A Black and White Decision
By Tharindu Dananjaya Weerasinghe
The Budget for Year 2022 proposes to raise the retirement age of public sector employees in Sri Lanka to 65 years. The Government also recently raised the retirement age for private sector employees to 60 years. “...currently, the average life expectancy of the people has increased, and the aging population of the country is increasing. Hence, it is necessary to utilise their experience and maturity as many retirees are able to continue in active public service. Hence, it is proposed to extend the retirement age of public sector employees to 65 years...” said the Minister of Finance in his Budget speech.
Sri Lanka’s aging population is projected to grow rapidly over the next 50 years. This will slow down the growth of the Sri Lankan workforce and is expected a contraction in the Sri Lankan workforce after 2030. According to the World Bank, life expectancy in Sri Lanka has increased from 62.1 years in 1960 to 73.2 years in 2020. During that period, the average life expectancy of women in the country has increased to 75.6 years. In 2020, 11% of Sri Lanka’s population were over 65 years of age. Sri Lanka is currently ranked 50th among countries with a population over the age of 65.
The employed population of the country has decreased from 8.181 million in 2019 to 7.999 million in 2020. This is a decrease of 2.22%, according to the Central Bank of Sri Lanka (CBSL). However, by the end of 2020, the total public sector employment in Sri Lanka had increased to 1.528 million from 1.467 million in 2019. This is due to the increase of 61,000 public sector employees in the country in 2020.
This increase is reflected in many Government agencies in the country, including Ministries, Departments, District Secretariats and Divisional Secretariats. CBSL states the overall employment in the public sector has increased due to the recent Government programme to provide employment to 60,000 unemployed graduates and 100,000 low income earners. Also, in the year 2020, 19.10% of the employment in the country was represented by public sector employment.
Some institutions as well as officials in the public service in Sri Lanka continue to be accused of being inefficient and corrupt. At the same time, it seems that the public sector employment is constantly expanding indefinitely. Not only the number of employees joining the public sector in the country, but also their salaries, are increasing annually. In such a situation, it is true that a country like Sri Lanka with a weak economy cannot afford the high wage burden of the public service. Many young people, including unemployed graduates, try to enter the public service because of the pension benefits. It is in this backdrop, young people are trying to join the public service by giving up even some ‘highly paying’ private sector jobs.
At the same time, the promise given to the youth at every election that they will be given jobs in the public service has now become a major factor in gaining political power in the country. Politicians seem to apply the strategy of giving Government jobs as a token of gratitude to their allies who helped them.
Many such recruitments are irrational. It has been reported from time to time that some of the public sector employees so recruited do not even have a chair to sit and perform their duties. If the public service is not to be a burden to the economy politicians must now take action to deviate from the strategy of providing Government jobs for political gain. Instead of the short-term strategy of using public sector employment as an easy way to eradicate youth unemployment, a long-term, analytical plan should be put in place to create an economic environment that will create new employment opportunities.
There is a correlation between the population of a country and the development of that country. Population size, quality, age structure, distribution and migration have a strong, direct impact on the economic development of a country. Economic development in a developed country with a low population density and a low percentage of employable people requires an increase in population. But, that rule is not applicable for a developing country like Sri Lanka, which does not have such a strong economy. At present, the adult population in the Sri Lankan population pyramid is close to the young population.
In such a situation, the Government will have to improve the health facilities for the elderly population as well as create elder care opportunities. Similarly, the Government will have to bear the additional cost of the elderly. This cost will ultimately be borne by the current workforce. It will not be easy for the local economy to bear as it will impose an additional tax burden on the workforce.
Accordingly, by raising the retirement age of the public sector employees to 65 years, it is more advantageous to bring a more productive service and pay a salary than to maintain them as retired citizens. Then they will get a monthly salary and become independent. It may help to reduce the ratio of workforce to dependents to some extent, and to reduce the psychological damage that some retirees may experience due to being confined to their home after retirement, and to improve their mental well-being.
On the other hand, it is important to raise the retirement age and retain currently employed public sector employees to maintain the stability of the labour market as the aging population is projected to grow further and the workforce to shrink over the next eight years. However, there are limitations. From a Human Resource Management (HRM) perspective, retaining older employees in the public service alone is not enough. To get an effective service from them, the Government has to further improve welfare facilities to ensure their physical and mental well-being. It is an additional expense. Thus, merely raising the retirement age is not appropriate without a proper plan on how to manage those additional welfare costs effectively.
The salaries of many public servants who are now of retirement age are higher than those of public servants at the beginning of their employment. Simultaneously other perks and benefits such as accommodation, vehicles, fuel allowances, medical allowances and insurance cover are also high. Accordingly, a significant reduction in public servant salaries and benefits cannot be expected from the continued retention of highly-paid elderly public servants. Given the current life expectancy, it cannot be assumed that most public servants are physically and mentally healthy until the age of 65 years.
The Government will also have to hire support staff on contract or temporary basis to get an effective service from those elderly public servants. It is again a cost on the Government Budget. Moreover, raising the retirement age of public servants to 65 years would have very little positive effect if the Government does it to secure the professional privileges and interests of a handful of political allies currently in higher positions in the public service.
Raising the retirement age of public servants will also have a major impact on the promotions of public servants. Employees in the second and third levels of the hierarchy of public service will have to wait even longer until higher positions become vacant to get their promotions. Young employees who fail to get promotions on time become frustrated and dissatisfied with their jobs. It creates a long-term leadership vacuum in the public service.
This results in a delay in the training of an appropriate second group to assume responsibilities in higher positions in the public service. Accordingly, a number of other decisions related to raising the retirement age of public servants will have to be taken. Either creating new positions at higher levels of the hierarchy of public service or succession plans should be formulated including alternative career paths aimed at the professional development of young public servants.
Problems regarding the confirmation of new recruits to the public service in the recent past are also escalating. Raising the retirement can lead to not only problems with promotions but also with the confirmation of employment of some new recruits. As such groups unite as trade unions and begin to carry out struggles and seek the protection of various political groups, which may again put pressure on the Government and the public service.
In the recent past, the salaries of some public servants have been increased through trade union struggles. Also, employees of State-owned banks and State-owned enterprises receive a pay increase in every three years based on Collective Agreements. All of this is happening at a time when Government revenue is continuing to fall. Accordingly, the job security of recently recruited public servants and the need for planning for professional future should also be taken into consideration.
Due to the increase in the retirement age of public servants, new recruitments to the public service will have to be further restricted in the future. Then the ‘new blood’ with new knowledge, new skills, new attitudes and new practices will not be allowed to enter the public sector institutions. It blocks the learning / mentoring practices that seniors learn from seniors as well as the reverse learning / mentoring practices that seniors learn from seniors. Empirical research evidence show that such a situation causes employees to turn to internal organisational politics which is considered a negative impact on the sustainability of the public service. As a result, the organisational health of public sector institutions deteriorates.
It appears that if the decision to raise the retirement age of public sector employees is implemented on the basis of a long-term plan rather than simply based on a political opinion, it will result in a more quality and efficient public service in the future.
Tharindu Dananjaya Weerasinghe
(Senior Lecturer, Department of Human Resource Management, University of Kelaniya)