Columns - The Sunday Times Economic Analysis

A twist in the tale

Reversal of fertility trend adds new economic burden
By the Economist

A reversal of the declining trend in fertility is disclosed in the most recent Demographic and Health Survey. The latest statistics of fertility in the country indicate a reversal of the declining fertility rates observed since the 1990s. This would bring fresh burdens on the economy. The demographic dependency would rise to serious proportions in the coming decades. The fertility rate had fallen as early as 1994 to only 2.0, which is less than the replacement level of 2.2. It has now increased to 2.3.

The demographic dependency of a country consists of the proportion of the population below 15 years and those above the working age of 60, as a proportion of the population between the ages of 15 and 60 that is deemed the working segment of the population.

The implication of the increasing fertility is that the rising old age dependency will be merged with a high child dependency to result in a high total demographic dependency ratio. Prior to this revelation the child dependency ratio was expected to decline and reduce both state and household expenditure on children. This was a welcome relief as the burden of old age dependency was gaining momentum. This it appears will not come to pass with the fertility increase that would add to the number and proportion of children.

The Demographic and Health Survey of 2007 disclosed that the total fertility of the population had risen from the previous 1.9 in 1995-2000 to 2.3 in 2004-2007. The highest fertility was on the estates where it was 2.5, while in rural areas it was 2.3. As to be expected, fertility in urban areas was the lowest at 2.2. The recent finding means that the proportion of the population at the lower end of the population pyramid that was shrinking would increase and the deceleration in the rate of population increase will be reversed. The population will once again rise at a higher rate than forecast earlier.

At the other end of the pyramid is an increasing number of the elderly. The swiftness of the ageing process in Sri Lanka and the severity of the consequences of an ageing population are hardly recognized. The speed of the ageing process in Sri Lanka is unparalleled in any country in the world. Demographers have observed that the ageing process that took 45 to 145 years in western countries and around 25 years in Japan will be accomplished in about two decades in Sri Lanka. We will be the only country in the world to have over 20 per cent of population in this high age category in 2020-25.

The ageing of the country’s population poses serious economic and social challenges that have to be addressed immediately. What was previously expected was an ageing population with its attendant problems to which the country is not geared. However one of the favourable factors to cope with the ageing population profile was that since child dependency was declining, resources could be transferred from the needs of the young to caring for the elderly.

The costs of improvement of health services to cater for the illnesses associated with old age could have been offset to some extent by the costs of health care for children. Now that advantage appears to be waning with the country having to cope with a total dependency consisting of both a high level of old dependency as well as a high level of child dependency.

The population projections of Professor Indralal de Silva published by the Institute of Policy Studies in 2007 show that the elderly population would exceed 20 per cent next year, 2011. While the new finding on fertility increases the child dependency and the proportion of the population in the lower age groups it will not change the high proportion of the ageing population. The numbers who are ageing would grow rapidly, while the younger population would also grow.

The ageing of the country’s population, defined as the doubling of the proportion of those over 60 years from 7 to 14 per cent, poses serious economic and social challenges. The provision of adequate income for the ageing population is one of the serious problems arising out of longevity. The ageing of the Sri Lankan population would erode the real incomes of the ageing population during the extended post-retirement period, the viability of pension schemes and impact on the public finances of the country. Further, the retirement benefits cover only part of the workforce. Workers in the unorganized or informal sector have to rely largely on their savings or participation in several new pension schemes for informal workers that cover only a small proportion of the self-employed workers.

The ageing of the population implies a need for the social system to have methods of caring for the elderly. The traditional system of the family caring for the elderly is breaking down, though this is still the prominent system of caring for the elderly. Increased female labour participation, pressures on housing conditions, migration of wives and daughters for overseas employment, and changing social values, have all contributed to the erosion of the traditional system of caring for the elderly within the household. Urbanization, the less subsistence nature of rural family household income, the erosion of incomes through inflation, increased consumer needs have also reduced the capacity of younger households to care for the elderly.

The present residential facilities for the elderly run by the state, by voluntary organizations, with some state assistance, and by community or religious organizations without any state assistance, are inadequate to care for about 2 million elders. The more-affluent aged in Sri Lanka could be cared for through the development of private Elders’ Homes but the bulk of the elderly population requires a degree of public support for their care. Health care systems would require gearing to the ageing process and caring for illnesses associated with longevity.

The incidence of old-age illnesses, such as Alzheimer’s disease, arthritic conditions and osteoporosis, would increase considerably. The incidence of heart disease, diabetes and cancer would increase. More attention to such health conditions as well as an increase in specialized services to cope with them is needed. Geriatric services, quite insufficient at present, should become a priority specialization. At present there is hardly any training for geriatrics at the several medical colleges.

How the country manages the emerging transition to an ageing population together with an increasing child dependency will be of utmost significance in determining the quality of life. Meanwhile it is necessary to monitor the increasing fertility to determine whether it is an aberration from the trend and whether this increasing fertility could be reversed.

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