For a few months now, I have had several conversations with my peers, partners and clients about the aging megatrend that has affected (and will continue to affect) Malaysia over the coming decades. What a lot of people don’t get is that the issues we are facing today are a result of the increasing life expectancy. Malaysians used to live only up to their late 50s in the past; today, we are living up till our mid to late 70s, or even longer.

This means that today, we have a minimum of three generations living at the same time with different life experiences that are driving their needs, expectations, and wants towards government. This, coupled with the scarcity and depletion of resources, is why it is increasingly hard for governments to balance the needs of the Rakyat and the interest of other affected groups. 

It is with this context in mind that we must approach the aging megatrend. We are now  an aging nation, where at least 7% of the population is aged 65 and older as reported by the World Bank in a report released at the end of 2020. Once this number hits 14%, we will be called an aged nation, which is a trend that is expected to happen in 2044 in Malaysia. Life expectancy will continue to increase at a rapid pace over the next few decades. 

As a result, a lot of voices have been raised on the need to overcome potential issues such as the dependency of the retired and elderly on the younger population, insufficient retirement funds, and poverty increase that come with old age. Several solutions have been proposed, where one of the most popular seems to be the idea of increasing the retirement age to allow for the elderly to work longer.

I wrote this article specifically to discuss my concerns (and that of many of my peers) regarding this move, and especially its repercussions if this is not handled with proper care and thought.

If we look at this issue critically, increasing the retirement age seems to make sense on the surface. This move is becoming especially popular given the fact that the Employees’ Provident Fund (EPF) has mentioned that even today, only 3% of the population have enough savings to retire when the time comes. In simple math, 97% of the population, including the elderly, do not have enough. 

People have debated the pros and cons of increasing the retirement age in Malaysia, and for me personally, I should say that I do see the benefit of it. As we grow, it is important, and it is our rightful duty, to not forget about our parents and grandparents who have largely set the foundation where we are building on today.

Yet, on the flipside, I often can’t help but wonder what implications these decisions may have on our youth and other adults who are stuck in the middle. At best, we face the risk of putting a stop gap that will burst and backfire within a few short years.

As younger professionals move up the career ladder and assume roles in the middle management, it becomes harder for them to climb further despite the talents that they have if we have an increased retirement age. Never mind what gifts, talents, skills and expertise they may have: if the retirement age increases, there is a high likelihood that senior professionals will continue to hold crucial decision-making positions and not make way for new talent. 

Why is this a problem you may ask? Isn’t the more experienced person a better fit for the leadership role? My answer to that is two fold:

1. The pace of technology today is creating multiple scenarios and circumstances that require decision-makers to actually know the technology to effectively manage the changes. And this is not governed by the person who lives longer, but rather the person who actually has experienced the technology/area in question. For example, today we can see policies on the internet and tech being regulated and crafted by individuals who might not have grown up with the internet. We have people who don’t even dabble in cryptocurrency trying to talk and regulate NFTs. We have to ask ourselves, how effective will this be?

2. The productivity and demands of the job need to be considered. It has been proven that generally, the older you get, the less productive you will be as you may not have the energy to keep up with the demands of the job. As such, you end up hiring younger persons to support the senior person. I believe this is the scenario in a lot of organisations, especially government linked companies (GLCs) and government entities where the middle is being squeezed and the top have it much easier.

Some may argue that this is fine; it’s the middle that must now pay their due as the current leadership/seniors have worked their asses off to reach the top, but really think about how much harder it is today to reach to the top compared to their time. While I acknowledge it was challenging, how many had work following them home before we had laptops, emails and connectivity? How many could delegate their childcare responsibilities because maids were cheap and can we really do the same today? The circumstances today have changed exponentially; salary increases are tied to the same limited leadership positions, and without the positions, this is also why, along with rising cost of living, people are struggling to make ends meet. 

Let’s not allow these top talents to become sandwiched in their current positions with very little room to progress further. Their voices remain unheard and unacknowledged. 

If we look at some of the articles written by major business thought leaders and organisations, a lot of them argue that increasing the retirement age does not reduce employment opportunities for younger persons. In other words, decreasing the employment of the senior generation does not translate into more opportunities for the youth. And I believe this is true. But what I believe has largely been glossed over is not the situation with fresh graduates per se, but opportunities for those who should by now be given leadership positions, but are refrained from doing so simply due to lack of vacancies at the upper level. This is the concern that I wish to highlight. Yes, fresh graduate positions are unaffected. But what of those in middle management who wish to climb up the career ladder?

Let me give you a very real example. The average age of a deputy minister used to be within their late 30s to early 40s in the 1980s. It is 57 today, if the new article I read is to be believed. I believe if we take a moment to examine the changes in the average age of CEOs of public listed companies and boards over the past few decades, a similar scenario will emerge. What may have taken 15 years to rise to the top in my father’s time may take 20 to 25 years today (depending on industry).

I have no doubt that the issue is being examined from all sides as our government continues to mull over this. Countries like Germany, Denmark and the Netherlands have already introduced and implemented calculations and reliable plans to gradually increase the retirement age. However, for a developing country like Malaysia, I feel that we have more things to consider than other developed countries.

With the rapid pace of globalisation and innovation, I strongly feel that it is high time to have younger leaders lend their voices and expertise to drive the country and their respective organisations forward. If we simply increase the retirement age, at best, we are leading to a stifling of innovation and at worst, we are creating a culture where only the connected and super rich young rise to the top and drive our other younger talents to pursue opportunities elsewhere i.e. the brain drain. 

So how do we implement this while still ensuring the older generation’s wellbeing is taken care of?

We must first acknowledge that this is an intergenerational problem and not an aging nation issue. This means we need to do more than just have one measure in place but multiple items. Among the things that can be considered:

1. Doing a transitional retirement age increase policy. 

This is where instead of a blanket retirement age policy increase, we have one which requires organisations to transition seniors to more minor roles with lesser pay and/or a contractual limitation that allows the person to be renewed for 1 to 2 years in the same position. i.e. the retirement age can increase but they must transition to other roles and not hold the same key positions.

This will pave the way for better succession planning and a smoother transition. My granduncle who was a colonel in the army mentioned that the UK army has this practice of demoting old generals to captains while still keeping them in the army before full retirement as they can still benefit from their invaluable insight and experience while their younger leaders still need support. 

Depending on the organisation, I am sure that discussions and plans can be made in terms of decreasing the allowances or salaries of the senior workers with lesser responsibilities that entail reduced working hours, or even to allow these professionals to come to work every other day as they transition out and enter retirement. A benefit of this is that we allow them to enter retirement gradually and prepare for what is to come, compared to the current practice where retirement is abrupt and sudden. 

Still, I believe these conversations should happen now. Organisations should already identify their second-liners. They should be rethinking salary policies and job scopes, perhaps even working hours and retirement preparations. That way, we can both take care of the wellbeing of our aging population, and ensure no tacit knowledge gets lost in the process and that we can set the young leaders up for success.

2. Financial knowledge and retirement planning.

At the heart of this issue is the problem of resource management of the Rakyat in preparing for their retirement. It’s about making sure that they can afford their retirement and not be a burden on the government. Recommendation 1 is merely a stop gap measure if nothing else is put in place to help.

This means we need to help maximise the retirement savings of our rakyat, especially the bottom earners. EPF is moving in the right direction with its review of a tier dividend plan with an emphasis to help the lower income contributors. But if this is done without additional exposure and financial knowledge transfer to higher income contributors, we will still run into issues later on.

We need to bring financial knowledge and retirement planning into the minds of the Rakyat. Have mandatory courses and classes from a few points in the lives of the people; potentially when they are starting out in their early 20s and perhaps 20 to 15 years before their retirement. It should be made mandatory for employers to have their employees undergo retirement planning classes, possibly hosted by EPF. These classes should include knowledge on investing and scenario planning of different retirement lifestyles, downsizing etc.

3. Creation of aged-friendly financial instruments.

We should also look into fine tuning financial instruments and products to suit aged persons like reverse mortgages. Reverse mortgage is a financial product introduced in the United States in the early 1960s. Reverse mortgage is a financial instrument aimed at retirees who do not have a source of income but own a completely paid-up home whereby they can now take a loan on their home that is disbursed in stages while still staying in the home. Upon their death, the bank will take possession of the home and sell it for a profit. Potentially looking into how to create and encourage the usage of these types of instruments will go a long way to ease the burden.

4. Addressing the pay gap.

Again, consider the fact that the heart of the issue is the problem of availability of resources for an ever-growing population as people are living longer. Therefore, we have to ask ourselves whether we are paying people enough that they can not only survive today but save for tomorrow. 

The common solution or discussion to this has been to increase the minimum wage. I feel this is good but there is another quicker win that would be easier to take in ensuring better wealth distribution. 

The argument of the pay gap between the bottom employee and the CEO is a commonly debated issue in the west. Malaysia can and should move to have all public listed companies declare the pay gap between their bottom cadre of employees and their C-suite in their annual reports. Depending on a matrix of indicators which can include their profitability, industry norms, and the ratio benchmarked against other countries, they must pledge to detail out a plan on how they intend to reduce the pay gap to an acceptable ratio within a defined timeline.  This way, we are forcing corporations to actually come up with a plan instead of lip service saying market conditions will make it happen. The best part, this is done without making it a compulsory target that scares away business.

I am throwing out these ideas, with hope that there are others who would like to join in on the conversation. For sure this is not going to be an overnight conversation. It requires proper thought and planning, as well as the crafting of policies based on what can benefit everyone; not just the older generation, but those of us still starting out and those of us stuck in the middle.