Saturday, September 4, 2010

Implications of No Retirement Age

Frontpage article on the Straits Times today - MM Lee: If a man is fit, let him carry on working.

The issue of raising, or even doing away altogether with the retirement age, has been bandied about for quite a while now. Let's begin with a quote from MM Lee, his answer to the last question of the interview the Straits Times did with him (of which a transcript can be found in the Straits Times): 

Q: Some Singaporeans disagree with your view that they should not retire but keep on working. They argue that the end of life is a happy retirement, not more work.

A: Those who want to engage in new pursuits, and develop new interests which they could not do so because of work, can do so. They will have no income and may run out of their savings and CPF monies earlier.

The most important thing, something that must always be kept uppermost in mind, is that the government does not want to own the "retirement problem". More to the point, it does not want citizens, for lack of their own funds, becoming destitute, so that the government is placed in the uncomfortable position of either having to loosen the purse-strings, or risk appearing heartless and stingy (and self-aggrandizing, with the massive ministerial pay packets it's famous for).

[Here, of course, we ignore the inconvenient fact that cabinet ministers in Singapore are one of the few groups of civil servants still eligible for pensions.] 

Every other argument in favor of raising or abolishing the retirement age, including the rapidly ageing workforce, is a red herring. We've already imported foreign workers by the planeload. And the government has no qualms in importing more. As many as are needed to keep growth high. The recent speeches are just platitudes to placate the masses.

Once you comprehend the motivation behind why MM Lee desires to abolish the retirement age, things become much clearer.

Capable people whose skills are in demand, no matter what their age, are likely to be able to find employment no matter what their age. MM Lee falls into this category (although some would argue that he's manufactured his own need, but I digress). Such people are also likely to have sufficient financial resources to retire as and when they wish.

The real problem is those who can't afford to retire, and must continue working until the day they die to make ends meet. If they're unemployable beyond a certain age, due to some pesky thing called a retirement age, where is the money going to come from to feed and clothe these people? Heaven forbid that it be government.

Please note: In this post, I do not intend to make a stand for or against abolishing the retirement age. I am merely exploring motivations and implications. It just so happens that in exploring motivations, it is difficult not to arrive at the conclusion that the government shall we call it, mercenary.

Somebody needs to pay for the retirement of citizens who cannot afford to not work even in their twilight years. Correction. Let me rephrase that. Somebody needs to finance the decommissioning costs of labor inputs who have outlived their productive life span, are passing into senescence, and who happen to have the statutory status of "citizen" on this island called "Singapore, (Inc.)".

There, that sounds suitably technocratic.

And there is a simple solution for that. Abolish retirement. Make people pay their own way from cradle to grave. And their employers too.

But realistically speaking, employers face massive problems with no retirement age, as amply covered in the Straits Time today. Those problems are serious and real. And besides, foreign direct investment, business and enterprise, these are the lifeblood of the Singapore economy. When push comes to shove, it is far easier to shortchange citizens than businesses here in Singapore. That's why corporate taxes were cut while GST was raised simultaneously in 2007.

Just two days after my last post, I have new predictions to add to my list. What else will the PAP do after being returned to power in the next elections?

1. Further reduce or even eliminate employers' contribution to CPF for workers after the age of 62. 

2. Raise the age at which CPF can be withdrawn for retirement purposes (currently 55).

3. Other tweaks to the CPF scheme, such as raising the minimum sum, or requiring a larger amount to be set aside in Medisave. Perhaps more unusual changes, like permitting Medisave to be used for occupational therapy. Or an income-withdrawal matching scheme - you can only take out of CPF an amount that is proportionate to income you earn after 62.

4. The laws requiring employers to retain employees after 62 will certainly be passed at some point, and they will be enforced. But the terms under which employers extend employment to the elderly are likely to be relaxed and weighted in favor of employers. Employers may be free to offer a starvation minimum wage, few benefits or temporary contracts. It's not like the people who need the work are in a position to bargain. I mean, what are they going to do, petition the government for more equitable terms?

Aside from these predictions, there are other implications of abolishing the retirement age.

1. The civil service is going to lead the way. On paper, retaining staff with years of expertise sounds great. So does abolishing seniority-based wage structures. Admittedly, I have interacted with only a few senior civil servants in a personal capacity. But those few I have met all seem to have a very hard time relaxing their grip. It's almost a pathological condition. Having a very large group of people, all with considerable egos, jockeying for position in what already seems like a highly adversarial environment, seems like a hazardous position for bystanders. Like ordinary Singaporeans. 

In my job, I've frequently been placed in the ludicrous position of helping to devise 5-year "roadmaps" every 2 years. Every person of "note" desires to put their personal stamp on their new appointment. Personal fiefdoms and what I like to call "turf issues" are remarkably common. If KPIs for civil servants and growth at all costs got us to where we are today, I hesitate to imagine what the future will hold when we have a civil service even more stuffed with highly driven, opinionated and competitive Type A's. Add crotchety, curmudgeon-y, and every other bad elderly cliche to the list.

2. With employers being compelled to retain older people, that means less labor flexibility, which, oddly enough, is sharply at odds with the national labor philosophy. That could ricochet all the way down through the generations. The Straits Times article mentioned Japan. Could we develop a freeter underclass as well?

3. Lots of people won't think too much now about the abolition of the retirement age. They're either too young, or think that they will be financially secure enough to afford voluntary retirement anyway, years from now, so the point is moot.

I am not even 30, but my opinion is different. The economy now is as good as it gets. Fiscal stimulus in developed countries can only go so far, and China's economy is a house built on sand. Normal people are now stretched to afford housing or the lifestyle they aspire to even in such a benign environment, having to take on massive amounts of debt (at currently low interest rates). What happens when all those finely laid plans are turned to dust? Things may appear far less sanguine years into the future.


Aziz Jangbar said...

I believe that retirement is not good for a person's mental and physical health. We really need to work to stay happy. The problem arises when someone has to work a job that they don't enjoy. So the goal, in my opinion, should be to find something that you enjoy doing and do it as long as you live.

Many people make retirement their goal, which is really sad because we don't really know if we are going to live that long. Whereas the goal should be to find something we enjoy doing and do it for the rest of our lives.

It is a known fact that people who retire and have nothing to do end up dying quickly.

Melbourne said...

@governments being mercenary:

As a property investor, I've noticed a similar pattern with regards to HDB flats.

Why are people who are clear credit risks being extended loans by HDB to purchase flats? No Australian bank would ever extend credit to such individuals.

Conclusion: If these were not forced to pay for their own housing, the state would have to foot the bill.

Some real-life examples were featured in the homeless debate on the Online Citizen website back in May.

Melbourne said...

Don't know about you, but my preferred retirement age is 40.

Hopefully I'll live to be that long. ^_^