Feature--Unlocked Potential of Ageing and Silver Economy in Sri Lanka

By Dr Bilesha Weeraratne, Research Fellow and Head of Migration and Urbanisation Policy Research at the Institute of Policy Studies of Sri Lanka

With over 18 per cent already aged 60 and above—and one in four projected to be 60 or older by 2041—the Sri Lankan population is rapidly ageing. If harnessed effectively, the elderly population and the related Silver Economy have great potential to contribute to Sri Lanka’s economy. This blog analyses shows the challenges and the possibilities for Sri Lanka to reap demographic dividends by unlocking the potential of the ageing population and the related Silver Economy. 

Demographic Dividend and Silver Economy

Although population ageing poses challenges such as slower growth and increased fiscal pressures, healthier ageing trends offer a silver lining by boosting labour force participation, extending working lives, and enhancing productivity. Population ageing becomes a demographic dividend when the older population is considered an economic asset, rather than a social burden, and the potential of the change in the age structure is harnessed to accelerate economic growth. This involves creating employment and other economic opportunities, products, and services required by the elderly.

The Silver Economy refers to the economic opportunities associated with the growing public and consumer expenditure related to population ageing and the specific needs of the 50+ population. It is the system of production, distribution, and consumption of goods and services, targeting older adults, who are recognised as active economic agents with spending power, life experience, and growing demographic significance.

Changing Population Dynamics

To trigger a demographic dividend, this older population requires accumulated savings and investments to finance consumption during their retirement.  However, the status quo of the elderly in Sri Lanka is mostly gloomy. In recent years, 49 pe cent of 55-64 year old cohorts were economically inactive, while the labour force participation rate for males and females were 36 per cent and 11 per cent, respectively. This suggests limited interest, capacity, and/or employment options. For instance, the retirement age of 60 years restricts formal employment opportunities for the elderly. Hence, a majority of older workers are employed in the informal sector, which underutilises their skills and underemploys them. Similarly, the elderly have limited options for part-time and flexible work, and are dissatisfied with participating in work. With the current average life expectancy of 75.5 years, they face about 15 years of post-retirement life with limited income and employment opportunities.

Additionally, only 31 per cent of those above retirement age received a pension in recent years. Over three-quarters of retired persons were net dependants, and 91.7 per cent did not receive any income from savings. Among those with savings such as the Employees’ Provident Fund (EPF), most spent their EPF without saving or investing for later life. Estimates suggest that by 2030, the economic old-age dependency ratio in Sri Lanka will reach 29.2 per cent. Moreover, the 65+ years population had the highest multidimensional poverty headcount ratio (17.9 per cent) in 2019. The age group of 36-64 years, including those who will be 60+ years in 2037, had a multidimensional poverty headcount ratio of 16 per cent. With the worsening of overall poverty in the post-crisis setting, Sri Lanka’s older population is likely to be more vulnerable now.

Looming Care Crisis

Moreover, there is a growing care deficit – a gap in demand and availability of caregivers, for the ageing population. Around 76 per cent of 65+ years population live with children, which is projected to decline over time with the emerging cultural and social shift from home-based care towards institutional care. Three-generation households are projected to decline from 19 per cent in 2012 to 5 per cent by 2060. The decreased availability of family care due to smaller family sizes and growing female employment will increase demand for commercial care. Yet, as discussed, most elderly people will not have the financial capacity to seek commercial care. At the same time, the elder care sector in Sri Lanka is polarised. On the one hand, there is an excess demand for the limited number of state-run elder care institutions—often of relatively low quality, while fee-based facilities remain unaffordable for the average elderly. Hence, the less-affluent middle-class elderly have virtually no options for institutional care. On the other hand, formal and professional home-based care is costly, while lower-cost options are informal and ad hoc. Moreover, free adult day care centres are limited and often target low-income elders, with almost no paid day-care options for other income groups. Across all care options, there is an acute deficit in both formal and informal care workers. Projections indicate a 149,076 deficit of long-term care workers by 2037.

Silver Economic Strategic Plan

Therefore, without timely strategic action, the ageing population would become a burden to the Sri Lankan society and increase government expenditure on health and other care, pensions, and social protection.  The potential demographic dividend would instead become a drag on the economy.

The global approach to reap a demographic dividend includes policies supporting healthy ageing, increasing labour force participation among older individuals, and closing gender gaps in the workforce, to boost growth and rebuild fiscal buffers amid demographic headwinds. In the case of Sri Lanka, targeted strategies are needed urgently to facilitate the elderly to accumulate savings and investments to finance their post-retirement consumption. Similarly, it is important that Sri Lanka creates an ecosystem of affordable products and services for healthy, productive, and dignified lives for this demographic group.

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

1.       Prioritise the extension of economic opportunities into later life. This includes employment opportunities, such as phased retirement, flexible working arrangements, part-time work, and work-from-home arrangements targeted at older workers, to engage them in productive economic activities for a longer period. Such activities include adopting an age-friendly certification for businesses and employers to ensure businesses are welcoming, accessible, and responsive to older workers and clients. Another is to increase the minimum retirement age in the formal sector beyond 60 years of age. Moreover, increasing awareness on saving and investing for retirement and expanding related options—such as scaling up coverage of private life insurance and state-led contributory pension schemes—are essential.

2.       Expand care options to not only protect the elderly but also create economic opportunities. This includes scaling up both free and fee-based elder care facilities to cater to all income types across both living-in and day-care options. Another is providing incentives, such as tax breaks or land, for the private sector to invest in care facilities and tie these to subsidised services for low-income elders. Additionally, existing infrastructure and systems, such as Development Officers at the Divisional Secretariats and local government community centres, could be harnessed to provide community-based care. Similarly, establishing and protecting the rights of elder care workers, providing formal recognition of prior learning and certifying their skills would help attract and retain care workers.