The decree, reducing the age limit for people who begin their careers at the age of 18, was agreed on at a cabinet meeting, Social Affairs Minister Marisol Touraine told reporters as she left the meeting.
It will be finalised before the end of the month before being published in France’s official gazette.
Next year around 110,000 people are expected to benefit from the measure at an estimated cost of €1.1 billion ($1.4 billion), an amount expected to rise to €3 billion a year by 2017, she said.
Up to six months of unemployment and six months of maternity leave can be included in the calculation of the amount of time a worker has to pay into pension funds to benefit from retirement at 60, Touraine said.
This system means that “women who worked and who had children will not be penalised in the calculation of their pension”, she said, adding that the project will be financed by a 0.1 percentage point rise in worker and employer contributions.
Touraine said that the new decree, which goes against the current of pension reform in Europe, was “a measure of justice which concerns those who were penalised most by the reform of 2010”.
Right-wing president Sarkozy raised France’s retirement age that year from 60 to 62 despite months of protests that brought millions onto the streets.
Under the new system, workers who begin their careers at 18 will be able to retire if they have paid into state pension plans for 41 years or 41.5 years, depending on their year of birth.
The reform comes ahead of a “social conference” to be held by Prime Minister Jean-March Ayrault on July 9-10 which will include representatives from France’s five main unions and employers’ organisations.
The conference is expected to cover employment, training, pay, the minimum wage, working conditions and retirement.