Retirement at 65? How about giving employees a choice

retirementBy Saleh Mohammed

There has been a suggestion to increase the mandatory retirement age from 60 to 65. I don’t know who made this suggestion.

I am glad that Women, Family and Community Development Minister Rohani Abdul Karim said the government was always open to receiving suggestions. “Extensive research needs to be carried out because the mandatory retirement age was only just increased to 60 in July 2013,” she added.

Let us take a look at the reasons for the suggestion:

1. Private sector employees:

If the private sector employees had suggested it, I guess the most logical reason is the small amount of money available at the current retirement age due to low wage levels in Malaysia. This is compounded by the spiralling cost of living. They have too little money to pay for long-term obligations.

2. Private sector employers:

It does not sound logical for this group to have suggested the mandatory increase, mainly due to the higher cost of keeping long-serving staff with high pay.

3. Government servants

I have a feeling the suggestion may have come from this group, either from the lower ranks or even the senior ranks. The latter, with all the perks will be too happy to fully support the suggestion. Further, after retirement they are offered directorships and other advisory roles.

4. The government

I am not too sure the suggestion is from the government given the high percentage of emoluments in the yearly government budget. But, we may never know if political expediency is a consideration. This is strengthened by the words of the Chief Secretary to the Government Ali Hamsa last month: “Seluruh kakitangan kerajaan dinasihat supaya tidak menjadi seperti kacang lupakan kulit” (Roughly meaning, ‘Don’t forget the hand that feeds you’).

There may be a thousand reasons to support the suggested increase. One of them is the rise in life expectancy (1991 – 71.0 years; 2016 – 74.7 years). The other is retaining skilled workers.

But, life expectancy is not spread evenly.

A paper prepared in June 2016 titled “Are the Poor Dying Younger in Malaysia? An Examination of the Socioeconomic Gradient in Mortality” concluded that socially disadvantaged districts were found to have worse mortality outcomes compared with more advantaged districts. The findings suggest that socioeconomic inequalities disfavouring the poor exist in Malaysia. There is also evidence of a slight growth in income inequality (in both public and private sectors) and a trend of increasing wealth concentration at the top level. It will then be unfair to ask low-earners to take a benefit cut to pay for the added benefits high-earners enjoy because of their longer life span.

Yes, we are living longer. But is it healthier? In most cases those healthier lives are due to life-saving bypass operations, blood medication, cancer treatments and other procedures.

Be that as it may, the government has to consider factors such as whether the cost increase is sustainable, especially for government servants given the high number in employment.

The pension plan has to be “recalibrated or rationalised” to address the impact of an aging society and longer life expectancy. The pension scheme must return to its original goal of protecting against poverty due to old age.

There is a need not to saddle younger generations with excessive taxes. There should not be indiscriminate benefit cuts or higher taxes. The former is harmful to the vulnerable beneficiaries and the latter will penalise the young.

Other factors include the effect on morale due to the extended time for promotion, birth/fertility rate, the ability of some older employees to continue working in physically demanding jobs, productivity, ‘dead wood’, high medical bills, work related pressures, availability of talented youths and the need to increase labour-force participation from under-represented groups such as women with kids.

Meantime, help is to be provided to employees to upgrade their skills to better match the rapidly changing needs of the labour market. Jobs of the future will depend very much on future technological changes.

People are recognising that retirement can be an opportunity for reinvention and new beginnings but financial barriers are preventing it. Almost one in five people fear that they will never be able to retire fully.

How about giving a choice and not make the extension mandatory? Allow flexible working hours and flexible workplaces for parents and older employees and also employment extension under contract.

Let’s have a win-win situation for all stakeholders.

Saleh Mohammed is a FMT reader.

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