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More older workers staying employed till 65
THE Retirement and Re-employment Act (RRA) enacted in 2012 has had a positive - though small - impact on the employment rate of eligible older workers, a study has found.
The employment rate of eligible older workers has risen by 1.6 percentage points on average each year since the implementation of the RRA, said the study by Lee Zen Wea, Huang Jirong and Guo Jiajing, who are from the Ministry of Manpower.
The authors said this modest positive impact is likely to have resulted from social norms, that is, workers could have taken the re-employment age of 65 as the new "mental anchor" on the appropriate age to retire, instead of the statutory retirement age of 62.
The study also found no evidence of a pre-emptive shedding of older workers in 2011, ahead of the implementation of the RRA. It said: "It is likely that employers were making decisions on the employment of their workers based on business considerations and the ability of their workers, rather than trying to replace them pre-emptively, which could be disruptive to business.
"This finding is consistent with our view that the RRA is not onerous on employers and did not reduce the demand for workers by firms."
For the study on the impact of the implementation of the RRA, individual-level datasets of Singaporeans and permanent residents spanning the period of 2001 to 2015 were used. The data came from administrative sources and covered variables such as gross wages, gender and age.
To be eligible for re-employment under the RRA, workers have to have served their employer for at least three years before turning 62 (among other criteria). The study noted that older workers' decision to accept re-employment is unlikely to be influenced by financial incentives, because the RRA is not linked to age eligibility for Central Provident Fund (CPF) payouts from individuals' retirement accounts.
The study also looked into the likelihood of RRA directly affecting firms' demand for workers as it compels employers to offer re-employment to eligible employees past the age of 62.
It found that the RRA's impact on firms' demand is likely to be limited, as private-sector firms were already offering re-employment to 97.9 per cent of workers who just turned 62 in 2011 - before the RRA kicked in. The figure rose to 98.6 per cent in 2016.
The study said the majority of workers who accepted re-employment in the same job at age 62, either on a new or existing contract, did not take a wage cut upon re-employment both before and after the implementation of the RRA; this suggests that that firms continued to have a strong demand for such workers.