By Joachim Ng
Perakians should be happy with the National Budget for a reason that nobody has noticed. As a silver state for retirees, oldies from elsewhere flock to Perak and it has the country’s best retirement home located near Ipoh. But many local oldies are in fact struggling to survive beyond retirement.
Newspapers, social media, NGOs, and Budget analysts failed to notice Paragraph 102 in the Finance Minister’s Budget Speech delivered in Parliament on November 6 afternoon.
The paragraph says: “To encourage employment opportunities for senior citizens, further tax deduction on remuneration given to employers who employ senior citizens is extended until year of assessment 2025.” Three million citizens are aged 60 and above.
However, the EPF savings of retired private sector employees are below RM100,000 in most cases. At a dividend yield of 6 percent, they are getting just RM500 a month. One unmentioned consequence of the Budget move to allow young contributors to withdraw RM6,000 from their EPF Account I in addition to Account II is that the EPF will be drained of RM15 billion.
This means RM15 billion less to invest, and the EPF dividend yield will likely drop below 5 percent. So now the poor retiree gets only RM420 monthly to survive on. What if the retirees eat into their EPF savings, reducing it by RM10,000 a year? In 10 years it will all be gone.
But retirees will live to age 80 and beyond if they don’t get struck down by heart attack, diabetes, cancer, or a speeding car. If retirees eat into their savings instead of living on the dividends, every street in Malaysia will have to be renamed Beggar Lane by 2040.
Age 60 is a magical number for employers who are keen to replace senior citizens with young workers at one-third the salary of an oldie. Just before last year’s Budget Speech, the Federation of Malaysian Manufacturers issued a statement calling for the retirement age of 60 to be maintained and not extended because extension will deprive young graduates of the opportunity to be employed. Is that the true reason, or is it to reduce the salary expenditure?
Manufacturers see the national economy as a “tiger versus crocodile” river battle, with the tiger representing young graduates and the crocodile symbolic of the oldies. The crocodile must die so that the tiger can live. But where in nature is there a tiger vs crocodile battle? It is fiction.
Surprisingly, the 95-year-old Tun Dr Mahathir Mohamad supported the stand taken by manufacturers on grounds that retaining oldies will block employment and promotional opportunities for the younger generation. This also is fiction.
To some extent, the new Budget still reflects this decades-old “tiger vs crocodile” mentality because “Measure 1: Hiring Incentive” provides encouragement only for employment of the disabled, long-term unemployed, retrenched workers, and foreign workers. With no mention of retirees, it fails to back up Paragraph 102 that encourages employment of senior citizens.
Our manufacturers and national economic planners are still living in the 20th century, unaware that many countries are jacking up the retirement age to 75 so as to add vibrancy to the economy. Yes, these countries have discovered that senior citizens are not crocodiles; they are tiger parents who help the younger workers to excel, and overall they boost national productivity.
Every Malaysian ought to be informed that there is a high medical cost to retiring the workforce at age 60. A British study last year found that retired people lost their purpose in life and fell victim to depression and other severe ailments that needed expensive healthcare.
Who pays for these expenses? Taxation rates will soar as Government hospitals will need more funds to treat an army of 60-year-olds falling sick. Medical insurance premiums will also shoot up to cover a massive jump in claims.
Another cost that nobody in Malaysia has pondered is already worrying Japan. There, retirees with no income have taken to shoplifting. It is just a matter of time before this happens in Malaysia, and the push ironically comes from Budget 2021 when young EPF contributors withdraw RM6,000 each from the retirement fund. This will pull down the dividend yield that retirees depend on for survival.
Across Europe and North America, private sector retirees have organised mass online protests against the slashing of pension fund dividends which jeopardises their survival. Slowly a global movement of retirees is being formed to protest against Governments that have adopted this “tiger vs crocodile” way of managing their national economies.
The Perak Government, running a silver state, ought to make Paragraph 102 of the new Budget a highlight of its 2021 economic thrust. There is a silver lode embedded in the silver hair of these oldies.
Extending the retirement age to 75 will save the Government billions of ringgit in pension payments to civil servants every year. Which country can afford paying a generous pension to each retiree for a long stretch of 20 years? European governments are already planning to keep silver-haired civil servants on the job until age 75 as a viable way to reduce their pension bills.
Why did America choose a 78-year-old man to be its next President? Why not place a cap at age 52? In the next article, we will highlight five reasons why keeping workers till 75 need not block youngsters from getting jobs or promotions. Instead, the presence of oldie workers can greatly boost national productivity. It all boils down to harnessing their strengths and rectifying their weaknesses.