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25 May 2016
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Benefits to the state of extending the retirement age

Phacharawadee Tasee

A proposal by the Civil Servants Commission that the government extend the retirement age of government officials from 60 to 65 years of age has attracted mixed reactions. Even though the Prayut Chan-o-cha government has put on hold the proposal for now, the idea is still worth a review.

The proposal wins support from many who think it will help save on the state budget which covers the salaries, medical expenditure and pensions of civil servants.

Each year, some 30,000 personnel out of the 1.7 million total retire from the bureaucracy. Without an age extension, the state will have to deal with a major fiscal issue: it will have to pay a pension as well as medical expenditure for all new retirees for the rest of their lives, while also paying salaries to the new recruits who fill the vacant positions.

However, some may question the need to extend the retirement age just so the state can postpone pension expenditure. In their opinion, sooner or later the government still has to pay. So they think it’s to the state’s benefit to let the retirees go, pay them their due pension, and hire a new generation at a lower salary.

Moreover, many people still have a negative attitude towards older people working, particularly in the public sector. For this, there are common reactions like: “Too old to work and should just rest”; “Most government officials are unproductive”; and “Senior officers receive a high salary so it is better to save money by hiring young people”.

Many regard an age extension as “stealing jobs from the new generation”. These comments are perhaps a result of limited understanding about the vital role which senior personnel can play.

The real issue for an age extension in fact goes beyond keeping older people at work longer. This is because Thailand is becoming an ageing society, with people aged 60 and over accounting for 11 million, or more than 10% of the population.

By 2027 it will become a completely ageing society with this group making up more than 20% of the total. Not only there will be more older people, but also a smaller labour force as a result of the decreasing birth rate. Two implications from these demographic changes are shortages of labour and income security for the elderly.

An extension to the retirement age, or keeping people at work longer, would definitely mitigate the impacts of an ageing society.

Letting people work longer and retire later sustains the supply of labour and gives older people a longer stream of income. Studies indicate working elderly are more healthy and active.

In addition, if an extension is endorsed for the public sector, a similar add-on can be expected in the private sector. In most ageing societies around the world, extending the retirement age is imperative since the issue involves the sustainability of social security spending.

Apart from that, the rate of ageing in Thailand is growing rapidly. As mentioned, in about 10 years from now, onefifth of Thais will be elderly.

As a result, the fiscal burden on the government of taking care of older people in the area of health care and financial support will be enormous.

In fact, many officials aged 60 years and older have years of working experience and know-how. Most remain healthy and active. If years of experience can be counted in terms of money, keeping these older officials (extending their retirement age) can be worth millions of baht.

At present, some government agencies such as the Ministry of Justice, the Office of the Attorney-General, and some universities, have adopted age extensions for their officials. So, other state agencies can consider following suit.


Phacharawadee Tasee is a researcher at the Thailand Development Research Institute (TDRI).

First published: Bangkok Post on Wednesday, May 25, 2016

 

 

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