Raising retirement as Malaysia ages: Navigating the workforce challenge

Focus Malaysia

2 days ago

THERE is a well-known Asian saying—'older ginger will be spicier'—highlighting the wisdom that often comes with age.
Across many Asian cultures, including our own, elders are held in high esteem, seen as valuable sources of guidance and experience.
This deep-rooted respect reflect a broader tradition of valuing age not just as a number, but as a reservoir of accumulated insight.
However, the increase in the elderly population is putting us between a rock and a hard place.
With Malaysia's fertility rate continuing to decline, we are steadily marching into the category of an aged society.
According to the Department of Statistics Malaysia, 11.6% of our total population in 2024 was aged 60 and above.
This is projected to grow to 17.3% in 2050, and by 2057 we will become a super-aged society, as 20.5% of our population will be over 60 years old.
This immediately poses some important questions that need to be answered quickly, like 'Will our healthcare system be adequate enough to handle the surge of senior citizens?' and 'Will the government be able to shoulder the financial strain of taking care of our elders?'
However, the most important question among these is, 'Will we be able to replace the retired workforce when we inevitably become a super-aged society?'
Currently, the minimum retirement age is set at 60 years old. Amid rising workforce concerns, the Minister in the Prime Minister's Department (Law and Institutional Reform) Datuk Seri Azalina Othman Said suggested we raise the minimum retirement age from 60 to 65.
Raising retirement age to cope with demographic change—especially one that concerns the ageing population—is common practice across the globe.
The Chinese government raised the retirement age for men from 60 to 63 years old, for women in blue-collar jobs from 50 to 55, and for women in white-collar jobs from 55 to 58.
The Danish government is set to increase the retirement age for people born after December 31, 1970 to 70 years old by 2040.
However, common practice does not mean that it is the only one we should consider, and it certainly doesn't mean it is the best. While it is logical, raising the retirement age has its own merits and concerns that need to be addressed.
For one, raising the retirement age will certainly benefit future retirees, particularly in terms of their finances, as the cost of living continues to rise.
Five more years in employment will be very helpful for workers to financially prepare for their retirement, considering only 33% of active EPF members had minimum savings of RM240,000 for retirement in May 2024.
Furthermore, medical insurance premiums continue to rise. In lieu of more and more Malaysians living an unhealthy lifestyle, which leads to an increase in non-communicable diseases and a higher obesity rate, which is projected to hit 41% by 2035, this could quickly deplete retirement savings for the common working class.
On a bigger scale, it was estimated that a 1% increase in elderly dependency would reduce our GDP growth by 6.6%.
Other than economic and financial concerns, raising the retirement age would definitely have a positive impact on our workforce not only in quantity but also in the depth of experience older workers can provide.
This is particularly important given the scale of Malaysia's brain drain. Our highly skilled youth are increasingly seeking better job opportunities abroad, leaving critical gaps in sectors such as engineering, healthcare, and ICT.
In such a context, retaining experienced older workers becomes not just a demographic adjustment, but a strategic imperative.
Yet, concern over its impact on youth employment immediately arises. Some fear that raising the retirement age would further limit opportunities for the youth, making the job market even tougher than it already is amid economic hardship and limited vacancies, in which over 65% of degree holders earn less than RM3,000 per month, and as much as 36.8% of graduates are underemployed.
This suggests that the job market is so rough that the graduates are willing to work for less and accept jobs that do not match their skills.
However, in reality, some older workers have faced age discrimination in their workplace.
While people from all age groups could experience ageism, it most commonly affects those in their 50s and above, with 57% of respondents reporting experiencing age discrimination in their workplace.
Furthermore, one study found that many employers are reluctant to hire older workers, with some actively excluding candidates over 40 years old.
Hence, it is not entirely correct to say that raising the retirement age would further restrict opportunities for youth to secure better jobs and positions.
In fact, data show that there is a positive correlation between employment rates of older workers and younger workers in Malaysia.
Obviously, this matter requires many more studies to determine whether raising the retirement age is indeed viable, or if there are any other methods that can be implemented to negate the impact of becoming a super-aged society.
Other than raising the minimum retirement age, the government needs to consider giving workers the flexibility to choose when they wish to retire.
It is important for the government to recognise that while some senior workers wish to continue working past their 60s, others might want to retire earlier due to personal issues such as medical complications that prevent them from working comfortably.
Allowing workers to choose not only when but also how they want to retire would certainly be beneficial for the future retirees, and the positive impact would most likely spill over to the younger generation of employees.
While some may argue that flexible retirement would be ineffective in maintaining the working population, evidence from Singapore suggests a different result, as the flexible retirement scheme there effectively increased the likelihood of senior workers continuing in their longest-held jobs by 11.4%, delaying pension claims among elders, and had a general positive effect on Singapore's labour supply.
In addition, although an increase of pension-eligibility age by one year would increase the full-time working rate by 8.2%, there was also had a negative impact on well-being of less-educated elders, many of whom work in physically demanding jobs.
Raising the retirement age may seem like the simplest solution to an impending crisis, but giving people a choice could lead to a better outcome rather than forcing everyone to work longer than they want.
In today's highly competitive job market, offering flexibility in retirement age would be a desirable action for both retirees and the youth. ‒ June 12, 2025
Chia Chu Hang is a Research Assistant at EMIR Research, an independent think tank focused on strategic policy recommendations based on rigorous research.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
Main image: Independent Spore News