The Sri Lankan population is experiencing a significant demographic shift, with over 18% of the population currently aged 60 and above. By 2041, this figure is projected to increase to one in four. If managed effectively, this ageing population and the associated Silver Economy have the potential to significantly contribute to Sri Lanka’s economic landscape.
An analysis by the Institute of Policy Studies highlights both the challenges and opportunities for Sri Lanka to leverage this demographic trend for economic growth. A key focus is on transforming the ageing population into an economic asset, rather than viewing it as a social burden. This involves creating employment and economic opportunities tailored to the needs of the elderly.
Demographic Dividend and Silver Economy
While an ageing population can bring about challenges such as slower economic growth and fiscal pressures, healthier ageing trends present opportunities to enhance labour force participation, extend working lives, and boost productivity. The demographic dividend arises when the ageing population is harnessed as a source of economic growth, creating opportunities for employment, products, and services that cater to the elderly.
The Silver Economy refers to the economic potential associated with the growing public and consumer expenditure related to the needs of the population aged 50 and above. This encompasses the production, distribution, and consumption of goods and services tailored to older adults, who are increasingly recognised as active economic agents with considerable spending power.
Changing Population Dynamics
For Sri Lanka to benefit from a demographic dividend, it is essential for the older population to have savings and investments to support their consumption during retirement. Currently, the situation is challenging, with 49% of individuals aged 55-64 being economically inactive. The labour force participation rates for males and females are 36% and 11%, respectively, indicating limited employment options and capacity among the elderly.
The retirement age of 60 years restricts formal employment opportunities, pushing many older workers into the informal sector, where their skills are underutilised. Additionally, there are limited part-time and flexible work options, leaving many elderly individuals dissatisfied with their employment prospects. With an average life expectancy of 75.5 years, many face 15 years of post-retirement life with insufficient income and employment opportunities.
Furthermore, only 31% of those above retirement age receive a pension, with over three-quarters of retirees being net dependants. A significant number do not receive any income from savings, and many exhaust their Employees’ Provident Fund (EPF) without saving for later life. By 2030, the economic old-age dependency ratio is expected to reach 29.2%, with the 65+ population experiencing the highest multidimensional poverty headcount ratio (17.9%) in 2019.
Looming Care Crisis
Sri Lanka is also facing a growing care deficit, with a gap between the demand for and availability of caregivers for the ageing population. While 76% of those aged 65 and above currently live with children, this is expected to decline as cultural and social shifts move towards institutional care. The decrease in family care availability due to smaller family sizes and increasing female employment will likely increase demand for commercial care, yet many elderly individuals lack the financial means to afford such services.
The elder care sector is polarised, with a high demand for limited state-run facilities, which are often of low quality, and fee-based facilities that are unaffordable for most. The middle-class elderly have few options for institutional care, and formal home-based care is costly. Estimates indicate a projected deficit of 149,076 long-term care workers by 2037.
Silver Economic Strategic Plan
Without timely strategic action, the ageing population could become a burden on Sri Lankan society, increasing government expenditure on health, pensions, and social protection. To prevent this, Sri Lanka needs targeted strategies to facilitate savings and investments for the elderly to support their post-retirement consumption.
The global approach to harnessing a demographic dividend includes policies that support healthy ageing, increase labour force participation among older individuals, and close gender gaps in the workforce. For Sri Lanka, it is crucial to extend economic opportunities into later life, such as phased retirement, flexible working arrangements, and work-from-home options. Raising awareness about saving and investing for retirement, along with expanding pension schemes, is also essential.
Additionally, expanding care options is necessary to protect the elderly and create economic opportunities. This includes scaling up elder care facilities to cater to all income types, providing incentives for private sector investment in care facilities, and leveraging existing infrastructure for community-based care. Establishing the rights of elder care workers and certifying their skills can help attract and retain necessary care workers.
