Older workers to work for less. A want or a need?

By SY Lee and Leong Sze Hian  “Less pay is okay, say older workers” (Straits Times, May 3) takes the top news of the day. It is said that 70% of the 50 seniors polled in the a survey, would want to work beyond 65 even if means a cut in their paycheck. The current legislation, Retirement and Re-employment Act (RRA) which covers re-employment after the retirement age, states that healthy workers who hit the retirement age of 62 must be offered re-employment until 65, or a one-off payment. The RRA would, however, not apply to certain categories of employees who have been exempted by the Minister for Manpower under the Act. The employer can also choose not to offer re-employment to the employee if the employee is assessed by his employer to not have satisfactory work performance or not medically fit to continue working. (See here)

The re-employment legislation is a joke? When Roy Ngerng, Han Hui Hui and I went to Oslo last month to interview their Confederation of Trade Unions – what we encountered was disbelief and bewilderment from the unions that our re-employment legislation primarily allows the supervisor of the worker and the company to determine whether the worker is “healthy” enough to be offered re-employment. Also, an employer can offer any terms – huge pay cut, longer work hours, heavier work load, etc – and if the employee does not accept – the employer would have fulfilled their obligations under the legislation. If the employer does not want even to offer any terms – its just a one-time payment of $4,500 to $10,000. In this connection, when most of our pilots were told recently that they would not be re-employed at age 62 – I wonder how much compensation they received – $10,000? Another issue related to the re-employment act, may be that there is widespread age discrimination in regards to wages in Singapore. MOM commissioned study? A MOM commissioned study at a local university concluded that Singaporeans are expected to be more adequately prepared to retire than the average of the OECD countries. Real wage growth declines with age? According to the Retirement Study (“Retirement Study: High IRR?“, Nov 15), “In contrast to previous studies which assumed constant wage growth, we used data collected by the Ministry of Manpower (MOM) for the Labour Force Survey (LFS) over 2001 to 2011 to simulate real wage growth paths for individuals”. “It is a hump-shaped distribution of earnings by age where wage growth is faster when the worker is young and tapers off into the negative as he gets older”.

Taken from "Adequacy of Singapore's Central Provident Fund Payouts: Income Placement Rates of Entrant Workers"

From the graph in the study, it appears that real earnings start to decline from around age 38, for males at the 50th percentile for earnings. Our understanding is that at age 55, which is the age used to compute the Income Replacement Ratio (IRR), the real earnings would be about the same as that at around age 33. So, does this mean that we are assuming that one would be earning at age 55, the real earnings equivalent of what one earned at around 33? Is the above not statistical evidence that there is an existing age discrimination against older workers, since real wage growth declines with age, particularly for lower-wage occupations? With the national newspapers giving an impression that older workers will gladly take a pay cut to keep their jobs, would the companies out there not take up the offer and suppress the already low wages for elderly workers in Singapore? Uniquely Singapore!