The retirement age

The retirement age

Turning 55 years old must be the most dreaded thing for many
Indonesians. At that age, they are required to retire, even
though they are probably fit, both mentally and physically.
Unfortunately, they are not entitled to what few benefits are
available to senior citizens, defined as 60 years old and above.
At 55, they are well below the average life expectancy for
Indonesians, which is 64. In essence, they are considered too old
to work, yet too fit to be unemployed, and too young to die.

This may soon change. T.B. Silalahi, the state minister of
administrative reforms, disclosed Friday that the government is
considering to extend the mandatory retirement age for civil
servants from 55 to 65. He argued that at 55, a person is not
only still productive, but is more mature and professional -- two
highly sought qualifications among employees. Sending them into
retirement would be a tremendous loss, not only to the persons
concerned, but also to the nation.

The plan is being worked out jointly by Silalahi's office, the
Civil Service Administration Agency, the State Secretariat and
the Ministry of Home Affairs. It will be submitted to President
Soeharto for approval sometime next year. If endorsed, many
private companies will likely adjust, given that most of them
follow the government in setting the mandatory retirement age.

It is difficult to argue that at 55, one's productivity has
declined below the remuneration given for the work. This is
certainly true in the civil service and in jobs where
intellectual capacity counts more than physical capacity. The
argument applies to jobs that rely more on physical capabilities,
such as industrial jobs, but even this may be debatable.

The government has made some exceptions to the rule, as many
private companies undoubtedly have, in retaining their valuable
employees beyond the formal retirement age. First-echelon
officials are already being retained until they are 60.
Government researchers are kept on the payroll until they are 65.
The new proposal is putting into wider practice those exceptions.

The proposal will have many consequences, mostly positive,
making it difficult not to support it.

First, it is a recognition of the services that people at 55
can contribute, whether they are working for the government or
private companies, chiefly because of their experience and level
of professionalism.

For the individual, there will no longer be the psychological
stress that comes with being forced to retire before they are
ready. The stress usually comes five years early, the moment a
civil servant enters what is known as MPP, an Indonesian acronym
indicating the period to prepare for retirement.

Keeping them employed longer means they will continue to
contribute to the pension funds, rather than draining them. This
means a lot to the government's tight budget.

The proposal will reduce the number of dependent people. In an
increasingly graying society, this will relieve the burden that
working people have to bear to support the dependence.

One immediate negative consequence of extending the retirement
age is on the employment front. As it is, the nation needs to
create three million new jobs each year to accommodate young
newcomers in the labor market. Some of these have been absorbed,
thanks to openings created by retirements. Delaying the
retirement age means that at least initially, there will not be
as many job openings as before. The civil service has already
adopted a "zero growth" recruitment policy, hiring new workers
only to replace those going into retirement. This negative
consequence will only be temporary, while the civil service and
companies adjust to the new retirement age.

While Silalahi's proposal deserves support, the speed in which
the regulation is expected to be signed without any public debate
still left us perplexed. The plan is only being discussed by four
government agencies, yet it has such wide repercussions on the
economy, society and on the lives of many people. While many
would agree that 55 is too early, some people might argue that 65
is too late and that 60 is probably more appropriate.
Certainly, a thorough study and public discourse are merited
before such an important regulation is introduced.