Journal of Administrative Science Special Edition: ICOPS, JAS, Vol.

15, Issue 3, 2018

Available online at http:jas.uitm.edu.my

Aging Workforce: A Challenge for Malaysia

Anisah Abas @ Hamdan1, Aliza Abu Hassim2 & Fadilah Puteh3

1,2&3
Faculty of Administrative Science & Policy Studies, Universiti Teknologi MARA (UiTM) Shah Alam, Selangor
[email protected], [email protected] & [email protected]

Abstract

The world is moving towards an aging population as projected by the United Nations (UN) in the 2015 report.
The number of elderly population is envisaged to increase to 1.4 billion in 2030 and 2.1 billion by 2050.
Modern lifestyles and declining fertility rates have changed the demographic trends across the globe. In most
countries, the trend has led to changes in the economic environment, creating unique and unprecedented
challenges and opportunities for businesses. Understanding the demographic changes that are likely to unfold
over the coming years as well as the challenges and opportunities they pose is crucial for achieving a
sustainable development. One of the most significant issues faced by organizations and governments, especially
in the developing countries, is an aging workforce. Scholars are beginning to look at the impact of an aging
population across disciplines. This paper presents a meta-analysis and literature review by scholars on aging
workforce challenges at the workplace. It is hoped that the paper provides an overview and better
understanding of the issues to be addressed at both the organizational and national level in the Malaysian
context.

Keywords: Aging Population, Aging Workforce, Aging Workforce Challenges

INTRODUCTION

The world population is experiencing rapid growth across all regions and it is
projected to grow further in the coming years, though at a slower pace compared to in
the past 10 years. According to the 2015 report by the UN, the average global
population growth rate was at 1.2% per year. The population is projected to increase by
more than one billion people within the next 15 years, reaching 8.5 billion in 2030, 9.7
billion in 2050 and 11.2 billion by 2100. The report also indicated a decline in the
world’s fertility rate from 2.47 children per woman during the period 2015-2020 to 2.25
children per woman in 2045-2050. This rate is expected to decline to 1.99 children per
woman in 2095-2100. However, life expectancy is found to have increased between
2000-2005 and 2010-2015 (UN Population Division, 2015).

Based on the demographic projection by the UN, it is evident that the world is
moving towards an aging population as elderly comprise more than 15% of the total
population. They are from the baby boomer generation who reached or will reach the
age of 65 years old. The highlight of the 2015 UN report is that there were 901 million
people aged 60 years and above or 12% of global population in 2015, and it is growing
at a rate of 3.26% per year. Thus, the number of elderly is projected to be 1.4 billion by
2030 and 2.1 billion by 2050 and could rise to 3.2 billion in 2100. Analysis by The
Journal of Administrative Science Special Edition: ICOPS, JAS, Vol. 15, Issue 3, 2018
Economist Intelligence Unit (2015), shows that during the period 2015-2060, aging
would have the largest impact on the world population structure.

An analysis by Ismail, Siti, Abdul, Aizan, and Abdul (2015) on some of the
empirical studies showed ambiguous results. Some researchers were of the view that
population aging could boost economic growth, while others, such as Gruescu (2007)
commented that aging of the population has a negative effect on economic growth.
Similar finding has been noted earlier in numerous simulations and models with
overlapping generations. The aging workforce is a human resource issue at all levels,
from functional to corporate and has an implication on public policy and should
therefore be addressed strategically.

According to The Economist Intelligence Unit (2015) report, the overall growth
rate of the working-age population from 1990 to 2010 has been driven the Baby
Boomer generation and X generation with a 67% growth rate. This trend is expected to
continue over the 2010-2030 period with a growth of 41.2%. By 2050, in some of the
fast aging European countries such as Germany, Spain, and Italy, the share of the
elderly population is projected to be over 35%, while in Japan, Korea, and Singapore it
is expected to reach 40%. This phenomenon is envisaged to spread to developing
countries (UN Population Division, 2015). In the developing countries, the
proportionally fastest growth rate of the “oldest old” demographic group (85 years and
older) has implications for current members of the workforce (El Fassi et al., 2013).
According to Beard et al., (2012), developing countries would have less time to adjust
and establish the infrastructure and policies necessary to meet the needs of their rapidly
shifting demographics. It also means that, unlike the developed countries, the
developing countries would have to cope with the possibility of the population getting
old before they get rich.

The objectives of this paper are twofold. Firstly, to discuss the overview
perspective on issues and challenges with regards to an aging workforce at the
workplace using a meta-analysis derived from several scholars. Secondly, this paper
also discusses how Malaysia as a developing country could learn and address the issues
in the Malaysian context.

AGING WORKFORCE CHALLENGES

With respect to an aging workforce, the focus has thus far been on how to
manage the older workers, how to ensure their job security at the workplace, and how to
minimize costs. An issue often overlooked is dealing with the new cohorts at the
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workplace. Thus, in this section, we explore both issues and the challenges in the
workplace.
Aging Stereotype at Workplace
 Research concerning perceptions of older workers could be traced back to the
early 1950s, and scholarship specific to the concept of ageism back to the late 1960s
(Butler, 1969). Since then there has been biases against older workers with a belief that
performance declines with age. Griffin, Bayl-Smith, and Hesketh (2016) indicated that
when the focus of a study is on older workers, the specific concern has been limited to
age discrimination of older workers in the workplace. Often, the older workers are
discriminated in terms of skill recognition, denied employment or promotion, or left out
of training programs.

Tuckman and Lorge (1952) found that younger participants tend to agree with
the negative perceptions concerning older workers. A negative stereotype could be the
starting point of discriminatory behavior at work (Sánchez Palacios, Trianes Torres, &
Blanca Mena, 2009). This would have an impact on HR practices in the organization
towards older workers. At the same time, it creates negative vibes for the older workers
themselves. Age discrimination among older workers has been linked to the stereotype
that is associated with low self-efficacy, performance issues, decline in job satisfaction,
organization commitment and job involvement (Orpen, 1995).

The major challenge by older workers is age stereotype at their workplace. In a

review of the literature on the health and productivity of older workers, by Robertson
and Tracy (1998), it was noted that older workers often encountered negative
performance appraisals partly due to stereotypes and myths about aging at work and the
older worker (Hertel & Zacher, 2015), “being older” is predominantly associated with
negative connotation of performance decrease, physical decline, dependency on others
and costs to society (Zacher, 2015).

The study by Posthuma, Wagstaff, and Campion (2012) defined age stereotype
as judgments about an individual employee based on their age rather than on their actual
knowledge, skills or abilities. The age stereotype has been sorted into six main
categories, namely poor performance, resistance to change, lower ability to learn,
shorter tenure, costly, and high dependency level. Iweins, Desmette, Yzerbyt, and
Stinglhamber (2013) reported that these beliefs often manifest specifically in the light of
technological changes and advancements. Ng and Feldman (2012) concurred that the
only common negative stereotype for which there is some element of truth is that older
workers on average, are less willing to engage in development and training

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opportunities compared to the younger workers. Despite the opportunity given to

enhance knowledge on new technology, some of them are reluctant to participate.
Another study on the stereotype of older workers from the perspective of younger and
middle-aged workers revealed that 60% of the descriptors generated by younger
workers and 85% by middle-aged workers were positive. The most common belief that
emerged was “experienced.” However, “resistant to change” and “unable/unwilling to
learn” still remained prominent among the negative characteristics (Finkelstein, King, &
Voyles, 2015).

Hertel and Zacher (2015) in their article on Managing the Aging Workforce
highlighted that there is no age differences in core task performance between younger
and older worker. Nevertheless, the older worker has more positive job attitudes. Iweins
et al., (2013) stated that positive stereotypes towards older workers were related to
affection reflecting admiration, which showed relationships with supportive workplace
behavior. Furthermore, it was found that older workers have skills and competencies
often lacking among the young workers. The older workers are typically more engaged,
loyal, and client-focused and have better social skills. Evidence from a meta-analysis by
Waldman and Avolio (1986) found no significant differences between age groups in
objective work performance measures. Rather, their results indicated that older workers
received lower performance scores when subjective supervisory ratings were used.

Stereotypes not only describe our beliefs about how workers of certain age
groups are, but also how they should be. Under certain conditions, stereotypes could
affect behaviors ranging from major workplace decisions to everyday interactions at
work (Finkelstein et al., 2015). Scholars believe that understanding the relationship
between age and performance would ease the biases and reduce any unfair,
discrimination of older workers.

Selection and recruitment discrimination of older workers

Irrespective of the influence of statutory retirement age, choices about whether

to retire or not are likely to be heavily influenced by personal economic pressures for
the majority of the workers. A study by Puteh, Abd Radzuan and, Abd Ghafar (2011)
revealed that 66% of the respondents agreed that older workers are still productive and
show better performance. Furthermore, about 77.5% of the respondents agreed that
being senior is good because they have greater work experience. In addition, about 40%
of the employers in Malaysia viewed retirement of an older worker as the loss of
valuable skill and experience. To be able to engage older workers and encourage them
to remain in the workplace it is vital to first understand what motivates individuals to
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continue to work. Yusoff and Yusof (2013) indicated that the elderly might need to
continue working because they have to augment their income, while others might enjoy
working or to remain active.

In general, productivity declines as people age. This stems from physical and
cognitive decline and the natural obsolescence of skills and knowledge acquired at an
earlier age. The Ontario Human Rights Code 1961 recognized and responded to the
reality that an aging workforce would experience physical and or psychological changes
that increase the likelihood and or frequency of conflict between the aging individual
and the demands of the workplace as it is currently structured. The older worker is not
as healthy as his/her younger colleague and is more prone to injury. It is true that
sensory, motor, and cardio-respiratory function all decrease with age. Physical and
cognitive abilities do decrease with age, but the rate by which these changes happen is
neither linear nor is it pre-determined. However, Robertson and Tracy (1998) argued
that depending on the job, reduction in physical strength and endurance and reaction
time could be compensated for with increased experience, by pacing activities and by
enhancing performance. Nonetheless, chronological age has not been found to be a
valid predictor of performance for a specific individual in a particular job (Cleveland &
Landy, 1983).

Age of an employee could (under some circumstances) trigger age stereotypes

that resulted in unfair decisions about or treatment of older workers (Finkelstein et al.,
2015). Despite what most of the reviews and meta-analyses on this issue suggest, there
is no consistent evidence that shows work performance decreased with age. Bias against
older workers has created discrimination during selection or recruitment, which
indirectly has limited the job opportunities for them. A recent study argued that
selective incivility at work and targeting certain social groups are among the tools of
discrimination in the modern workplace (Cortina, Kabat-Farr, Leskinen, Huerta, &
Magley, 2013).

Managing Multi-Generation Workforce

The increase population growth globally has changed the workforce landscape,
with most of the older workers choosing to remain in the workplace, while the younger
cohorts are also entering the workforce. This inter-generational difference of cohorts
has created a multi-generational workforce. In general, currently, there are three cohorts
that consist of Baby Boomer Generation (born in 1964), Generation X (born during the
period 1965 to 1980) and Generation Y (born in 1981 and thereafter) (Puteh, Kaliannan
& Alam, 2015).

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Though most business entities welcome fresh blood in their organizations, the
changes in leadership has created a new trend of younger people supervising older
employees. A study by ACCA and Mercer (2010), on 3,200 Generation Y finance
professionals across 122 countries found that almost 40% of Generation Y employees
were already holding managerial positions. This has created supervisor-supervisees’
conflict as the younger supervisors were found adopting a less collaborative style of
managing conflicts or avoiding conflict with older supervisees (Cappelli & Vovelli,
2010). There is a lack of common concern, soft skills and experience among the
younger managers to complement their supervisory role. Furthermore, Cappelli and
Vovelli (2010) also claimed that age-related conflicts might be severe in Asian
countries because of the tradition of respecting the elders. This cultural trait is contrary
to the role of supervisors which is mainly to direct or challenge subordinates. Further,
there is the perception that older staff would feel insulted reporting to a younger
supervisor.

Aging population has an impact on the economy and the labor force as the baby
boomers begin to retire in great numbers while the number of employees who could
potentially replace them are getting lesser (Duxbury & Halinski, 2014). The problem
would arise if the older employee chooses to continue in the same career or job role,
thereby not only reducing job opportunities in the open market but also resulting in
fewer internal opportunities for career progression among other age groups in the
organisation. In the long run, the organization would face difficulties in terms of
recruiting people for managerial, professional or technical positions. This leads to a
bigger problem when the organization is unable to prepare successors to sustain the
organization and remain competitive against their competitors.

MALAYSIA AND AGING POPULATION

The objective of the National Population Policy in Malaysia is to increase the

total population to 70.0 million by 2100. Notwithstanding the initial adverse responses
to the policy, it could not be denied that there are in fact sound reasons for the
expansion of the country’s population size. It is a vital factor in the effort to create a
population of industrious, disciplined and productive people. It is a starting point for
Malaysia to build her foundation to become one of the industrialized countries in South
East Asia.

Malaysia is currently moving on the right track, with her demographic profile
experiencing a major shift in the last 65 years. In 2015, Malaysia’s population reached
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30 million population compared to 6.1 million people in 1950 (UN Population Division,
2015). As with other developing countries, Malaysia also experienced a decreasing
trend in the number of child births based on Total Fertility Rate (TFR). The TFR was
2.1 in 2010 and decreased to 2.0 in 2015. This lead to a decline in the population age
group of 0-14 years by 2.4%, that is, to 25.0% (2015) compared to 27.4 % in 2010
(Department of Statistics, 2015).

Better health facilities in Malaysia have decreased the mortality rate resulting in
an increase in the average life span. The average life expectancy in Malaysia rose risen
from 71.3 years (1990-1995) to 74.5 years (2010-2015) and is forecasted to increase to
80.1 years (2045-2050).

Declining birth rates and population growth led to an increase in median age of
the older population group. Undoubtedly, the median age of the population has changed
in line with the increase in the aging population. It rose from 17.4 in 1970 to 27.8 in
2015 (Department of Statistics, 2015). This would change the population age structure
in future where Malaysia could experience a reduction in the number of young people.
Based on Malaysia’s population pyramid 2015, the distribution by age group showed no
major difference since 2010 to 2015, as displayed in Figure 1.

Figure 1 Population Pyramid of Malaysia, 2010 and 2015

Source: Department of Statistics (2015) Current Population Estimates, 2015,
Malaysia.

The number of elderly in Malaysia has doubled from 7% to 15% within the past
28 years and by 2030 the aging population is expected to constitute at 15% of total

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population (Jacob, 2016). Statistics from the Ministry of Human Resources (2016) for
employment and labor in 2015, indicated that 26.1% of total workforce in Malaysia are
in the 45 years and above age cohort, with 2.8% comprising the aging workforce (60
years and older). This number is envisaged to increase as the growth rate of the aging
population increases in coming years.

AGING WORKFORCE IN MALAYSIA: A WAY FORWARD

Unlike the European countries, Malaysia is just beginning to acknowledge the

anticipated acceleration in the of aging population growth rate. Thus, appropriate policy
formulation and adaptations towards an aging population are important given the
retirement phase of baby boomers, slowing labour force growth, and the rising costs of
pensions. Therefore, Malaysia must strategize on long-term sustainable programs to
care for the an aging workforce population (Ismail et al., 2015) or the government
would have a burden to bear in the future.

Currently, the population of Malaysia is still relatively young but changes in the
age structure are becoming evident. Malaysia is anticipated to experience an aging
population in 2030 when the number of people over 60 years old is projected to increase
by 15%. Increase in life expectancy, declining fertility due to late marriages, reduction
in the family size, more women in the workforce and urbanization are among other
factors accounting for changes in the population profile (Jacob, 2016). Like other
developing countries, Malaysia has taken the step in 2012 to delay the retirement period
by increasing the retirement age from 58 to 60 years (Yusoff & Yusof, 2013).

Although the full impact of aging population has yet to be felt in Malaysia, the
Government must play a major role in planning and addressing the changes, together
with the non-government organizations (NGOs) and the business community. The
extension of retirement age as announced by the government is an interim solution
which might create a new problem in the future (Yusoff & Yusof, 2013). Strategic
moves are needed to ensure that the potential of aging population could be utilized and
their well-being taken care of in the coming years.

As mentioned earlier, the UN 2015 report as well the data from the Department
of Statistics and Ministry of Human Resources, Malaysia show that the number of
elderly in the workforce would increase and at the same time a shortage of younger
cohort is predicted in the future. This situation is envisaged to create an imbalance in
labor supply in the coming years. In order to stay sustainable, Malaysia must pay

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serious attention to this issue as not only the manpower supply is affected but also there
is a need to ensure the capabilities and competencies of the future workforce,
particularly of the new cohorts.

In order to secure the well-being of an aging population, the Government put

forth the National Policy for Older Persons and Plan of Action for Older Persons in
2011. The policy and plan of action were formulated based on the review made by the
earlier National Policy for Older Persons (1995) and Plan of Action for the Older
Person (1998). The review is aimed at incorporating the development and reintegration
of older persons into the society, in order to equip them with a high sense of self-worth
and dignity (Zawawi, 2013). Despite being a good policy initiative taken by the
government in preparation for aging transition, especially welfare and health care, the
financial incentives for the elderly were noted to be absent in the Policy. It was only
included as a sub-program (Yusoff & Buja, 2013). Compared to the Equality (Age)
Regulations 2006 (UK), which provides protection for an individual from
discrimination on grounds of age in employment or vocational training (Parry & Harris,
2011), the 2011 National Policy for Older Persons and Plan of Action for Older Persons
has not addressed the issue, that is to remove age barriers in employment policies and
practices in Malaysia.

Stereotypes about older workers are common when it comes to an aging

workforce. Thus, this has to be addressed through training, conferences or other
initiatives to change the culture across the organization. Top managements and HR
practitioners are the target groups that are required to have a better understanding of how
to manage and utilize the full potential of older workers in their organizations.
Together, with the assistance of government agencies, employers’ association and trade
unions, it is hoped that the stereotypes concerning older workers could slowly be
eliminated to improve aging workforce management.

The organization has to strategize both in terms of talent competencies (older

and younger workers) based on organization’s needs and reducing their operational
costs. There is a growing consensus among progressive employers that because of their
complementary capabilities, a good mixture between older and younger workers could
in fact lower workforce-related risks (Beard et al., 2012). Furthermore, there are
important paradoxes in different segments of the workforce (Chand & Tung, 2014).
Businesses would soon have little choice but to be more attentive to the needs and
capacities of the older employees. Their ability to adapt could become a source of
competitive advantage.

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Based on the meta-analysis by scholars and current scenario on aging workforce

in Malaysia, it could be concluded that several initiatives are required to ensure the
well-being of aging workers. All parties, namely the Government, Non-governmental
organizations (NGOs) and business entities in private sectors have to take cognizance of
and make the necessary preparations to welcome aging workers in Malaysia’s labor
workforce segment. The preparations include promoting and establishing policies and
incentives for older workers. With a good foundation and appropriate strategies, the
discrimination against older workers could be reduced and a healthy aging lifestyle
could be promoted. The nation’s productivity as a whole could be enhanced by
promoting an active aging workforce. As this paper is only based on the findings of
other scholars from different countries, it is suggested that a proper study be conducted
to analyze the Malaysian scenario and perceptions in order to obtain a clearer and
detailed insight of the issues related to an aging population. The findings would
undoubtedly contribute to a new body of knowledge with respect to aging population in
Malaysia.

CONCLUSION

The aging of the workforce in most industrialized countries is not only due to
population aging, but also because of changes in workforce participant patterns,
including delayed workforce entry as well as early or delayed retirement (Beehr &
Bennett, 2014; Martin & Xiang, 2015).

Without knowledge or better understanding of issues pertaining to aging

workforce, many employers have the perception that having older workers in the
organization means incurring higher costs. As such, to stay relevant and sustainable,
organizations must adapt by shifting organizational structure or revising their current
human resource practices. Given the different competencies, organizations have to
acknowledge that a combination of older and younger workers provides an opportunity
to optimize their talents to achieve organizational objectives and at the same time
increase their profits. The Government and business communities need to work together
in ensuring both assets (older and younger workers) are equally taken care in terms of
their wellbeing and opportunities in the workplace. This cannot be achieved without full
commitment from both parties.

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Malaysia
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