Higher retirement age would not crowd out younger workers

Andrew Lo

By Peter Sibon

KUCHING, Sept 7: The Malaysian Trades Union Congress (MTUC) Sarawak Division viewed that increasing the retirement age of workers to 65 years old would not deprive youth of job opportunities as studies have shown that it would actually provide youth the opportunities to grow in their long career.

MTUC Sarawak Division secretary Andrew Lo pointed out that increasing the retirement age from the current 60 to 65, would actually bring more benefits to the country as a whole.

“It should be noted that work done by a mature worker may not be the same work to be done by youth or a graduate. For instance, a graduate accountant would not want to take over the work of a 55-year-old labourer,” he said in a press statement today.


“Studies and experiences worldwide found no evidence that increasing the employment of older persons will reduce the employment opportunities of youth,” he added.

In fact, he said older workers remaining in the workforce longer would actually create more employment opportunities for younger people through increase in domestic demand for goods and services needed by a larger working population.

He emphasised that Malaysia has an issue with unemployed graduates due to mismatch in qualifications and needs of the industry, and not by increased retirement age.

“Employees’ Providence Fund (EPF) data indicates that on average, less than 100,000 active EPF members will retire in each of the next five years. Our unemployment rate is 3.9 per cent, which is considered full employment,” he explained.

“Therefore, the impact of increasing the retirement age on unemployment, or specifically youth unemployment is negligible,” he said.

Lo added that empirical evidence and studies have shown overwhelming support for an increase in retirement age to address concerns of rising life expectancy with Malaysia’s at the average of 80 years old.

The issues, he named, include ageing nation due to declining birth rate; reducing the cost of pension and burden on governments to provide healthcare and old age welfare; boosting public finance through increase tax collection as people work longer; and changing demographic patterns and family structure.

He pointed out that as the country moves towards a high value economy, Malaysians are entering the workforce at a later age after having completed tertiary and professional education.

“They are marrying and having children at a later age which means that at age 60, they will still have to support their children who will still be studying,” he said.

Increasing the overall productivity of the workforce, he added, could boost enterprise productivity by encouraging better human resources management and facilitate introduction of performance and productivity link wage system as companies cannot rely on retirement as manpower attrition tool to manage non-performers.

“It will also help in restructuring employment to allow younger workers who are currently in low value job (such as toll booth attendant) to higher value jobs; allowing employees to continue in gainful employment longer (on similar terms and benefits) will increase household income and reduce poverty; contribute to domestic demand and gross domestic product (GDP),” he said.

He added that studies in the UK have shown that increasing retirement age by five years would increase the GDP growth by 0.2 per cent per year.

According to Lo, the economy will also benefit from older workers’ precious skills and experience and their increased buying power; ensuring adequate retirement savings when workers finally retire.

He highlighted that currently, at least 75 per cent of EPF contributors do not have enough savings to survive at the poverty line during their retirement.

“This can be drastically reduced if retirement age is increased to 65 and reducing reliance on foreign workers,” he said.

“We have at least three to four million foreign workers, who make up almost 30 per cent of the work force. Just compare Changi Airport in Singapore where Singaporeans in their late fifties and early sixties are efficiently maintaining the airport, while KLIA is flooded with Bangladeshis,” he added.

“Would extending retirement age deny promotional opportunities for younger employees. Such views are only valid in the old fashion human resources thinking that promotion should be based on age and seniority. Promotion must be based on relevant skills and competencies,” he elaborated.

Lo also found it ironic that some employers’ group and the country’s 94-year-old Prime Minister (Tun Dr Mahathir Mohamad) thought that Malaysian workers nearing retirement age were ‘deadwood’.

“It is very insulting to all Malaysian workers to claim that those who are 59 years old are sick, unproductive and problematic. Employee productivity and efficiency is not an age issue. It is a performance management issue. This must be addressed whether retirement age is increased or not. A worker may be unproductive whether he is 30, 50, 54 or 56 years old. If there are indeed so many deadwoods, then it reflects incompetent human resources management,” he stressed.

Older workers, Lo said were generally as good as younger workers as they will show less absenteeism, lower turnover, fewer accidents, higher job satisfaction and more positive work values than younger workers.

“They are less prone to work related injuries, substance abuse and lifestyle health issues. The belief that older employees cost more is not conclusive and can be mitigated by performance pay. Even in non-performance pay structure, the workers reach their maximum salary typically between 15 to 20 years, ie. when they reach 40 to 45 years,” he added.

While MTUC had fully supported the implementation of the minimum retirement age for employees to be at least 60 years in 2011, Lo stressed that the time has come to increase this to 65 years within the next eight years.

“A decision must be made as soon as possible. Currently, Malaysia has still one of the lowest retirement age and amongst the highest life expectancy in the world. Singapore, the Philippines, Laos, Thailand and even Brunei have extended the retirement age to between 60 to 65,” he concluded.— DayakDaily