The Sri Lankan population is experiencing rapid aging, with over 18% already aged 60 and above, and projections indicating that one in four will be 60 or older by 2041. If managed effectively, the elderly population and the associated Silver Economy hold significant potential to contribute positively to Sri Lanka’s economy. This analysis explores the challenges and opportunities for Sri Lanka to leverage the demographic shift and unlock the potential of the aging population and Silver Economy.

Demographic Dividend and Silver Economy

While population aging presents challenges, such as slower growth and increased fiscal pressures, healthier aging trends offer opportunities to enhance labor force participation, extend working lives, and boost productivity. The demographic dividend occurs when the older population is viewed as an economic asset rather than a social burden, and their potential is harnessed for economic growth. This involves creating employment opportunities and developing products and services tailored for the elderly.

The Silver Economy encompasses the economic activities associated with the spending power and specific needs of the 50+ population. This includes a system for producing, distributing, and consuming goods and services targeting older adults, recognized as active economic agents with significant spending power and life experience.

Changing Population Dynamics

To realize a demographic dividend, the older population needs savings and investments to finance consumption post-retirement. Currently, the situation for the elderly in Sri Lanka is concerning. Recent data shows that 49% of those aged 55-64 are economically inactive, and labor force participation rates are low, with 36% for males and 11% for females. The retirement age of 60 limits formal employment opportunities, pushing many older workers into the informal sector, which often underutilizes their skills. Additionally, options for part-time and flexible work are limited, leading to dissatisfaction among the elderly workforce. With an average life expectancy of 75.5 years, many face about 15 years post-retirement with limited income and employment opportunities.

Moreover, only 31% of those above retirement age received a pension in recent years. Over three-quarters of retired individuals are net dependents, and 91.7% do not receive income from savings. Many who have savings, like the Employees’ Provident Fund (EPF), exhaust these funds without further saving or investing. Projections indicate that by 2030, the economic old-age dependency ratio in Sri Lanka will reach 29.2%. In 2019, the 65+ population had the highest multidimensional poverty headcount ratio (17.9%). The age group of 36-64, who will be 60+ by 2037, had a poverty headcount ratio of 16%. With increasing overall poverty in the post-crisis setting, Sri Lanka’s older population is likely to become more vulnerable.

Looming Care Crisis

A significant care deficit looms, with a gap between the demand for and availability of caregivers for the aging population. Approximately 76% of the 65+ population live with children, but this is expected to decline as cultural shifts move towards institutional care. Three-generation households are projected to fall from 19% in 2012 to 5% by 2060. With smaller family sizes and increased female employment, demand for commercial care will rise. However, many elderly individuals lack the financial capacity to afford such care. The elder care sector in Sri Lanka is polarized, with high demand for limited state-run facilities and unaffordable fee-based options. Middle-class elderly have few options for institutional care, and formal home-based care is costly. Projections suggest a deficit of 149,076 long-term care workers by 2037.

Silver Economic Strategic Plan

Without strategic action, the aging population could become a societal burden, increasing government expenditure on health care, pensions, and social protection. The potential demographic dividend might instead strain the economy.

Globally, strategies to harness a demographic dividend include policies promoting healthy aging, increasing labor force participation among older individuals, and closing workforce gender gaps to support growth and rebuild fiscal buffers. For Sri Lanka, urgent targeted strategies are needed to facilitate savings and investments for post-retirement consumption and to create affordable products and services for healthy, productive, and dignified lives for the elderly.

To achieve this, Sri Lanka should focus on two strategic areas:

• Extend Economic Opportunities: This includes providing employment opportunities such as phased retirement, flexible working arrangements, part-time work, and work-from-home options for older workers. Adopting age-friendly certifications for businesses and increasing the formal sector retirement age beyond 60 are crucial. Raising awareness about saving and investing for retirement and expanding options like private life insurance and state-led pension schemes are also essential.
• Expand Care Options: To protect the elderly and create economic opportunities, it’s crucial to scale up both free and fee-based elder care facilities to cater to all income levels. Incentives like tax breaks or land for private sector investment in care facilities, tied to subsidized services for low-income elders, should be considered. Existing infrastructure, such as Development Officers at Divisional Secretariats, can be utilized for community-based care. Establishing rights and certifications for elder care workers will help attract and retain necessary personnel.

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