Lowering the retirement age from 60 to 55, as Uganda struggles to cope with youth unemployment, is back on the cards. But experts are warning of technical and financial pitfalls.

With less than six months to the general election, President Yoweri Museveni has come under pressure to get rid of the old-guard in the public service.

The pressure is mainly from the youth, who constitute the largest voting block.
While speaking during celebrations to mark the Youth Day recently, President Museveni promised to lower the retirement age from 60 to 55.

The proposal is less radical than an earlier one to lower the retirement age to 50 years, but it will free up an estimated 33,000 jobs. However, with a backlog of more than one million unemployed youth, many of them unskilled, and another 400,000 joining the job market every year, the initiative does little to take away Museveni’s problem.

Anticipated skills gaps coupled with inability of the targeted labour pool to absorb the accruing job vacancies, future pension contribution gaps and potential social costs incurred by retirees have been cited as key threats to the policy review.

The review is being championed by President Museveni, who recently said a cut in the official retirement age would create more jobs in the public sector and mitigate rising youth unemployment.
However, the policy move also reflects a U-turn by the government, having raised the retirement age to 60 in the early 2000s from 55, the benchmark that had been in place for decades.

Though general unemployment remains high in the country, limited access to jobs among the youth has prompted concerns within the political elite on their role in political protests, rebellion and drug abuse.

The latest unemployment statistics were unavailable by press time, but the prevailing urban unemployment is estimated at over 20 per cent of all active adults, many of whom are between 18 and 35 years of age.

Over 60 per cent of the population is below 35 years and about 400,000 youth enter the job market every year, according to data from the population secretariat.

Thus many youths find themselves unemployed, leading to frustration and, consequently, to drug abuse and political dissatisfaction.

A case in point is the September 2009 political riots witnessed in Kampala and other towns in Central Uganda, sparked off by the government’s refusal to allow the Kabaka of Buganda to visit Kayunga district.

The riots claimed 23 lives and were mainly instigated by unemployed urban youth disgruntled by the government’s action.

The government expects to generate over 30,000 jobs through the policy move. But observers say lack of relevant skills needed in the civil service among the youth and the lingering pension deficit might undermine the policy intervention.

“Professional areas like agricultural research and university education will be most affected by the reduction in retirement age due to the high numbers of highly experienced professionals above 55 years.

“Such employees have matured in their line of work and are ready to pass on vital knowledge and skills, which becomes impossible when they are retired suddenly.

“The government’s current pension arrears are still high, while the savings on salaries of young and new civil servants will not be sufficient to cater for the pension expenses of retired employees,” said Rosemary Senabulya, executive director of the Federation of Uganda Employers, a private sector advocacy group.

The new measure is likely to affect 33,000 out of a total 254,159 civil servants on the government’s payroll as of April this year.

Trade union activists argue that the measure is insufficient to clear the current labour backlog, estimated in millions, and its cumulative growth.

“We need 500,000 jobs a year to meet the current demand. But there are still 60,000 unfilled jobs in the public service and the government is reluctant to fill them. There is a need to exploit vast employment opportunities in the railway business that tends to benefit thousands of people.

“Reduction of the retirement age to 55 will also hinder regional integration, as other member states are in favour of 60 years,” said Wilson Owere, chairman general of the National Organisation of Trade Unions.

Due to slow progression levels in Uganda’s civil service, many staff have found themselves serving at a single rank, both senior and junior, for long periods.

Though this slow rate of promotion is detrimental to their career progress, such employees have gained immense skills that could be lost through their hurried exit from the civil service.
Some of the employees have served over 15 years in critical positions, especially in the medical sector, while getting closer to retirement age.

On the other hand, new and younger employees in their early 30s, though more energetic, possess few of the skills needed in critical jobs in the civil service.

This scenario makes it difficult to absorb the majority of unemployed youth eager for such opportunities.

In addition, low entry salaries in the Ugandan civil service — equivalent to Ush200,000 ($90) per month for some positions — are deemed inadequate to meet the pension expenses of retirees in the medium term.

The current pension payments are partly calculated on the basis of final salary earned prior to retirement, which is usually much higher than entry level salaries.
Under the current reforms towards a contribution-defined scheme, as opposed to the traditional benefit-defined model, existing pensioners are paid out of contributions made by those still active in employment.

This requires closely matched claims and contributions. Civil servants will be required to pay five per cent of their monthly salary into a pension scheme under the new arrangement.