Debated in Parliament on 20 Jan 2014.
Mdm Speaker, I beg to move, "That Parliament do now adjourn."
Question proposed.
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Mdm Speaker, Singapore is among the fastest-ageing populations in Asia, which is aggravated by a low fertility rate and longer life expectancy. By 2050, it is projected that almost a third of our people in Singapore will be 65 or over.
The changing demographic trends will require adjustments to be made by individuals and society at large. In particular, Government policies and attitudes of both employers and employees on retirement age, and employment of seniors need to be recalibrated to reflect the signs of our time.
A fast-ageing population, compounded by a tight labour market, means it makes business and economic sense to recruit and retain mature workers.
Thus, with changes in the labour employment landscape and the introduction of re-employment legislation, it is timely to review two co-related Singapore employment policies, namely, (a) the statutory retirement age of 62 years, and (b) the reduction of employer's CPF contribution for workers turning 50 and above.
Singaporeans aged 65 today can expect to live for another 20-25 years, a third more than their contemporaries 25 years ago. It is important that workers remain employed longer as this will enable them to start dipping into their savings at a much later age, thus supporting financial self-sufficiency. However, remaining employed for longer is not just important for financial reasons, but also for health, fulfilment and personal well-being.
To many, work is an important part of active ageing. According to a 2013 Hong Kong Shanghai Bank study, 47% of Singaporeans aspired to continue working in some capacity in their retirement. This highlights the difficulty in drawing a line between when work stops and retirement starts. The retirement age should not become a barrier to active ageing.
I propose for the removal of the statutory retirement age in Singapore. Workers should be given the flexibility to choose how long they want to work or when they wish to retire. The important factor is the restoration of choice for
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our senior workers on retirement.
I want to emphasise that I am not suggesting that people should work to their graves, and I am certainly not suggesting that people should be made to work past an age if they want to stop. I hope to see workers being empowered with their own decision of retirement, rather than being subject to a legislative policy.
Enforced retirement is often a life-changing event. Complete retirement often precipitates rapid physical and psychological decline, especially if a person does not find ways to remain socially active. It was mentioned in a recent Straits Times' article that cab drivers who retire often feel grief and a sense of loss of their worker identity and their network of connections which they had built over the years.
Workers who have retired need to find new ways of generating income to meet their financial commitments. Those without financial burdens need to find ways of occupying their time, need to rebuild at least part of their social networks.
MOM reported an improvement of seniors being re-employed, but there are others who are unwillingly ushered into an earlier-than-planned retirement, are also denied promotion, or are offered re-employment with a recalibrated contract with lower pay and less benefits even though they are re-employed to do the same job. Many do not have the option of maintaining their current terms of employment. In effect, they become the "oldest new employee" in their organisation.
The statutory retirement age imposes the presumption in a merit-based remuneration system and perpetuates the impression that once a person hits that age, he or she really should stop working because they are deemed as "old and less productive to their companies" and "should make way for new or younger employees".
Let us take a look at our Civil Service. Although it has moved to a merit-based rather than a seniority-based remuneration system, retiring employees were given re-employment contracts with a "downsized" package. If even the Civil Service is taking this stance, what more the private sector? Under this scenario, it is highly possible for a mature worker who may be more experienced and productive than a younger colleague to earn less, which is a
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strange inequity in a modern workplace.
It may not be timely for us to examine whether the policy of re-employing retired staff on contracts with lower salaries or lesser benefits are justified, especially if the current reduction of CPF contribution is maintained. Our Civil Service should take the lead in instituting fair and equitable compensation upon re-employment. This would set an example for the private sector to accord our mature workers a remuneration based on merit and contribution to the company, rather than on perceptions of productivity based on age.
I would mention that the impact of legislation goes far beyond the actions they directly compel; laws can either encourage change in societal attitudes or entrench existing prejudices. A determined ageist employer will find ways to get rid of mature workers or be prejudiced against hiring them. Hence, the Government, by removing the statutory retirement age, will be sending a clear and strong message that there can be no room for institutionalised discrimination against mature workers in our society.
Our seniors today are able to work longer than the generation before. They remain mentally and physically able to perform their jobs effectively. I would like to point out that, with increased automation and job re-design in the modern workplace, jobs which were previously physically demanding are becoming less so, and do not require workers to be at their prime of fitness.
Senior employees in knowledge-based employment can be as mentally active and dexterous as their younger colleagues, plus the additional benefit of a wealth of experience behind them.
It is observed that there are now more employment opportunities for mature workers in Singapore. From the 2011 National Survey of Senior Citizens, more elderly employees are gainfully employed, even as they are near or past the retirement age. This is attributable to rising education levels, the need to supplement their retirement savings and Government policies aimed at enhancing elderly employment.
It has been two years since the amended Retirement and Re-employment Act came into effect. During this time, businesses and mature workers have adapted to the changes with largely positive responses. I believe it is now appropriate to further refine the re-employment legislation and to abolish the retirement age.
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Under the current legislation, once an employee is no longer eligible for re-employment at age 65, he or she may be dismissed on the basis of age alone. The employer may also dismiss an employee at the minimum retirement age of 62 by paying Employment Assistance Payment. Although many of these workers are still productive, the reality is that it will be virtually impossible for most to find suitable jobs after they have been retired.
Whilst the tripartite re-employment legislation provides the framework and flexibility for both employers and employees in re-employment, I would endeavour to seek an enhanced re-employment legislation where the re-employment age can be maintained or raised and do away with the statutory retirement age. Recourse for wrongful dismissal or inequitable compensation will be provided for under this legislation, regardless of age.
Hence, the removal of the statutory retirement age is, at its core, a symbolic but important step in changing the mindset and attitude of employers, to drive home the message that age is not a barrier to productive employment. The last thing that mature workers need is a statutory presumption that, by a certain age, they are ripe for retirement, as they are perceived by society to be less productive or effective, compared to their younger colleagues. What the Government should do is to remove this presumption and, instead, give incentives to employers to train and hire mature workers.
Mdm Speaker, let me now touch on CPF contribution rates for mature workers. CPF rates were reduced in response to the recessions of the 1980s and 1990s. Our mature workers were then told to bite the "silver bullet", take a pay cut and have their employer's CPF contributions reduced so that they could have a better chance of retaining their jobs and increasing the opportunity to be employed.
Whilst it was a reasonable response, it is also discriminatory. Today, our people are living longer and healthier. In the late 1980s, age 50 might be a sign of physical decline but, today, those in their 50s and, for that matter, 60s and 70s, are fitter, healthier and stronger. Yet, the truth is our Singaporean workers have to suffer a progressive reduction in their remuneration the moment he or she turns 50 but are working at the same pace and doing the same work.
I asked a Parliamentary Question last November whether MOM would consider restoring the employer's CPF contributions of our mature workers. Acting Minister Tan Chuan-Jin reassured that the tripartite partners remain committed to restoring the contribution rates of mature workers and this must
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be done, as he said, at a suitable time to moderate the impact of take-home pay for employees and business costs for employers.
Madam, I believe the suitable time is now for us to call on the Government to quicken the restoration of the employer CPF contribution rate for our mature workers, not just for those in the 50-55 age group, but right up to 65 years and beyond.
Our CPF system provides comfortable Income Replacement Rates for new entrants to the workforce. This does not cover older generations of workers, many of whom do not meet the CPF Minimum Sum. While this system ensures fiscal sustainability, it also exposes Singaporeans to various risks, including prolonged unemployment, inflation risk and longevity risk.
Undeniably, CPF savings are significant for our seniors as they will depend even more on them for their retirement and healthcare needs. However, cutting the CPF rate is intrinsically different from the other Government schemes on one key point, namely, it has the effect of reducing the retirement savings for our mature workers.
Rather than tinkering with the workers' retirement savings by using CPF as a calibrating tool to make them more affordable and employable, we can look at enhancing schemes like the Special Employment Credit or leveraging on the MediShield Life Scheme to encourage employers to hire mature workers.
Even though current financial incentives are given to employers to employ mature workers, these workers are still paid less than what they were getting before their retirement, thus under-valuing the contributions to the workplace which mature workers can bring. This seems to sit uncomfortably with the main reason why companies would be willing to hire or retain their mature employees, which is for the value of their loyalty, experience, reliability, maturity and familiarity with their jobs.
Indeed, employer CPF contribution rate for mature workers should be restored because:
(a) Employers already on a merit-based remuneration system would not need any further statutory cuts to the employee's pay;
(b) The CPF restoration would go towards contributing more resources to ensure that these mature workers, if they do stop work subsequently, can better
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sustain themselves with their CPF savings;
(c) One should look beyond CPF restoration as an "additional cost" to the employers' wage bill. Before the worker hits 50 years old, he or she would be an effective contributor to the workplace. I validly make this assumption, for if the worker was not contributing, he or she would have been asked to leave under a merit compensation system. For the employer to want to continue having this worker around, it would mean that this worker is of value to the company. There is no change to the worker's contribution but, because of age, employers are given a discount on the wage bill;
(d) The removal of this "discount" from wage reduction does not add significantly to any employer's wage budget, but would go a long way in removing the misconception that mature workers are less valued.
The employer CPF contribution rate for low-wage workers was fully restored at the start of this year. This is a good step forward and I believe more can be done for our low-skilled mature workers.
These workers have lower educational levels, and disproportionately occupy low-wage jobs. In June 2012, those 50 and above formed 68% of resident cleaners and labourers, and 59% of assembly line workers. Many of these lower-skilled mature workers belong to a class of the working poor in Singapore today.
Singapore's transformation from a labour-intensive to a knowledge-based economy, and the rapid rate of technological renewal have left many of our mature workers unprepared for today's economy. In their younger days, they worked hard to create progress for Singapore but, ironically, this progress has caused them to be left behind.
We have gradually increased the Workfare Income Supplement payout since 2007 and this is the way to go. We should also consider further increases of cash payouts to meet the present needs of the low-wage older workers.
I warmly welcome the recent news that our cleaners will be paid progressive wages, with the minimum entry level pay of $1,000 from the current median pay of $850. This shows the decisiveness of our Government in uplifting our low-wage workers. I do hope that this Statutory Progressive Wage Model will have a knock-on effect on wages of the low-skilled in other industries,
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benefitting many of our mature workers across the board.
The removal of the retirement age does not necessarily mean that jobs will be available for mature workers. We can extend the productive years of our elderly workers through appropriately re-designing jobs and workplaces. In fact, if companies are unable to adapt to an ageing employee profile, the economy will suffer from structural rigidities, ultimately leading to job losses for all. Support needs to be in place to facilitate this transition process, as our Government has, indeed, been trying to do.
Companies in other countries have trod down this path of workplace redesign. A BMW factory in Germany, conducted an experiment by creating a production line staffed entirely by mature workers. It was found that simple changes like instruction screens with larger letters and a magnifying glass, adjustable-height work benches and having part-time policies, resulted in a 7% increase in productivity in a year. Productivity was comparable to that of younger workers, but the quality of work was, in fact, higher. This shows that with suitable adjustments to the workplace environment, mature workers can be just as productive as the younger cohorts.
Redesigning jobs is not just about compensating but should be about making full use of the skills mature workers have gained through age.
Currently, our primary mechanism to encourage hiring of mature workers and job re-designing is through the WorkPro, which I believe has potential to achieve far greater outcomes. I hope the Ministry can proactively propagate this scheme to companies and employees and to ensure that requirements to qualify for these grants are not excessively onerous.
Mdm Speaker, age discrimination has no place in our society. Singaporeans have come together to categorically reject discrimination based on race, religion or social background, but, as yet, this has not extended to age discrimination.
I reiterate my call for the restoration of employers' CPF contribution rate for our workers who are 50 years and above and instituting fair and equitable compensation and re-employment based on performance and not age. The abolishment of the retirement age will restore choice for our mature workers so that workers can choose if they want to work or choose to retire. The retirement age has no bearing on one's productive capacity and denies many senior
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workers' aspirations for active ageing.
There must be a social mindset shift in the way we view our seniors and mature workers. Although the tight labour market provided the impetus, it is time to accord the respect and value to our mature workers so that it goes beyond looking at mature workers as a liability but as an asset. We must make every effort to eliminate ageism in the workplace and in our meritocratic society.
Mature workers should be seen for what they can bring to the table, instead of what they cannot. Senior workers have a part to play too, to ensure that they embrace healthy ageing and stay relevant through upgrading and job training.
Let us all come together to create an age-friendly, progressive and inclusive workplace for our grandparents, parents, friends, neighbours and, eventually, ourselves.
Dr Amy Khor.
Mdm Speaker, I thank Mr David Ong for raising this topic and for his various suggestions. The challenges faced by our ageing workforce remain a top priority for my Ministry and our tripartite partners. I will highlight two key strategies we adopt which address some of the issues Mr Ong has raised.
Mr Ong proposes removing the retirement age and giving our older workers a choice to work longer. The current minimum statutory retirement age of 62, in fact, protects workers below the age of 62 from being dismissed on the grounds of age. It is not meant to, and it does not impede people from working beyond 62. In fact, there is no statutory age at which employers must retire a worker.
We did consider various options, including extending the statutory minimum retirement age or removing it all together. We also studied the approaches taken by other developed countries and concluded that re-employment is a better and more practical approach for us. Re-employment allows workers to work longer, which is what Mr Ong is calling for, while ensuring that employers have sufficient flexibility to manage their manpower needs. We should be mindful that requiring employers to continue employing
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their older workers without providing them the flexibility to manage their business needs would not be in the best interests of the workers.
We adapted the re-employment approach from Japan, which introduced re-employment in 2006. Today, Japan is one of the countries with the highest employment rates for older workers. We, therefore, enacted the Retirement and Re-employment Act, or RRA, in January 2012. Employers are required to offer re-employment to their workers from age 62 to 65.
The bar for re-employment is deliberately kept low. The employee needs to have satisfactory work performance and be medically fit. Employers have the flexibility to make some adjustments to their employment terms for these employees based on reasonable factors, such as employees' productivity, duties and responsibilities and the extent of seniority elements in the wage structure.
Overall, this allows older workers to work longer without affecting their employability. The implementation of the RRA has been smooth since it came into effect. In particular, re-employment rates have been high. Based on our 2012 survey, 98% of local employees who turned 62 in the year ending June 2012 were offered re-employment. This included 70% of retiring employees who were offered re-employment on existing contracts without any change in employment terms.
Among those who accepted re-employment on new contracts in the same job, three in four retained their basic wages. Including those who continued on existing contracts, 94% experience no change in their basic wages. Re-employment disputes have also been low, numbering two to three cases a month.
The RRA has been in effect for only two years. We should allow time to monitor its impact. The Tripartite Committee on Employability of Older Workers continues to closely monitor the implementation of the RRA with the view to further extending the re-employment age, possibly to 67, at an appropriate time.
With regard to the re-employment policies in the Civil Service from 1 August 2013, Division III and IV Officers who typically perform clerical and frontline operational duties were offered re-employment at the same grade and salary. Division I and II Officers who are managers and executives will only experience an adjustment if their salaries are above a pre-determined maximum-minimum ratio that is reflective of the typical competencies, duties
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and responsibilities required of their jobs. Any adjustments will not be more than 15%.
I agree with Mr Ong that it is crucial to help employers redesign jobs and the work environment to adapt to the ageing workforce. We encourage employers to tap on the generous funding available under WorkPro to do so. Since WorkPro was launched in April 2013, more than 600 companies have received the Age Management Grant to implement age-friendly practices. We will continue to promote awareness of these schemes.
We also encourage older workers to continue to train and stay at work through the Workfare Income Supplement, or WIS scheme, and its enhancements. In 2013, we extended the WIS eligibility criteria and increased the maximum WIS quantum by 25% to $3,500. We also increased the cash proportion of WIS payouts to 40%. WIS payouts today can make up to a third of a worker's monthly income. To date, about 360,000 Singaporeans have received more than $400 million in WIS for work done in 2013.
Mr Ong suggested that older workers should enjoy similar CPF contribution rates as their younger counterparts to help them save more. While we do want to help older workers accumulate more CPF savings, we have to balance this with their continued employability. CPF contribution rates were lowered for older workers when the retirement age was raised in the past so as to address employers' cost concerns, because of the prevalence of seniority-based wages.
The tripartite partners have since made good progress in narrowing the wage scales. The employment rates of older residents aged 55 to 64 have also increased significantly from 47% in June 2004, to 65% in June 2013. In September 2012, we made a first step increase in CPF contribution rates for older workers aged 50 to 65. Concurrently, the Government enhanced the Special Employment Credit, or SEC, to mitigate the impact of the CPF increases on the employability of older workers above age 50.
Since 2011, about 107,000 employers who employed 470,000 older workers have benefited from more than $760 million of SEC. More than 90% of workers, whose employers received SEC in the first half of 2012, had remained employed one year later.
We agree that it is timely to review the CPF contribution rates for older workers. We announced in 2012, that we would equalise the contribution rates for workers aged 50 to 55, with younger workers aged 50 and below, and we
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remain committed to do so. However, we should approach this carefully and gradually so as not to adversely affect their employability. We are monitoring the employment situation of older workers and are consulting our tripartite partners on whether and when to take the next increase.
Our second strategy is to shape positive perceptions towards older workers. The key lies in changing social attitudes and dispelling prejudices against them. Schemes, such as WorkPro and SEC, are already in place to inculcate positive mindsets. We have also been working closely with employers and the unions for the adoption of fair, responsible and merit-based employment through the Tripartite Alliance for Fair Employment Practices, or TAFEP. Employers are persuaded to not restrict recruitment opportunities to individuals of certain age groups and to base their selection on objective criteria, such as the candidate's ability to perform the job.
Mdm Speaker, addressing an ageing workforce is an ongoing task and Mr Ong is right to point out that this is an important one. I urge everyone to make every effort to stamp out ageist mindsets and treasure the cumulative knowledge and experience of our seniors. Meanwhile, as the labour market remains tight, we will continue to incentivise employers to tap on older workers. Over time, through a mix of promotion and legislation, we hope to nudge society as a whole, and employers in particular, to recognise older workers as a valuable asset in our workforce, rather than a liability.
*Question put, and agreed to.*
*Resolved, "That Parliament do now adjourn."*
Adjourned accordingly at 6.45 pm.
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