Connexion: Fix retirement age at 70 to bring down poverty

By Joachim Ng 

Most Perakians could have missed a little detail when Perak Social Welfare Department (JKM) director Nor Tipah Majin commented in March 2023 that 97 homeless folks were rescued last year from the streets of Ipoh. The little detail was that senior citizens above aged 60 were among 21 who were sent to JKM shelters, as they were no longer able to earn a living.

They are probably retired employees whose savings have been exhausted. Perak at 10.5% tops the list of the four most populous states for those aged 65 and over, followed by Penang (10.2%), Melaka (9.6%), and Kuala Lumpur (7.2%). Photographs of homeless people, not only in Ipoh but also in Kuala Lumpur and George Town have been surfacing. This is the distraught face of a retirement crisis that the country has steered itself into.

Expect more homeless retirees to camp in city walkways, open spaces, and under the bridges — a scenario our national economic planners should have foreseen ten years ago when the retirement age was fixed at a low 60 instead of the benchmark 70 set in 1881 by German chancellor Otto Von Bismarck.

Although Bismarck gave all retirees a pension funded by employer, employee, and the Government, few people lived beyond 70 and hence the financial burden on the German Government was negligible. In effect, Bismarck had initiated a lifelong-work practice.

Malaysia’s original retirement age of 55 was in keeping with Bismarck’s concept, as life expectancy in our country then was just 53.6 years. But the current mandatory retirement age of 60 is way out of step as life expectancy has risen to 77.4 years. Life expectancy is expected to keep rising until it reaches 82.4 years by 2060.

In 2020, we already had 2.3 million people or 7% of the population aged 65 years and older. This percentage is expected to hit 14% by 2043 and 17% by 2050.

Yet economic planners prefer to keep the retirement age at a low 60 as they believe that the purpose of retirement is to make the old vacate their jobs so that everyone below them moves up, and youngsters fresh out of school or university can get employment.

This belief exposes our failure to grow the economy and reveals a small-cake approach to economic development. We are telling the seniors: “You’ve had your share of the small cake, now get lost.” We fail to adopt a super-mind approach that looks at ways to expand the cake to feed young people maturing into working age. The national economy has become sluggish these few decades, in keeping with our small-cake mindset.

Our modern practice of retirement to dump the old and replace them with the young is a scandalous distortion of Bismarck’s noble “unretirement” concept. The result is tragic: according to the Mental Health Foundation one in five present-day retirees experiences depression. Recent studies have indicated that retirement increases the chances of suffering from clinical depression by around 40 percent, and of having at least one diagnosed physical illness by 60 percent.

What is wrong with Malaysia’s retirement practice? There is no Government-funded pension for private-sector employees. They have to depend solely on EPF savings.

For a senior single living in the Klang Valley, the estimated monthly budget is RM2,520. The median wage is just RM2,600 per month, half the working population earn just around RM2,000 monthly, and over a third of formally employed Malaysians earn below RM2,000 monthly. Hence, only 3% of EPF members have enough in their account to retire at age 60 with sufficient funds to pay their bills till end of life.

However, this works for them only if they leave their savings intact and live on the annual dividend. What if they pull out the entire EPF sum or most of it to pay off a housing loan? They will have to eat bricks for breakfast.

The low retirement age not only penalises golden agers but will also drive thousands more households into poverty. The Poverty Report 2022 published by the Department of Statistics Malaysia shows that 487,576 households are living in poverty.

Strong advocates of a proposed Senior Citizens Bill want a clause that punishes adult children if they fail to upkeep their retired parents. The average household income size is 3.8 persons, and the median household income is RM4,494 in Perak. Add two retiree parents and you get 5.8 persons. Divide this number by the income and you get RM775.

Budget 2024 provides no tax relief for families looking after the elderly who have no income. It also does not take up a suggestion to reduce the car road tax for senior citizens owning only one vehicle if it is more than 15 years old. Obviously, these oldies can’t afford to buy new cars and yet need to move around independently as bus services are poor and ride hailing is costly.

Should a Senior Citizens Act compel young adults to financially maintain their aged parents, many more households will fall into poverty. Instead of keeping the golden agers working and earning money, our society forces them to become jobless and dependent on their adult children.

But many aged parents will hesitate to impose on their children, as they prefer them to spend on the grandkids so that they grow up well on nutritious food and good education. So off to the streets these oldies go to live out their final days on five-foot walkways, surviving on free meals provided by NGO-run soup kitchens.

For the immediate needs of those who have already reached age 75, a monthly social security payout of RM570 for private sector retirees has been suggested, but it will never roll out because of the endless debates over who are the deserving and who are not.

It should therefore surprise no one that Budget 2024 offers no handouts for the golden agers. But around the world, many countries have established the rule that age should be the only criterion. The reason is that the rich pay the most taxes throughout their lives. The rich guy is funding social security, so he is deserving of a handout. An easy way around the problem is to ask the rich old guy to nominate a charity or foundation to which the money due to him can be sent directly.

The Government must act fast to keep employees working till age 70. In Singapore, a survey of older workers conducted three months ago has found that 8 in 10 employees prefer staying employed until age 68 and above. The republic’s Manpower Minister has revealed plans to raise the retirement and re-employment age to 70 by year 2030.

If well-off Singaporean oldies are eager to keep working until 70, poor Malaysians are certainly doubly eager. If they are poor and unwilling to work on, that is a sign of mental sickness or bad work conditions.

This isn’t just about financial necessity; it’s also the need to stay productive and engaged with society to stay healthy and mentally alive. An oldie with nothing to do but idle at home will find his immune system lowered, with sicknesses coming more often, medicinal expenditure rising, and hospital stay a frequent likelihood.

Apart from their strong work ethic and reliability, seniors have greater patience that makes them suitable in customer service. Seniors also want to pass on their experience, expertise, and good work orientation to fresh young employees. While young people are digitally skilled, old people are better at people management.

If you think that oldies lose their mental and physical ability, there is a 90-year-old Japanese woman who works as a cleaner at a McDonald’s outlet in Kumamoto City. Tamiko Honda, affectionately known as “genki grandma” (“genki” means lively or energetic in Japanese), does a three-hour shift five days a week and has been working at the outlet in Chuo-ku for an impressive 23 years.

Our national economic planners should read Camilla Cavendish’s book on 10 Lessons for Living Longer Better. She cites the stunning example of BMW’s biggest European carmaking plant, Dingolfing in Germany. In 2007, the plant started an “older” line that the young workers derisively labelled “the pensioners’ line” but it recorded higher productivity, lower absenteeism, and zero defects.

The experiment proved a valuable point: The cost of hiring and training new staff, instead of keeping the old ones, would have been significantly more.

Camilla Cavendish gave numerous examples of “unretirement”, among which are two outstanding ones: Bette Nash, 82, the world’s oldest stewardess who is with American Airlines; Minuro Ishikawa, 79, an upcycler in Toyota whom the founder’s son called “irreplaceable” for doing a job that younger workers don’t have a passion for.

Donald Trump in the book Why We Want You to be Rich cited a memorable quote from his father: “To retire is to expire” and said that remaining active and plugged in seems to prolong life.

The key to overcoming the opposition of employers lies in the word re-employment. Under this plan, employees who reach age 60 are retired and automatically re-employed under new terms. But if their performance has consistently been rated unsatisfactory, or they have a poor medical record, they should not be rehired.

The re-employment plan allows for seniors with managerial rank to be moved sideways to non-command positions so that the next in line can move up the authority chain. Employers have the liberty to put these rehired oldies on half-day work or half the week at half pay. A high-ranking senior earning RM28,000 monthly could be put on half-week half-day work and paid RM7,000 (one-quarter).

Medical benefits for rehired employees should be scrapped and compensated by a monthly EPF contribution of 20% paid fully by the employer.

Most golden agers will be happy with this scaling back, as it gives them more time to learn the use of digital technology and maintain their contribution to the economy. When they become more tech-savvy, they can also relate better to their grandchildren.

There is another reason why this rehiring plan is good for employers: if a manager is promoted to head a department at age 45 and although he is now 60 you still value his services, you don’t want to lose that guy. But having served 15 years as HoD, he should vacate the position.

The reason is that researchers at two American universities have found that there is a performance tipping point. The first 10 years shows performance rising, the next five shows a flat line, and after 15 years the performance starts to dip. The guy loses oomph and creativity in holding the same position over a long span of 15 years. It’s time to move sideways and be more of a mentor than a commander.

The Government should move boldly ahead and resist the pressure from powerful lobby groups to keep the retirement age at a low 60. The World Bank stated in a 2020 report that there is no evidence that young people will have constricted job prospects due to a higher retirement age, and even our local universities have done research showing that youngsters will have plenty of job opportunities if we focus on growing the economy.


Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of Ipoh Echo

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