While the working-age population is shrinking, the population of the aged is increasing, raising social and economic questions.
In Sri Lanka, currently, 12.3% of the population is 60 and above, the highest proportion of older adults in the South Asian region.
Interestingly, but not surprisingly, the Western province has the highest percentage of the country’s elderly at 31.7%, while the Northern Province has the least at 4.8% (World Bank blog by Rene Leon Solano entitled: Sri Lanka must increase its efforts to protect and promote the human capital of the elderly, 2021). Western Province is the most prosperous, while the war-devastated Northern Province is the least developed in Sri Lanka.
As per a 2019 report of the Asian Development Bank (ADB) entitled:Growing Old Before Becoming Rich, Sri Lanka will experience a contracting population after 2038, assuming that fertility rates continue to be at the customary low levels. The working-age population, i.e., those aged 15–64, will reach a peak in 2027 before starting to decline. The share of the population over 65 years will be going up to reach 21% by 2045 and 35.6% by 2100.
“In Sri Lanka, the demographic shift to an aging society is far more rapid than in many other countries at a similar level of development, and is occurring at the same speed as in countries with much higher per capita income,” the ADB says.
This scenario means that caring for the elderly will pinch the pockets of Sri Lankans and the Sri Lankan government more, compared to richer Western nations with a similarly growing elderly population.
The “old-age dependency ratio” will nearly double from 2020 to 2050, the ADB says. This means that in 2050, each working-age Sri Lankan adult will have twice as many elderly relations to support in comparison with his counterpart in the richer nations.
“The demographic transition from a youth bulge to an aging society creates several economic, health and social challenges,” the ADB points out.
As the years roll on, the number of Sri Lankan workers retiring will increase, while the number of people entering the workforce will decrease, resulting in lower productivity, lower tax collection, lower national income, lower growth, and lower savings, World Bank blogger Leon Solano points out.
“Healthy life expectancy” in Sri Lanka is 67 years and the overall life expectancy is 77.3 years. This means that about 10 years of a person’s life, from 67 to 77, are unproductive. With increased morbidity and disabilities due to advancing age, this period may require specialized, comprehensive and extended medical care. Therefore, the last decade of a person’s life will be more expensive than productive, Solano says.
That puts a strain on a family’s resources because most elderly persons in Sri Lanka stay with their families. Even if they are put up in old-age homes, the family will have to pay the charges. In fact, the number of elders living alone, away from their kith and kin, has increased, according to the ADB. This population has to be funded either by the family or the State or both.
The aging population would need to be serviced by “caregivers”. But there is a shortage of old-age caregivers in Sri Lanka. According to Solano, there are, at present, only six public sector-run elder care centers and 324 private or community-run centers. These facilities have to be increased and enhanced in the coming years given the clear prospect of an increase in the number of elderly.
The falling share of working-age population and an increase in the aging population can bring down GDP growth. A changing age composition can affect savings. As people age, they may dip into their savings to meet expenses. And the youth may have to save more only to fund their extended retirement years.
Aging has implications for the government’s budget because pension costs and other forms of old-age security plus the cost of providing long-term care have to be funded by the Treasury. A higher number of retired workers means an increased burden for the public sector pension scheme, which, Solano says, now consumes almost 2% of Sri Lanka’s GDP and will become fiscally unsustainable in less than a decade.
In the absence of non-public sector pension schemes, Solano suggests a special, well-targeted, island-wide State cash transfer scheme. According to him, through the Emergency Response and Health Systems Preparedness Project (ERHSP), the World Bank has helped the Lankan government support 629,303 elderly persons through the delivery of cash and in-kind assistance.
The ADB recommends that given the fact that Sri Lanka will be facing a diminishing working-age population and a bulging elderly population, a multidimensional policy response is needed. It should simultaneously address constraints on growth, improve labor force participation, and create the fiscal space for additional expenditure.
“More of the population should be drawn into productive activities. In addition, attention needs to be given to raising the productivity of workers in the economy. A potential source of labor supply to offset an aging population is female labor force participation, which in Sri Lanka remains low despite high educational attainment among women. Policies to improve female labor force participation such as maternity leave, raising awareness about sharing of household responsibilities, flexible hours, work from home, and provision of childcare facilities will be essential to attracting women into the labor force,” the ADB says.
Further, “policies to improve overall productivity in the economy must be part of the response to aging. These include addressing constraints on attracting new investment as well as improving workforce quality. The experience of other Asian economies indicates that a key focus should be on upgrading the skills of all workers, including the elderly.”
“The broader challenge is to build learning systems that allow for continuous skill upgrading of workers across the life cycle. The education and training systems need to evolve from the conventional pattern of learning during childhood only, followed by work and retirement, to one where learning and skill upgrading happen seamlessly not only during formative years but also while working and after retirement,” ADB suggests.
Further, technological advancements can be leveraged to improve productivity, increase labor force participation, improve health and extend working life spans as well as longevity, and create a more flexible workplace.
The ADB recommends the lengthening of working lives to match increased life expectancy, so that the number of years spent in work aligns better with the number of retirees or years spent in retirement.
The young population had given Sri Lanka a “demographic dividend” in the mid-1990s. It is important to utilize this demographic dividend or opportunity for economic growth. Many East and Southeast Asian economies had leveraged this opportunity when they had high economic growth. However, Sri Lanka could not replicate the Asian Tigers due to the long drawn-out internal war from the 1990s up to 2009. The window of opportunity is still open but is expected to close by 2030.
It would, therefore, be prudent for Sri Lanka to make full use of the remaining years of the opportunity provided by youth-dominated demography to expand and train its labor force, secure foreign and domestic investment to increase its GDP, and make the elderly productive so that they stand on their own feet and are also reasonably well looked after by the State through financial transfer schemes in their twilight years.
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