• How can SL improve exit mechanisms under welfare programmes and empower people through job creation?

Sri Lanka has long struggled with social welfare programmes that were well intentioned but structurally flawed. Programmes such as ‘Samurdhi’ have provided essential financial relief to millions of people over the years, but they have also fostered a culture of dependency. 

The lack of effective exit mechanisms, i.e. a clear pathway for beneficiaries to graduate from welfare, has kept many Sri Lankans trapped in a cycle of reliance on Government aid. This not only strains the country’s already limited financial resources but also fails to empower recipients to achieve financial independence.

In light of these challenges, the introduction of work-based welfare programmes where recipients contribute labour in exchange for Government aid could represent a much-needed reform. Countries such as India have implemented successful programmes of this nature, and the possibility of adopting a similar model in Sri Lanka could serve as a way to reduce dependency while ensuring that welfare recipients contribute to the economy. 

This week, ‘Market Mine’ delves into the current flaws in Sri Lanka’s welfare system, examines international models, and makes a case for incorporating employment into welfare programmes as a sustainable solution.

Intrinsic inefficiencies

The most glaring flaw in Sri Lanka’s social welfare system is the absence of clear exit strategies. Once individuals enter welfare programmes like ‘Samurdhi,’ many remain beneficiaries for years, if not decades. 

According to a report by LIRNEasia, 10 years and three months is the average duration a family stays in the ‘Samurdhi’ programme, with some staying for as long as 28 years. This long-term reliance on Government aid suggests that welfare, in its current form, is not helping recipients transition into self-sufficient lives.

Moreover, while ‘Samurdhi’ was designed to help the most impoverished, it has been plagued by errors of inclusion and exclusion. According to a study by the International Development Research Centre (IDRC), about 56% of households that should have been included in the programme had been excluded, while a significant portion of beneficiaries had not been from the poorest households. 

This inefficiency highlights a key issue in that welfare programmes in Sri Lanka are not adequately targeted and often continue to support those who no longer need assistance.

An exit mechanism is a key component of any successful welfare programme and could be a solution to the inclusion and exclusion errors. In an ideal scenario, welfare is a temporary solution, providing short-term relief while beneficiaries improve their financial standing through employment or other means. However, this is not the case in Sri Lanka.

Ensuring objectivity

As economist and Advocata Institute Chairman Murtaza Jafferjee pointed out, the welfare system needs to be more objective. 

“There has been criticism about the inclusion and exclusion issues, specifically with the scoring methodology. It requires periodic reassessment to ensure that it is more objective. Otherwise, decisions could be made based on subjective factors,” he noted. 

Without such assessments, people remain in the system even when they no longer need aid, fostering long-term dependency.

He referred to India, where Direct Benefit Transfer (DBT) ensured that welfare payments were made directly to beneficiaries’ bank accounts, reducing the risk of misallocation and leakage – a term used to describe funds that are lost or misappropriated before reaching intended recipients. 

Jafferjee believes that Sri Lanka can replicate this model, arguing that such a system is well within the country’s capabilities: “We’re a small country, and despite our limitations, we have reasonable access to financial systems that could support this. Even mobile payment systems like payment apps could be leveraged to make the process smoother,” he said.

In a 2023 UNICEF study, it was found that only 25% of Sri Lankan households received any form of social protection, with high exclusion errors affecting even the poorest segments of society. The fragmented nature of these programmes means that there is no structured way for recipients to graduate from the system, further trapping them in dependency.

Coupling welfare with employment

One of the most promising solutions for Sri Lanka’s welfare dilemma could lie in work-based welfare programmes, where recipients must provide labour in exchange for the aid they receive. 

A prime example of this model in action is India’s National Rural Employment Guarantee Act (NREGA), which guarantees at least 100 days of paid work per year for beneficiaries. This ensures that welfare recipients contribute to the economy while receiving financial support, thereby reducing the burden on Government resources.

Through a process of tying welfare to employment, the Sri Lankan Government could simultaneously reduce dependency and boost productivity. This would also help to address one of the key criticisms of Sri Lanka’s current welfare system: the perception that beneficiaries receive ‘free’ money without contributing anything in return.

Jafferjee also stressed the importance of cash transfers over subsidies, explaining: “When you interfere with prices and offer subsidies for specific goods, people benefit only if they consume those goods. But what if they don’t want or need them? It’s better to give them cash and let them decide how to spend it.” 

A work-based welfare system in Sri Lanka could have multiple benefits. First and foremost, it would reduce the long-term financial strain on the Government. 

Currently, social welfare programmes consume significant resources without guaranteeing that beneficiaries will eventually become self-sufficient. According to the International Monetary Fund (IMF), Sri Lanka spent 0.6% of its Gross Domestic Product (GDP) on social safety nets in 2023 – a number set to rise in the coming years.

Moreover, a work-based system could help address the stigma often associated with welfare. In many societies, welfare recipients are viewed as a burden on the state, a perception that often discourages people from seeking help when they genuinely need it.

Govt. plans

The Sunday Morning Business learns that the Government is planning to roll out a new social welfare initiative aimed at aiding economically vulnerable groups, with the goal of helping them become active participants in the economy through future job creation.

While long-term strategies such as job creation are in progress, immediate assistance will be offered through an updated welfare system, according to Senior Consultant to the President on Economic Affairs and Finance Prof. Anil Jayantha Fernando. “New programmes will address shortcomings in the existing framework to ensure more efficient and targeted aid,” he added.

He further stated that the Government’s responsibility was to identify and support those most in need while establishing a foundation for sustainable employment opportunities.

However, Prof. Fernando also said: “The introduction of any new welfare programmes will depend on the finalisation of budget allocations, which are expected to be outlined in the 2025 Budget following the formation of a new Parliament.”

Challenges and opportunities

Despite the clear advantages of work-based welfare, there are barriers to implementing such a system in Sri Lanka. 

One challenge is job availability. With unemployment rates already high, the Government would need to create sufficient jobs to accommodate welfare recipients. This could involve the expansion of public works programmes for the creation of new initiatives aimed at infrastructure development.

Another challenge is administrative capacity. Sri Lanka’s welfare programmess are already criticised for their inefficiency and corruption. According to the LIRNEasia study, many beneficiaries are required to wait for hours at welfare offices, only to be met with bureaucratic delays and poorly trained staff. Implementing a work-based system would require reforms to ensure that jobs are properly assigned, tracked, and compensated.

Research from international organisations also supports the idea of linking welfare to work. According to a World Bank report on poverty alleviation, welfare-to-work programmes have been successfully implemented in countries such as the US, the UK, and Australia. In these cases, recipients were required to participate in job training, community service, or other employment-related activities to continue receiving benefits.

In the US, for example, the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) significantly reduced long-term dependency on welfare by requiring recipients to work or participate in job training programmes. Studies found that the PRWORA helped reduce welfare caseloads by 60% over the course of a decade.

In Sri Lanka, such a model could also include skills training programmes that equip beneficiaries with the skills they need to find permanent employment. This would help individuals transition out of welfare and also contribute to the country’s economic development by improving the skill level of the workforce.