Pros and cons of a higher retirement age — Lim Sue Goan
JUNE 15 — When I visited a new village recently, I saw more than a dozen men about 50 years old smoking and chatting under a big tree. I wondered why they were not working. They looked healthy and strong and it was a waste of productivity.
The most appropriate retirement age for a person depends on his or her personal choice and capacity. However, it is also limited by law. The Private Sector Retirement Age Bill 2012 to raise the retirement age from the current 55 to 60 years old would bring different levels of impact to the government, employers and employees.
Extending the retirement age, implementing the minimum wage system in 2013 and the tax reform expected to be made after the general election, including levying the Goods and Services Tax and rationalising subsidies, are all efforts to pave a way towards the high-income economic vision.
The country has been facing a fiscal deficit for 15 consecutive years and with the constantly increasing expenditure and reducing oil revenues, it is imperative to cut subsidies. However, with the current salaries and savings, it is feared that low-income earners might not be able to cope with the surging cost of living. Therefore, allowing employees to work five more years and setting the minimum wage at RM900 have strengthened the social safety net.
The unemployment rate of the country is now 3.1 per cent, which is considered full employment. Together with over two millions of foreign workers, expanding the retirement age would not affect much the employment of the youth.
However, if civil servants work until the age of 60, the number of civil servants might increase as the government needs to take in fresh graduates. It would then push up the government’s expenses for salaries.
Some government-linked companies, like Malaysia Airlines, have already been in a financial problem. With 20,000 employees, the new measure would further burden the company.
However, extending the retirement age allows the government to borrow more money from the Employees Provident Fund (EPF). Currently, members are allowed to withdraw one-third of their accumulated contributions at age 50. It is expected that after the law comes into force, the age requirement would be raised to 55 years old. It will allow the EPF to have more money to help the government keep the economy going.
For employers, the minimum wage system and the extended retirement age are a double burden. They might have a hard time if they do not transform and improve productivity.
The knowledge of experienced employees is indeed valuable, but they enjoy relatively higher salaries and better benefits, including medical expenses might increase. If these employees lack the ability to innovate and refuse to adjust, it will turn out to be a burden instead.
Late marriages have gradually become a trend and many people still have to support their young children when they retire at the age of 55. Extending the retirement age could reduce the government’s expenditure on education.
In addition, 70 per cent of low-income earners spend all their EPF savings three years after their retirement. Extending the retirement age could force wage-earners to save more.
As for society, extending the retirement age could break the myth that Malaysia is turning into a welfare state. If everyone thinks that they can retire early and enjoy life without working, the country’s competitiveness will then further decline.
However, it will be painful for employees and employers to extend the retirement age if the work culture is not improved and the mindset is not adjusted. Working will become torturous for those who do not like or enjoy their work, and do not know how to learn and improve themselves.
The minimum wage system and retirement age extension would test the country’s elasticity. If the country fails the test, it would then be more challenging to achieve the high-income target. — mysinchew.com
* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.