* Sri Lanka must reduce fiscal deficits to create space for critical investments in health, education and social protection.
* The education sector is antiquated and must be reformed to help youth find their feet in a technology-driven, global workforce.
* The private sector has a key role to play in driving reform across various sectors from education to healthcare.
What happens when a population pyramid no longer resembles a pyramid so much as a rectangle?
Sri Lanka is confronting a profound demographic shift, due to falling fertility rates and rising life expectancy. The base of the population pyramid – consisting of young people – is shrinking, while the number of elders is growing. By 2050, it is projected that the proportion of the elderly (23 percent) will surpass that of the youth (17 percent).
“The pyramid is losing its shape,” said Dr. Fernando Im, an author of the Sri Lanka Development Update and the Senior Country Economist for Sri Lanka and the Maldives, adding, “Compared to its peers, Sri Lanka has reached an advanced stage of this demographic transition.”
In a discussion held to mark the launch of the World Bank’s latest edition of the Sri Lanka Development Update (SLDU) recently, panellists noted that these changes presented Sri Lanka with challenges that spanned the spectrum from education and healthcare to economic growth and pension reform.
Placing this in a wider context, World Bank Vice President for the South Asia Region, Hartwig Schafer said that while the region had made tremendous strides in addressing poverty, regional statistics masked how vulnerable large segments of the population remained.
“Behind the strong economic growth, there are darkening skies because of debt dynamics, growing fiscal deficits and widening current account deficits. Should there be a global economic shock, this growth is fragile and we will need to have preventive measures in place,” he said.
It will be vital for Sri Lanka to stay on the fiscal consolidation path to create the space for urgent investments in health, education and social protection.
Educational institutions
Dr. Ramani Gunatilaka of the International Centre for Ethnic Studies shared her concern that Sri Lanka’s education system was “antiquated” and was doing little to prepare children for an increasingly digital world. “We are in the stone age in many ways,” she said.
Former Central Bank Deputy Governor Dr. W. A. Wijewardana said, “Our education system is concentrated on producing certificate holders,” emphasising that if Sri Lanka wanted to get back to a high economic growth path, it would have to produce human capital, equipping citizens with skills in demand in the modern workplace.
The private sector has a key role to play. While the “traditional private sector” could be declining, State Minister, Ministry of Finance and Mass Media, Eran Wickramaratne said that Sri Lanka was beginning to produce companies that were venturing into foreign markets and that this “new private sector” were pioneers, establishing Sri Lanka’s ability to innovate and compete internationally.
When it comes to education and addressing the skills mismatch, private sector engagement is needed for curriculum and teaching approaches that could support life-long learning. This is even more relevant because Sri Lankan youth are joining the workforce later and staying longer. Measures to boost educational attainment and make the labour force more educated and skilled could increase labour productivity and help reverse the slowdown in growth from demographic factors.
Strengthening the workforce
Strengthening schools and universities could also help lighten the burden on parents, said Colombo University Economics Department Prof. Amala de Silva.
Many women opted out of the workforce to raise children, in part because the current system needs a lot of support with homework and additional tuition. If schools did their job better, more women could go to work.
This would have a domino effect leading to job creation and boost economic growth, Prof. de Silva said. It will prove a vital shift as only 40 percent of working-age women were either formally employed or looking for a job. In contrast, 80 percent of working-age men were in the labour force. With Sri Lanka’s population aging, this represents a significant loss to the workforce.
Prof. de Silva highlighted barriers to women in the workplace, saying that few companies welcomed applicants over 35 years, discouraging mothers from returning to work when their children had grown up.
Pensions
The panel explored why cross-cutting reforms were needed to address the issues of the demographic transition. Many sectors needed an overhaul to cope with the pressures of a growing population of elderly people.
Former Colombo University Demography Prof. Prof. Indralal de Silva said that as lifespans increased, it was worth reconsidering retirement guidelines. “A woman lives for about 79 years, while men live for about 73 years,” he said, noting that if people retired between 50 and 60, they could expect to live close to two decades without a salary.
As the SLDU reports, in some cases, the average pay-out from the Employees’ Provident Fund might only yield an income of about Rs. 2,650 per month (below the poverty line) over a 23-year life expectancy at the retirement age of 55 for men and Rs. 2,130 per month for women, who can retire at 50 and have longer life expectancy.
The scenario is further complicated in the informal sector, where government pension schemes exist, but remain insufficient, affecting the estimated 61 percent of Sri Lankan workers.
“A major reform is under way, and we are coming to a paradigm shift that was much needed,” said Prof. de Silva, adding that the growing burden of non-communicable diseases was a major concern.
The government should also consider investment and innovation in elder care, not only among large firms, but also among small entrepreneurs. This would create jobs, improve the quality of life of the elders, reduce the rate of hospitalisation among the elderly and support family members who care for the elderly.