Free Trade Zone

1. THE RELATION BETWEEN DEMOGRAPHIC FACTORS
AND THE EMPLOYEES’ INTENTION TO QUIT IN
FREE TRADE ZONES IN SRI LANKA
Wasantha Rajapakhe
SLIIT Business School, Sri Lanka Institute of InformationTechnology, Sri Lanka.
wasantha.r@sliit.lk; wasanthaa@yahoo.com

2. SIGNIFICANCE OFTHE PROBLEM
 Performance of any profit or non-profit organizations depend on commitment of the
employees who engage in organizational activities. Therefore, reducing employee
voluntary turnover and employee retention is major concern for any of those
organizations.
 After establishing FreeTrade Zones (FTZs) in 1978, it was recognized that an increased
in the proportion of employment in the Zones majority of them young women.
 The number of employees in the Katunayake FTZ in 1979 was 5876. It was increased
to 53289 by 1992 (Boyenge, 2007).
 The total workforce in the EPZ’s in Sri Lanka was nearly 258,185 at the end of 1997
and 294,381 in 1998. The total employment in the FTZs were 4.4 percent of the total
work force in Sri Lanka. (Central Bank of Sri Lanka, 1999: 61-62).
 Despite the contribution and the rapid growth of the industry, in recent years there
has been recognition that employee retention in the FreeTrade Zone has been
decreasing rapidly.

3. SIGNIFICANCE OFTHE PROBLEM continued….
 The total workforce in 2002 was 330,000 reduced to 283, 000 in 2011; 126,366 in 2012
and 86328 in 2016. (Prasanna, et. al, 2013; Padmasiri, et.al, 2014; BOI, 2017).
 Board of Investment in Sri Lanka identified 16,000 job vacancies in FreeTrade Zones in
Sri Lanka in 2014. (Hiru Business News, 2014).
 In 2017 number of job vacancies have raised up to 35,000. (The Daily News, 2017).
 Moreover, the unemployment rate was 4.5 percent in 2016 and estimated 4.8 in 2017,
even though FTZs generated more employment opportunities. (The Department of
Census and Statistics, 2017).
 According to Central Bank sources, unemployment among females was 7.6 and
among males was 2.9 percent in 2016.
 Another salient feature of the unemployment in 2016 was higher unemployment
among persons with General Certificate of Education, Advanced Level (8.3 percent)
and General Certificate of Education, Ordinary Level (5.9 percent). (Central Bank
Report, 2016).

4. SIGNIFICANCE OFTHE PROBLEM continued….
 This evidence proves that the employee turnover issue is interrelated with a
national issue like unemployment.
 Furthermore, many firms may consider the turnover situation as simply part
of ‘doing business’ in these FTZs.
 Once the human resource managers are notified of employee dissatisfaction,
it is generally too late because the employee has already left.
 The problem of employee turnover is depending on many factors among
demographic factors are important. To recruit employees strategically, it is
important to know which demographic factors should be considered.
 The main objectives of this study are to examine the major demographic
factors affecting the employees’ intention to quit, and to make
recommendations to resolve the problem.

5. LITERATURE REVIEW
 Beach (1990. Quoted in Lee and Mitchell, 1994: 85) introduced a specific theory, ImageTheory, to
understand the employees’ decisions to quit.This image theory concept is much more related to
labor turnover in the FTZs.
 Hancock et.al (2011) highlighted that the working conditions and living conditions of the women
workers in the Katunayeke FreeTrade Zones were under the required standards.
 Weerasuriya, (2005) stated that even though unemployment in Sri Lanka is at a higher rate, it does
not reduce turnover in the Zones because of numerous problems. High production targets, fines and
punishment for not reaching quotas, accidents within the workplace, health problems, and freedom
of association all contribute to high turnover, in spite of lack of alternative employment.
 Bharathi (2007) found that there are many problems related to working and living conditions,
harassment and sexual violence, duration of employment and health, industrial accidents,
assassination of workers, and demonstrations and strikes.
 Hancock & Edirisinghe, (2012) were identified problems of the employee empowerment. Even
though the government has provided many rules and regulations, employers do not practice them.
The government is indirectly protecting investors by not punishing them.
 Adams, (2013) reported that incidents of suspected work-related harassments in Sri Lankan Export
Processing Zones have increased.
 Hancock (2017) reported that unsafe and unhealthy working conditions in Sri Lanka’s FreeTrade Zone
Factories threaten employees’ lives.

6. HYPOTHESIS
H0: Age, education, marital status,
length of service and family income
make differences in the intention to
quit in the FreeTrade Zones in Sri
Lanka..

7. CONCEPTUAL MODEL ON DEMOGRAPHIC
FACTORS
 The model of analysis for the hypothesis is diagrammed as follows.
 IQ =β0+( β1.Age)+( β2.Los)+( β3.Edu)+( β4.Mrs)+( β5.Fin) e…………Equation 1
 Where, Age = Age, Los = Length of service, Edu= Education, Fin = Family Income,
Mrs = Marital Status

8. RESEARCH METHODOLOGY
 This study is primarily based on primary data. However, to analysis
existing literature, secondary data has been used.
 The total numbers of factory workers who are working in the thirteen
FTZs all over the Island is over 86,000. (BOI, 2017).
 Required sample size calculated according to the confidence interval of
4 and confidence level of 95%. It is estimated over 600 to be as a
sample size.
 For this purpose 950 questionnaires were distributed among factory
workers in FTZs and approximately 60% (568) were responded.
 To determine an appropriate and representative sample, a random
sampling method has been used to select the factory workers.

9. RESEARCH METHODOLOGY Continued…
 Under primary data collection, a worker questionnaire was used to obtain
data leading to the variables, which are presented in the conceptual model.
 To maintain the validity of the test, the variables, which were included in the
questionnaire, have been derived through the review of literature, which are
related to labor turnover theories and practices.
 Reliability of the test estimated by using Cornbach’s Alpha coefficient of
reliability. Cornbach’s Alpha coefficient of reliability of items in this
questionnaire is 0.7481 and Standardized item alpha = .7673.
 The questionnaire consists of the demographic factors of respondents and
intention to quit from the job. Age, Marital status, length of service, family
income and education level considered as a demographic profile.

10. DEMOGRAPHIC CHARACTERISTICS OFTHE
RESPONDENTS
0
Table -01 Demographic Profile
Demographic
Factors
Frequency %
Age (years)
< 18 53 9.3
18 – 22 243 42.7
22 – 26 169 29.8
26 – 30 75 13.1
30 – 34 14 2.4
34 – 38 14 2.4
>38 1 0.24
Marital Status
Single 517 91
Married, and living
with spouse
38 6.6
Married, but not
living with spouse
12 2.1
Divorced or
separated from
spouse
1 0.23
Widowed 0 0
Length of Service
< 1 year 173 30.47
1 - 2 years 127 22.4
2 - 3 years 66 11.7
3 - 4 years 58 10.24
4 - 5 years 49 8.57
>5 years 95 16.7
Family Income/ month (US $)
<20.00 234 41.2
20.01 – 40.00 237 41.7
40.01 – 60.00 72 12.7
60.01 – 80.00 14 2.4
> 80.00 11 1.96
Educational Level
Grade 1 –10 53 9.33
G.C.E. (O/L) 407 71.66
G.C.E. (A/L) 106 18.66
Technical education 0 0
Professional
Education
0 0
Degree or above 2 0.35

11. DATA ANALYSIS AND RESULTS OFTHE STUDY
Table - 02 Analysis of Variance of factory workers’ Intention to Quit by Demographic Profiles
Source of
Variation
Sum of
Squares
DF Mean Square F Sig. F
Main Effects 374.478 14 26.748 36.148 0
Age 16.666 3 5.555 7.508 0
Marital Status 2.417 2 1.208 1.633 0.196
Length of Service 143.667 5 28.733 38.83 0
Family Income 88.038 2 44.019 59.487 0
Education 1.594 2 0.797 1.077 0.341
Explained 374.478 14 26.748 36.148 0
Residual 6181.018 526 0.74
Total 6555.496 568 0.783

12. DATA ANALYSIS AND RESULTS OFTHE
STUDY Continued…..
Table -03 Multiple Classification Analysis of Intention to Quit by Demographic Factors
(Grand Mean = 4.6881)
Variable and Category No. Unadjusted
Deviation
Adjusted for
Independents
Deviation
Eta Beta
Age
Below 18
18 – 22
22 – 26
26 - 28
53
243
169
75
.1636
5.0600
-3.3855
-.2217
.118
-2.2080
-1.0620
6.2260
-8.7350
.054
Marital Status
Single
Married and Living with Spouse
Married but not Living with Spouse
517
38
12
-.1096
8.6030
6.2130
.107
-9.8620
.1388
-.1617
.143
Length of Service
<1 year
1 – 2 years
2 – 3 years
3 – 4 years
4 – 5 years
>5 years
173
127
66
58
49
95
.1816
9.6470
3.3000
-.1511
-.1242
-.2675
.176
.1970
6.5790
2.2120
-.1447
-.1707
-.2468
.180
Family Income(US $)
<20
20.01 – 40.00
40.01 – 60.00
234
237
72
-8.3955
5.7300
-.1854
.109
-8.9220
6.348
-.2073
.121
Education
Grade 1 – 10
GCE (O/L)
GCE (A/L)
53
407
106
-.1116
9.0290
6.5740
.110
-5.7990
-6.5610
.2552
.113
Multiple R = .236 Multiple R2
= .057

13. FINDINGS
 The hypothesis states that, Age, education, marital status, length of service and
family income make differences in the intention to quit in the FreeTrade Zones in Sri
Lanka.. The results of the analysis of variance and the multiple classification
analysis related to this hypothesis is presented below.
 IQ= β0 + (β1 .Age) + (β2 .Los) + (β3 .Edu) + (β4 .Mrs) + (β5 .Fin) + e…Equation 1
 The statistical values from Analysis ofVariance of employees (n=568) can be
presented in the equation form based on the presented structural equation.
 IQ= β0 + (.054.Age) + (.180.Los) + (.121.Fin) + e……Equation 1

14. CONCLUSION AND RECOMMENDATIONS
 The research hypothesis was tested to determine whether there is any significant
difference between the demographic factors and the intention to quit.
 The results of the analysis of variance show that the main effect of the demographic
factors significantly affects the intention to quit among workers in the FTZs in Sri
Lanka at the 0.05 level of significance. However, the results of analysis show that only
age, length of service, and family income significantly affect to the intention to quit.
 Marital status and education did not produce significant results at the 0.05 level of
significance. These causes for the intention to quit can be reduced by retention of
efficient workers.
 Therefore organizations have to develop retention plan to attract young women by
paying more attention to give better compensation package and make sound career
development path.
 Managers have to pay attention to maintain quality of work life of these young
women.

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