Population Aging and Labour Market Participation of Old Workers in Sri Lanka

Abstract

Sri Lanka’s population is predicted to age very fast during the next 50 years, bringing a potential slowdown of labor force growth and after 2030 its contraction. Based on a large and detailed survey of old people in Sri Lanka, conducted in 2006, the paper examines labor market consequences of this process, focusing on employment outcomes of old workers and the reasons and determinants of labor market withdrawal. The paper finds that a vast majority of Sri Lankan old workers are engaged in the informal sector, work long hours, and are paid less than younger workers. Moreover, using hard evidence, it shows that labour market duality characterizing most developing countries carries over to old age: (i) previous employment is the most important predictor of the retirement pathway; (ii) older workers fall into two categories: formal sector workers, who generally stop working before age 60 because of mandatory retirement regulations, and casual workers and the self-employed, who, due to poverty, work till very old ages and stop working primarily because of poor health; and (iii) the option of part-time work is used primarily by former formal sector workers.