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MAY DAY – 2021

May Day which fell yesterday is the international day of the working people. The history of May Day goes back to the demand for better working conditions by the burgeoning labour movement in 1886 in the United States. Their agitation in May 1886 led to the massacre of labour activists in the Haymarket incident in Chicago setting off a powerful movement of solidarity throughout the world for an eight hour working day. The struggle epitomized the need to mobilize the working class to fight against inequity and safeguard the rights of the working class.
Sri Lanka is back to old times with the current health crisis being used as a pretext to attack labour’s hard fought rights and privileges. At a time when the world of work is moving towards a shorter working day, we are illegally increasing the hours of work with no additional compensation for the extra hour put in, totally disregarding our own labour laws.
The deteriorating conditions of labour has resulted in a significant number of working people being reduced to poverty with no income security. Sri Lanka has the lowest minimum wage in the region and globally only 16 countries have minimum wages that are less than that of Sri Lanka. Real wages are declining day to day as a consequence of inflationary pressures on the Sri Lankan economy. More and more people are in jobs earning incomes which do not guarantee them a decent life. Wage rates trail behind increases in productivity with whatever gains being shifted in the direction of capital. Sri Lankan labour laws and productivity schemes do not endeavour to secure for workers a share of the gains realized by enhanced worker productivity.
Women face multiple discrimination at work. Weekly hours of work are far above the global average. Arbitrary increases in permissible involuntary overtime to 720 hours per year from a previous 100 hours, extended shifts and night work that impact on their health and well-being, the indiscriminate use of surveillance technology invading their privacy and impinging on their fundamental freedoms are current features of the private sector employment which do not provide women with a conducive environment to work.
The traits of a gig economy (a labour market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs) are widely prevalent in the jobs that are now being created. Precarious work and non-standard forms of labour are on the increase with important consequences for unionization, worker representation and their voice and rights at work. Domestic workers and workers in the informal sector for all practical purposes fall outside the scope of the law. The modest safeguards available for employees in contract employment and precarious work have been whittled down, making it crucial for trade unions to concentrate on ensuring decent work conditions in such jobs through implementing measures that improve wages, expanding and enforcing regulations relating to contract labour, their safety and health, strengthening their social security and welfare and ensuring their voice and rights at work.
Grave issues confront workers and trade unions in the coming period. Sri Lanka is already one of the most liberal in flexibility in employment regulations and job quality according to a 2019 World Bank Report. Any further movement towards dismantling the labour law structure of the country would make our workers even more vulnerable to intensified exploitation by local and international capital.
On May Day 2021, the Ceylon Federation of Labour (CFL) calls upon organized labour to exert pressure on their leaders not to fall prey to the glib talk, specious arguments and machinations of capitalist employers to rob them of their hard won gains and to march forward in principled unity together with other sections of the working class in defence of their rights and privileges.
The uneven impact of the pandemic sweeping across the globe on the working class the promotion of ethno-religious nationalism and increased militarisation resorted to by the regime in power for its own survival make it even more necessary today to focus on class issues in order to defend, consolidate and advance the interests of Sri Lanka’s toiling masses.
Sgd. T. M. R. Rasseedin
General Secretary
Ceylon Federation of Labour (CFL)
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Personal income tax shock dims economic activities

ECONOMYNEXT –Sri Lanka’s personal income tax hikes have hit economic activity in the first quarter though despite currency stability helped businesses cut prices, Hemas Holdings, a top consumer goods group has said.As the currency stabilized, as central bank ended contradictory money and exchange policy conflicts, businesses had cut prices. Mainstream economists generally claim that price falls lead to delayed transactions and try to generate positive inflation through money printing, though businesses believe otherwise.
“The market witnessed price reductions and promotional trade schemes to stimulate consumption,” Hemas Holding told shareholders in the March quarterly statement.
“However, changes made to the personal income tax structure severely impacted modern trade sales volumes as consumers rationalised their purchases under reduced disposable income levels.”
Sri Lanka hiked personal income tax rates in 2023. Value added taxes were raised to 15 percent from 8 percent last year. Another 2.5 percent cascading tax was imposed on top of VAT, the effect of which was estimated to be around 4.5 or more through the cascading effect.
While value added tax allows the government to get tax revenues after citizens make transactions and getting the economy to work, based on best decisions needed to drive the economy to satisfy real needs, income tax kills economic decisions and transfers money to state actors, analysts say.
Net gains on income tax therefore comes at a cost of lost value added tax as well as killed real economic activities which would otherwise have been based on decisions of those who earned the money.
UK also almost doubled VAT in 1979, also to 15 percent, cut the base income tax rate and widened thresholds above inflation to give choice to individuals, amid criticism from Keynesian style or mainstream economists to recover the economy, after two back-to-back IMF programs failed to deliver concrete results, analysts point out.At Hemas Holdings, group revenues went up 52.6 percent to 32 billion rupees in the March 2023 quarter from year earlier amid price inflation as the rupee fell, and cost of sales went up 45.1 percent to 22.2 billion rupees, allowing the group to boost gross profits 72 percent to 9.8 billion rupees, interim accounts showed.
However, administration costs went up 54 percent, selling and distribution costs went up 36 percent, and finance costs went up to 1.3 billion rupees. Profit after tax was flat at 1.06 billion rupees.Sri Lanka’s central bank stabilized the rupee in the second half of 2022 after the rupee collapsed from 200 to 360 to from two years of money printing and also removed a surrender rule in March allowing the exchange rate appreciate.
The US Fed also tightened policy from March 2022 helping bring down global commodity prices after triggering inflation not seen for 40 years through Coronavirus linked money printing or accommodating a real shock through monetary expansion.
“While the modern trade channels witnessed a slow down due to the adverse impact of the tax reforms and high cost of credit on the middle-class urban population, the general trade channels experienced significant growth and increased foot fall,” Hemas told shareholders.
“The decline in global commodity prices in the second half of the year, enabled the business to make price reductions across the portfolio.
“However, the benefit of appreciation of the Sri Lankan Rupee in March 2023 was not seen during the quarter due to the lag effect but is expected to realise in the quarters to come, provided the current economic conditions prevail.”
Hemas is also has operations in Bangladesh where the central bank is also buying up government securities with tenors as long at 20 years to mis-target the interest rate, triggering forex shortages and depreciating the Taka, according to analysts who study the country.
Inflation had hit 9.3 percent in Bangladesh by March.
“In the face of numerous challenges including slowdown in the global economy, depreciation in Taka, heightened inflation and depleting foreign currency reserves, the country entered an IMF programme in January 2023,” the firm said.
“The value-added hair oil market witnessed a degrowth, as consumers curbed consumption in many non-essential items and switched to value-for-money alternatives.”
Mainstream economists mis-target rates to boost growth known as either monetary stimulus or bridging an output gap, though the effort result in instability and economic contractions.
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