Malaysia should raise the retirement age of its workers before public spending to care for the ageing population balloons beyond control.
THE minimum wage has been set by the government and let us hope that the positive spin- offs from the policy such as better living standard, lower poverty, higher productivity and stronger domestic demand, will be felt sooner.
Now that debates on the impact of the minimum wage are dying out, the focus should be on the retirement age.
The Private Sector Retirement Age Bill, which seeks to increase the private sector retirement age from 55 years to 60, is expected to be tabled during the next Parliamentary session in June - that is, if the Parliament is not dissolved to make way for the general election.
Some people may not be that enthusiastic about the proposed law.
The younger workers are concerned over their career advancement prospects, should the senior staff retire five years later than currently. For those above 50, they may already have plans to utilise their pension savings - the Employees Provident Fund - upon retiring at 55.
However, one should look at the bigger picture. What would it mean to the country and society at large if the retirement age is increased to 60?
Malaysia is moving towards a high-income, advanced economy and the fact is that the developed nation status will be accompanied by expansion in ageing population and fewer young people due lower birth rates as more women join the labour force.
The life expectancy in Malaysia has increased from an average of 50 in the 1950s to 73 for men and 76 for women today. However, the country's private sector still adopts a retirement age of 55, while in the public sector, it has been raised to 60.
Statistics show about three quarters of EPF contributors have less than RM50,000 in their accounts when they retire. As they have about 20 to 25 years to live after their retirement, they will definitely fall into hardcore poverty category as they are left with an average of RM200 EPF monies a month.
It is estimated that by 2030, slightly less than a-third of Malaysia's population will be above 70 years old. There's no way these elderly can depend on their children to take care of them because by then, each household in the country is expected to have an average of two kids, or in some households, none.
This would mean that the government has to set aside a large sum of expenditure for the elderly such as housing and nursing care, while the money could instead be channeled towards achieving higher standards of living and sustainable development.
Should the retirement age be raised to 60, with an option of another four years, as provided in the proposed law, these problems can be addressed.
Besides still being productive and earning an income until the age of 60 to 64, the private sector employees will also retire with bigger EPF savings. The employers, meanwhile, will be relieved of worker shortage problems, especially experienced talents.
Malaysia should, therefore, raise the retirement age of its workers before public spending to care for the ageing population balloons beyond control.
Japan, with life expectancy rising to 79.4 for men and 86.4 for women in 2009, has seen exponential growth in social security expenditure to care for its ageing society.
The country has the highest percentage of ageing society (65 and above) in East Asia. At the same time, its total population is also shrinking due to low birth rates.
Economics Professor from Tokyo-based International Christian University, Dr Naohiro Yashiro said the small proportion of young population in Japan has led to low national savings due to declining workforce participation, which resulted in lower social security contributions.
Japan, against its current stagnant economy, is now facing a widening gap between social security expenditure (to care for the elderly) and social security contributions.
"Japan's fiscal expenditure is high. Half of it is met by taxes and another half by debt issuance," Yashiro said in a meeting with visiting Asean journalists in Tokyo recently.
He also said Japan's current public pension fund is insufficient to meet the needs of future generations.
"My advice to Asian countries is to increase the retirement age now," he stressed.
Currently, Malaysia is the only country in South-East Asia to have a retirement age of below 60. The retirement age for workers in Indonesia and Thailand is 60, while in Singapore it is 62.