Extend retirement period in Sri Lanka, says CB
View(s):Sri Lanka, to reap the benefits of the long lasting second demographic dividend (ageing population), should adopt appropriate policy options such as altering retirement benefits to increase the number of years of work.
These options should also include legal provisions and cultural changes to discourage age discrimination, and continuous human capital development to encourage the adopting of necessary skills to suit the needs of a transforming economy, to motivate the ageing population to work longer, the Central Bank (CB) said in a special report on demographic changes.
A second demographic dividend arises to the extent that the individuals and policy makers are forward looking and respond effectively to the demographic changes that will occur in the future. The 2011 Census of Population and Housing reported a total population of 20.26 million indicating that the annual average growth rate of the population had declined to 0.7 per cent during the ‘inter-censal’ period of 2001 to 2012 from 1.2 per cent during the ‘inter-censal period’ of 1981 to 2001.
“This is mainly attributed to declining birth rate, low death rate and an increase in out migration, reflecting the demographic transition of the population,” the CB said.
The age structure transition follows the demographic transition and involves a shift from young to old age. According to the trends, Sri Lanka is experiencing the first demographic dividend with a larger working age population which could raise total GDP, if productively is employed. With elderly persons defined as above 65 years, the demographic dividend stared in 1991 and is expected to continue until 2030. However, if elderly persons are defined as above 60 years (which is the mandatory retirement age in Sri Lanka), the demographic dividend will last only until 2017 (De Silva, 2012).
Countries that have experienced the first demographic dividend have a stable macroeconomic environment, have adopted strategies to absorb the rapidly growing workforce, including greater female labour force participation and have implemented policies to encourage high savings and investments, thereby being able to produce favourable economic results and higher per capita income.The second phase of demographic transition will occur when the current working age population shifts to an elderly population, creating the potential for the “second dividend” of the demographic transition to take place.
Economists argue that the prospects of a longer life and an extended period of retirement, act as a powerful saving incentive in the absence of widespread social security and family support systems. Therefore, population ageing raises the population share of the elderly who hold more assets than others, resulting in higher wealth accumulation and asset income. This generates higher capital per worker, boosting labour productivity and resulting in greater output levels.
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