Increasing retirement age to 65 could raise the unemployment rate of the younger generation
by LYDIA NATHAN/ pic by MUHD AMIN NAHARUL
INDUSTRY experts have elicited mixed feelings on whether the retirement age being increased to 65 may be for the better or worse.
Malaysian Employers Federation (MEF) ED Datuk Shamsuddin Bardan (picture) said increasing the retirement age to 65 from its current limit for Malaysians could increase the unemployment rate among the younger generation.
He said in July 2013, the government upped the age to 60 years old, which led to the loss of about one million job opportunities for graduates.
“These job opportunities were supposed to be from employees retiring at the age of 55, but since the retirement age was then changed to 60, it was void. The private sector, meanwhile, has about 200,000 employees retiring every year,” he said to The Malaysian Reserve (TMR) in a telephone interview yesterday.
According to Shamsuddin, from July 2013 to June 2018, a lot of fresh graduates did not get the right jobs and the unemployment rate was three times the national unemployment rate in the span of five years.
“If the retirement age is set at 65 years old, the same thing could happen again and further increase the unemployment rate this year,” Shamsuddin said.
This was in response to Human Resources Minister M Kulasegaran who said yesterday the government will study the suggestion made by the Malaysian Trades Union Congress to raise the mandatory retirement age to 65 as practised in other countries.
Kulasegaran said the matter will be discussed with the Finance Ministry (MoF) before a decision is made.
“We have given our opinion and have forwarded the matter to the MoF,” he said.
Shamsuddin opined that the government should introduce a retiree employment policy, where employers are given incentives like multiple tax exemptions.
“Employees over the age of 60 Naharulcan be given a full tax exemption to recognise their contribution to the country,” he said.
Meanwhile, Sunway University Business School economics Prof Dr Yeah Kim Leng said while there may be some impact if the older workforce is given an extension, it may not be so severe and only at a minimal level.
He told TMR that unemployed graduates are usually at the entry level and do not hold managerial positions yet.
“More importantly, if the older workforce is allowed to stay on, it helps the organisation to enhance its productivity and maintain business operations, and then it will bring about positive gains like company growth,” he said.
Yeah added that when a company grows, it also creates more job opportunities and workforce expansion.
“It will vary according to organisations and will be up to the management to determine how to best optimise the skills and expertise of those nearing retirement age.
“There may be some concerns over deadwood employees who do not contribute at all, and performances will need to be looked into,” Yeah said.
He said, however, for the lower-level workforce, it may have a slightly larger impact as the management will want to replace employees with the younger generation as it does affect productivity.
He said from a national perspective, it is a necessary step and a welcomed move.
“This could be a good policy given the rising life expectancy and importantly adequate retirement savings and social safety nets for retirees. This will also assist the government to ease on social spending,” he said.
However, Yeah said a five-year increase could be a big jump and opined that the government could increase it progressively to allow the workforce to better prepare for the extension of work life.