is when vacations have been typically taken in the past.

Demand Patterns

Bibliography http://www.ft.lk/2014/05/12/sri-lankas-growth-paradox-when-poverty-yields-income-gap-holds-stubbornly/ http://www.samn.eu/index.php?q=economic-srilanka