Sri Lanka’s population is predicted to age vary fast during the next 50 years, bringing a
slowdown of labor force growth and after 2030 its contraction. Based on a 2006
representative survey of old people in Sri Lanka, the paper examines labor market
consequences of this process, focusing on retirement pathways and the 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, the paper shows that labor market duality carries over to old age: (i) previous
employment is the most important predictor of the retirement pathway; (ii) older workers fall
into two categories: civil servants and formal private sector workers, who generally stop
working before they reach 60 because they are forced to do so by mandatory retirement
regulations, and casual workers and the self-employed, who work until very old age (or
death) due to poverty and insufficient income and who stop working primarily because of
poor health; and (iii) the option of part-time work is used primarily by workers who held
regular jobs in their prime age employment, but not by casual workers and self-employed.