The case for raising the retirement age

QUESTION TIME | There is just one reason to raise the retirement age - more and more people need to have the opportunity to earn money to support themselves in their old age. People are living longer and longer, but they can still be useful, productive contributors to the nation, and thereby avoid becoming a burden to society.

It is a disappointment that Prime Minister Dr Mahathir Mohamad who, at 94, ironically 34 years above the official retirement age now, flatly turned down the proposal by the Malaysian Trades Unions Congress (MTUC) to increase the retirement age to 65 from 60.

Instead, he supported the young Sports and Youth Minister Syed Saddiq Syed Abdul Rahman (incidentally being a cabinet minister is his first job, indicating that even inexperienced youths will have no problems getting high-paying jobs if they have the right connections) who wrongly alleged this would reduce employment opportunities for the youth.

Predictably, the Malaysian Employers’ Federation (MEF), whose sole role in life seems to be to keep every employee’s income low, even though it might impoverish him, was opposed to the proposal, saying that it would increase the costs of employers, which again is not completely true as we shall show.

Improper consideration of this policy has led to one of Malaysia’s major problems being just shoved aside - the ageing of society and the need to allow the older, still productive members of society the chance to make a decent living so that they do not become a burden.

Consider this. Malaysia’s life expectancy at birth in 1960 (UN figures) was just short of 60 years, or five years above the retirement age of 55 then. By 2013 life expectancy had increased to nearly 75 years, or by 20 years. Most people had to be able to still support themselves without income for 20 years, which narrowed to 15 years after the five-year increase in the retirement age to 60 in 2013, still three times that of just five years in 1960.

If the government had agreed to MTUC’s proposed figure of 65, it would still be 10 years, still twice 1960’s five years, but it would have helped to narrow the gap during which an individual has no income before his death, a great relief to those in old age.

It would not have affected youth employment as wrongly claimed by Syed Saddiq because the official unemployment rate in the country remains lower than four percent, which is considered generally to be the full unemployment rate internationally - the rate which is always there due to movements in the labour market.

The youth unemployment rate is a structural problem - there may be high birth rates in the low-income group because of lack of proper education, and the poor employability of youth due to lack of appropriate education and new opportunities, problems we can lay at the door of years of mismanagement, of which Mahathir was part.

Besides, the empirical evidence shows the contrary (see chart).

The unemployment rate seemed to hover around three percent and even declined significantly in the aftermath of the rise in the retirement age from 55 to 60 in 2013. Despite the retirement age being fixed for the period before 2013, there have been fluctuations in the unemployment rate before that.

The MEF’s argument that costs will be raised need not necessarily be true. If a person retires, you have to hire another person to replace him and it is fair to assume that it will be at the same salary or higher. If you retain an employee, you don’t replace him.

Ultimately, it is about using those who are productive beyond the retirement age. They also have a lot of knowledge, and not a lot of them would be deadwood, as Mahathir said - “If we are to set the retirement age at 65, the deadwood will be sitting on their chairs and others will not be able to sit there,” - according to a Bernama report.

Mahathir’s argument for his own position rings hollow: “Don’t say that the prime minister is 94 and has yet to retire himself. Mine is not a case of not retiring, but being asked to come back to work.”

If he, at 94, can stay productive and work, why can’t others of much younger age be given an opportunity to do the same and earn some money to support themselves in their old age? Many of them need the opportunity to work much more than Mahathir.

The country’s retirement age should not be solely dependent on an inexperienced 25-year-old minister and an aged interim prime minister, but should instead be assessed and considered by a properly constituted expert body under the aegis of the Human Resources Ministry, which should handle these matters.

And then the findings should be placed before the cabinet, which should decide on the basis of whether the study was properly made and the conclusions fair and reasonable.

Otherwise, we are not going to have decision-making based on fact, analysis and with genuine consideration for all rakyat, but instead on the whims and fancies of some leaders.

Unfortunately, we not seeing this from the Harapan government so far, but ad hoc decision-making, not unlike the old administration. Isn’t this part of what the Harapan government promised to solve by institutional reforms?

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P GUNASEGARAM says the government needs to move with the times, in this case, a considerably increased life expectancy. He is the editor-in-chief of business weekly Focus Malaysia. - Mkini