Publication:
Will delayed retirement decrease young employment? Robust results for Malaysia
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Date
2025
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Abstract
Several economists, policymakers, and civil servants have raised concerns regarding the proposal to increase Malaysia's statutory retirement age from 60 to 65 years, arguing that such a change may exacerbate youth unemployment. This argument, however, stems from the long-discredited fallacy, which incorrectly posits that the number of jobs within an economy is fixed albeit what is deemed as "lump-of-labour". According to this fallacy, employment opportunities for younger individuals would be reduced with the consistent presence of senior (in terms of age) employees, resulting the labour market to be a zero-sum game where younger and older workers compete for a limited number of positions. This perspective has significantly influenced public resistance to raising the retirement age. Nevertheless, a considerable body of empirical evidence contradicts this assumption, suggesting that the employment of senior individuals does not necessarily diminish employment prospects for younger cohorts. This study offers robust empirical insights into the relationship between older and younger workers in Malaysia from 1982 to 2021. Specifically, it examines those aged 15-24 as younger workers and those aged 55-64 as older workers. Using various employment-related indicators - including total employment, employment rates, labour force participation rates, and unemployment rates, we employ several econometric techniques, including Ordinary Least Squares (OLS), robust regression, Fully Modified OLS (FMOLS), and quantile regression. Our findings consistently demonstrate that the employment of senior employees does not undermine the employment prospects of younger individuals. On the contrary, the results reveal a complementary nexus between these two age groups, suggesting that increasing the retirement age could be advantageous not only for younger workers but also for the broader economy.
Keywords
Delayed retirement , Lump-to-labour fallacy , Old and young workers , Complement , Malaysia
Citation
Habibullah, M. S., Saari, M. Y., Abd Rahman, M. D., Mokhyi, N. A., & Abdul Hamid, B. (2025). Will delayed retirement decrease young employment? Robust results for Malaysia. International Journal of eBusiness and eGovernment Studies, 17(11), 301-325.
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DOI
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