Raising retirement age: Boon or bane? |
Arab News - 06 July, 2012
The plan currently under consideration, to raise the retirement age for government workers from 60 to 65 has produced a mixed reaction, not least among government workers themselves, who may now to have to work for longer than they planned.
There is reasonable argument for both the extension and keeping the current age for giving up work. The most compelling reason for hanging on to employees, whether in the public or private sector, is that they carry with them a wealth of experience, knowledge and understanding, part of which at least, could leave with them when they are obliged to quit their jobs. This could be true even for workers in the most basic tasks, maintenance engineers for instance, who have become used to the quirks of a particular piece of machinery
At a more senior level, good managers, who have worked their way up through an organization, will often have a thorough-going appreciation of the day-to-day challenges of their roles. Therefore they will be able to respond more quickly and decisively than a younger replacement, less versed in the ways of the place.
This said however, there was a time when that same senior employee was a junior and had to learn the way the organization functioned. Moreover, one of the great challenges for the Kingdom is to find gainful employment for its young people in both the public and private sectors. Someone sitting in post in the government services, for an extra five years, in the demographically young Saudi Arabia, is arguably depriving new job entrants of work, because they are a block on the promotion ladder for people below them.
Therefore, is the plan for public sector workers to stay on for an extra five years really a wise move? Well in one sense, perhaps it is. Because of its wealth, the Kingdom has been able to take up slack in the employment market, by creating jobs. This strategy is not inherently bad, though it has to be admitted that many government and quasi-state organizations are over-manned and, as a result, some at least of their workers are under-employed.
What the five-year extension of the retirement age will mean, if it goes ahead, is that there will be less jobs available in the public sector. This in turn will oblige new entrants to the labor market to look to the private sector for their future. Businessmen are not about to employ more workers than they need. Nor are they going to start insisting that experienced employees should retire early and take their skills with them. Therefore for the private sector to step in and hire from the large pool of talented and well-qualified youngsters that is available, will mean that they must expand, and each must do so according to a clear commercial rationale and along the lines of a cogent business plan.
Government grants, not simply targeted at new hirings among young unemployed but also at assisting business growth, will play an important role here. The key sector is that of small and medium-sized enterprises (SMEs). The big companies already have strong human resources policies and tend to cream off the best of the new job entrants. It is the smaller firms, which dominate Saudi business and in whom, to a large degree, our future economic expansion lies, toward a non-oil economy, it is the smaller firms that need carefully crafted government support. Crafted assistance, both in terms of credit and management processes, will allow most, but clearly not all, of these firms to flourish. As they do so, they will create more new jobs and more opportunities and with these, further prosperity.
Therefore if the government does indeed implement the later retirement policy, while it will disappoint many government workers who are looking forward to spending the last part of their lives without the cares and pressures of work, it will also provide a significant boost to the economy by re-directing labor toward the private sector.
Given that business salaries tend to be higher than in the public services but job security is by no means as great, this will bring both opportunities and challenges, both for managements and new hirings.
Many companies within the private sector are already stepping up to line in new job creation. The extended retirement age in the state sector is likely to underwrite their efforts.