Raising the retirement age

SHOULD the retirement age in Malaysia be raised from 60 to 65?

According to the Department of Statistics Malaysia, the labour force participation rate for individuals aged 55 to 64 was 67.5% in 2020. For individuals aged between 25 and 54, the rate was 81.5%. By encouraging older workers to remain in the workforce, the country’s overall labour force participation rate could be increased, leading to improved economic productivity.

According to a World Bank report, a 1% increase in the labour force participation rate in Malaysia could result in a 0.5% hike in GDP per capita.

Besides increasing the labour force participation rate, individuals who continue to work past the mandatory retirement age of 60 would have more years to build a larger nest egg for themselves.

According to a survey by the Employees Provident Fund (EPF) in 2020, the average retirement savings for EPF members aged 54 to 59 was RM240,800. For those aged 60 to 69, it was RM307,500. This suggests that individuals who work beyond the age of 60 may be able to accumulate additional funds for retirement.

Furthermore, if more individuals remain in the workforce past the age of 60, there may be a reduced need for social welfare programmes such as old age pensions. This could help to reduce the financial burden of the government.

But there are potential challenges associated with raising the retirement age. Some employers may view persons older than 60 as less productive or less capable than their younger counterparts. This perception could lead to discriminatory practices such as not hiring older workers or offering them fewer opportunities for career advancement.

Some employers may also have concerns about the higher cost of employing older workers, such as healthcare and pension benefits.

Age discrimination can also manifest in the form of harassment, where older workers may be subjected to comments or jokes about their age or stereotyped as being unable to keep up with the pace of work. This creates a hostile work environment and makes it difficult for older workers to feel valued or respected in their jobs.

Job opportunities for younger workers could also be reduced when older employees remain in the workforce. Youth unemployment in Malaysia has been increasing in recent years, as reported by the Department of Statistics Malaysia, which saw a rise from 10.8% in 2019 to 13.8% in 2020 for youths aged 15 to 24. However, this significant increase can be partially attributed to the impact of the Covid-19 pandemic on the labour market.

The reduction in job opportunities for younger workers could also result in increased competition for available jobs, leading to lower wages and fewer benefits for younger workers.

This could have a long-term impact on their financial stability and career prospects, as they may struggle to establish themselves in the workforce or advance in their careers.

Ultimately, any decision to raise the retirement age needs to balance the needs of the country’s economy and workforce with the well-being of individual workers. It is important to consider the impact on all sectors of society and to ensure that appropriate policies and measures are in place to support workers of all ages.

DR PAUL ANTHONY MARIADAS and DR UMA MURTHY

Faculty of Business and Law

Taylor’s University