MANDATORY RETIREMENT AGE IN SINGAPORE

Abstract

In April, 1988, the National Wage Council recommended that the retirement age should be raised from 55 years to 60 years. This academic exercise traces the issue of extending the retirement age from the first lime It was brought up In 1979 to the National Wage Council recommendation in 1988, and finally to present age. The existing shortage of labour in Singapore; the longer life expectancy of the worker; and the mental well being of the individual were cited as reasons for the push to extend the retirement age. This academic exercise will examine the economic rationale for the existence of a mandatory retirement age. This involves a review of the existing theories or models in the literature. Three models are presented in chapter II. They are Lazear's retirement model; Lapp's employment insurance contract model; and Blinder's model by Alan Binder. Chapter Ill gives the Implications of the higher retirement age as explained by the three models. The latter chapters of the academic exercise looks at the practical Implications of extending the retirement age In the Singapore economy. The problems of implementing such a move are also discussed. The academic exercise concludes with a review on how the economy has actually responded to the 1988 recommendations of the National Wage Council. Surveys done by various organisations have shown that the overall response so far has been rather sluggish. The reason was identified to be the reluctance in the private sector to raise the retirement age. Since the NWC recommendations are not mandatory, there is no obligation to follow them. As a result, the government announced that it may consider legislating the retirement age. Legislation would be a the more efficient method of raising the retirement age to 60 years for all workers since, once it is implemented, all firms will be required by law to keep their workers till they reach the mandatory age. Such a suggestion has not been welcomed by the employers, especially in the private sector. However, the government is adamant to carry out the threat if the response to the recommendations do not make a miraculous turn for the better.