Why we may not need to extend the retirement age as yet

Lately, the topic of whether the need to extend the retirement age for the private sector to 60 from 55 is being hotly discussed. The latest coming from EPF on why Malaysians generally need to work longer appeared on TheEdge Daily to explain why we need to work until 60 of age. I agree to the reasoning as there are just not enough savings on average coming from the retirees.

More people extending their working age could also mean more domestic consumption. Generally, retirees are prone to cut down on their spending while people who have a steady income will probably have the tendency to spend more, hence increasing domestic consumption.

While it is true that the life expectancy of Malaysians have improved, it is also important to note that the extension of retirement age may create other problems.

Lesser jobs for the young
It is most important to find out whether we can create enough jobs for our young population. While the statistics on our unemployment is low, it may not mean that we are off the hook.

Quite a bit of the jobs created are from the public sector. It will not solve the problem of the country where we are close to having 1.4 million civil servants in the country. If the private sector's retirement age is pushed towards 60 years of age, it may mean that there are lesser jobs to be replaced which will result in the younger generations finding it tougher to get jobs from this sector. While the government is pushing for involvement from the private sector, we are at the same time increasing the intake of civil servants. In 2000, our total employees in the public sector was 894,788. Today, we have exceeded 1.3 million public servants.

An example of a failed policy when comes to addressing the need for extending the retirement age is Spain where it has close to 50% of its young people unemployed. In addressing the need to cover the increasing liabilities from pensions, the country has extended the retirement age from 65 to 67, while at the same time, its younger generation finds it tough to get jobs.

When the younger generations could not get jobs, many other factors may appear i.e. they may not get enough needed on the job training after their graduations. Personal plans may also be deferred as the younger generations could have find it more difficult to save. Marriage plans could have been deferred. Due to that, people may be forced to have children at older age. Already over the past few years, prices of properties and consumable goods were on exceptional rise. All these issues can itself be a vicious cycle.

I feel that the government has to look through the extension of retirement age once again. Yes, we have extended the retirement age for civil servants and probably reduces the extra burden on pensions but extending the retirement age for private sector would create other implications which on the onset may sound to be the right thing to do. Additionally, this may not be the right time to look into this as the global economies are not having the best of times, hence new jobs creation may be at its low.