THERE have been discussions in our country lately about raising the retirement age from 60 to 65. This proposal has potential implications for the country’s workforce, economy and society.
According to the Statistics Department, the labour force participation rate for individuals aged 55-64 was 67.5% in 2020, compared with 81.5% for individuals aged 25-54. By encouraging older workers to remain in the workforce, the country can increase its overall labour force participation rate.
An increased labour force participation rate can lead to improved economic productivity. According to a report by the World Bank, a 1% increase in the labour force participation rate in Malaysia can result in a 0.5% increase in Gross Domestic Product per capita. The report also noted that increasing female labour force participation can benefit the country’s economy and society significantly.
Furthermore, individuals who continue to work past the age of 60 can have added years to save for retirement and help them build a larger nest egg.
According to a survey by the Employees Provident Fund (EPF) in 2020, the average retirement savings for EPF members aged 54-59 was RM240,800, while the average retirement savings for those aged 60-69 was RM307,500. This suggests that individuals who work beyond the age of 60 may be able to accumulate extra retirement savings.
In addition, 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 can help reduce the burden on the government and taxpayers.
However, there are also potential challenges associated with raising the retirement age. Older workers may face age discrimination in the workplace, making it difficult for them to find or keep employment.
In the context of raising the retirement age to 65, some employers may view older workers as less productive or capable than their younger counterparts. This perception can lead to discriminatory practices, such as employers refusing to recruit 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. This may lead to employers choosing to hire younger workers, who are perceived to be less expensive to employ.
Furthermore, age discrimina-tion can also occur 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 work pace. This can create a hostile work environment and make it difficult for older workers to feel valued or respected in their jobs.
These forms of discrimination can make it difficult for older workers to find or keep employment, even if they are highly qualified and experienced, especially those who may need to work longer to supplement their retirement income or want to remain active in the workforce for other reasons.
It is important for employers to recognise the value that older workers can bring to the workplace and to avoid discriminatory practices that can limit their employment opportunities.
On the other hand, some older workers may experience a range of common health issues, including physical and cognitive health problems as well as mental health issues that can make it difficult for them to continue working beyond the age of 60. Working for an extended period may also lead to burnout and depression.
On the flip side, reduced job opportunities for younger workers can occur when older workers remain in the workforce longer and delay their retirement. This can create challenges for younger workers who are entering the workforce or looking for new job opportunities.
The youth unemployment rate in Malaysia has been increasing in recent years as evidenced by data from the Statistics Department, which saw a rise from 10.8% in 2019 to 13.8% in 2020 for youths aged 15-24. This marked a significant increase that can be partially attributed to the impact of the Covid-19 pandemic on the labour market.
The same concern was also mirrored by the World Bank report, which highlighted that youth unemployment in Malaysia has been a persistent challenge, with the youth unemployment rate of 10.9% in 2018. The report noted that this was higher than the overall unemployment rate in Malaysia, which was 3.3% in 2019.
Reduced job prospects for younger workers can also result in higher competition for available jobs, leading to lower wages and fewer benefits for these workers. This can have a long-term impact on their financial stability and career prospects as they may need to struggle to establish themselves in the workforce and advance in their careers.
Ultimately, any decision to raise the retirement age must be thoroughly considered based on the country’s economic needs and workforce, including the well-being of the 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 are lecturers for the School of Accounting and Finance at Taylor’s Business School, Faculty of Business and Law, Taylor’s University. Comments: letters@thesundaily.com
