Jobs till 67 – will softly, softly approach work?

WHEN over-achieving high-achiever Singapore sets a goal, it achieves it. Think anything from becoming a finance hub, to better health care for citizens, to infrastructure like the Marina Barrage.

Yet there is one long-term goal that, uncharacteristically, is yet to be ticked off despite the Government setting it 21 years ago - that of enabling employees to work until the age of 67.

Back in 1993, such a goal was motivated by an ageing population and rising life expectancies.

"It would be a waste of valuable human resource if Singapore workers retire at age 55, when they are still healthy and full of vigour," said then labour minister Lee Boon Yang.

Naturally, it met with some resistance from employers who were worried about the higher costs of hiring older workers. To address their worries, the Government cut the employers' portion of the contribution to older workers' Central Provident Fund accounts by 5 percentage points. The long-term target was to raise the retirement age to 67 by 2003.

But it was not until 2012 that a new law allowed senior workers the chance to be re-employed to the age of 65, not quite the original target set.

And the terminology has changed, too. The official "retirement" age is 62. But, by law, bosses must offer healthy workers who have performed satisfactorily what is termed "re-employment" from 62 to 65, or give them a one-off payment if no job is available. That magic age of 67 as the perceived extended ceiling of one's working life is in the forefront today.

Over the past year, closed-door talks were held among the parties involved - the Government, the employers and those representing the employees - to raise the re-employment limit from 65 to 67.

The option of using the law loomed in the background. After all, present laws already allow the Manpower Minister to prescribe the re-employment age as up to 67, in a single stroke of his pen.

But rather than take that course, the Ministry of Manpower (MOM) last month announced that it was going to provide incentives to employers to encourage them to voluntarily raise the re-employment age. It said the incentives will be announced next year and backdated to Jan 1.

The Singapore National Employers Federation (Snef) was relieved. It tells Insight: "Introducing the law at short notice would disrupt the manpower plans of companies. Companies need time to make changes to prepare and comply with the requirements of any new law."

MOM did not say what those incentives would be. When contacted this week, MOM and the Ministry of Finance declined to share any detail with Insight.

While the move will give employers time to adjust and not be forced into having to deal with the complexities of being forced to keep on older workers, it remains unclear how much time it actually bought them.

Advantages of not using the law

THERE are some who question whether incentives, or even the move to eventually legislate, are necessary in the first place. "If the objective is higher participation for older workers, there is a lot of evidence that it is already occurring," says Nominated MP and UniSIM professor Randolph Tan.

The resident employment rate of those aged between 65 and 69 has been rising steadily, from 35.2 per cent in 2011 to 38.5 per cent last year.

As for the legislative weapon up the Government's sleeve, assistant economics professor Walter Theseira of Nanyang Technological University says it should avoid excessive regulation of the labour market. "There is considerable economic theory that argues that regulations on hiring and firing, for example, tend to discourage employment and business activity," he said.

Employers, unsurprisingly, agree that incentives are better than legislation, though they do add that it depends on what incentives are introduced. They have been calling for wage subsidies and help with covering the medical costs of older workers.

"It is undeniable that costs go up when firms hire older workers. Some workers may be less productive. Medical costs are also a big issue as older workers tend to suffer from chronic illnesses," says Mr Kurt Wee, president of the Association of Small and Medium Enterprises (Asme).

On the other hand, it should be noted that employers' concerns about medical costs will be addressed to some extent when MediShield Life takes effect next year whereby those with chronic illnesses and a larger portion of hospitalisation charges will be covered.

Besides addressing medical costs, Mr Wee urges that the Government also help firms directly with wage costs. "Direct wage subsidies have the most direct impact."

The Snef has similar ideas. The bosses' federation suggests extending the Special Employment Credit scheme introduced in 2011, which subsidises 8 per cent of the wages of Singaporeans aged above 50 who earn up to $3,000 monthly. The scheme will last until 2016.

Mr Wee even makes a case for permanent incentives. "Our workforce is going to continue to age, this is something that is not going to stop. So why should the incentives be available for only a few years?"

But labour economist Hoon Hian Teck disagrees. He argues that "temporary financial incentives" such as wage subsidies should be offered to firms hiring the current cohort of older workers, but not future ones. This is because old pay scales were based on a shorter worklife span and firms may be worried about rehiring workers for fear that their productivity may not meet pay expectations. Professor Hoon adds: "(For) the current cohort of young workers, employers can work out their remuneration packages taking into account their longer life expectancy, and hence profitably employ them beyond age 65.

"No financial incentives are needed for this group of workers when they turn 65 in future." And National Trades Union Congress (NTUC) deputy secretary-general Heng Chee How warns that firms should not treat the incentives as "free money".

"Depending on grants is not the way to stay competitive," he says.

Slowly, slowly, but not too slowly

MP ZAINUDIN Nordin, who chairs the Government Parliamentary Committee for Manpower, feels that while the incentives should be given time to work, legislation should not be ruled out if the "carrots" do not work. "If the incentives work, we can let them run," he says. "But if they do not work after one, maybe two, years, we must be open to using the law. We cannot wait indefinitely." On its part, the Government hints that legislation is inevitable and the move to dangle carrots - rather than use a legislative stick - is to merely help firms adjust.

"We are allowing companies adequate time to adjust before legislating, and will provide incentives for employers who voluntarily re-employ older workers beyond 65 ahead of it being legislated," said Manpower Minister Tan Chuan-Jin last month, when the plan to introduce an incentive package was announced.

Firms are realistic, too.

Mr Wee says: "I don't expect legislation to be introduced in the next two or three years. In the meantime, we need to monitor the impact on firms on hiring workers above 65 closely."

The Snef adds that how employers respond to the carrots will determine whether the law will be deployed sooner or later. Until the law is amended, workers remain at the mercy of employers, especially those who suffer pay cuts when they turn 62, even when they are rehired.

One such worker is former Singapore Airlines Engineering planner Krishna Kumar, who claims that his monthly pay was cut by about $1,000 to about $2,000 when he turned 62 in 2011 (see side story).

"I felt I didn't have a choice but to accept the pay cut. I didn't want to change employers at my age," says Mr Krishna, 65, who eventually left the company in January after his yearly contract was not renewed.

Workers like him can only hope that the Government will take a firmer stand against employers soon.

And the Government has, in at least one instance in the past, resorted to legislation when promotional efforts failed. That was in 1993, when the retirement age was raised from 55 to 60 by law.

Five years earlier, in 1988, the Government set a three-year target to allow firms to voluntarily raise the retirement age to 60. By 1992, more than 70 per cent of unionised firms had done so, but the response of non-unionised firms was a dismal 5 per cent. In 1993, the Government decided to amend the law, forcing all firms to comply. Said Dr Lee, the former labour minister, in Parliament then: "The Government, therefore, has little choice but to introduce legislation to raise the retirement age. We cannot wait or delay any further while the population ages and our economic competitors overtake us."

That was 21 years ago. It was also the time that the Government announced the target of letting employees - those who want to, at any rate - work until age 67.

More than two decades later, the wheels have finally been set in motion to make it a reality. While the waiting game continues, at least the end is finally in sight.

This article was first published on Nov 8, 2014.
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