ANALYSIS: What you need to know to understand why pension reform spells trouble in France
Imagine a country with 42 different state pension systems, where some retire at 50 and other workers are 'cheated'. There's trouble ahead in France, writes John Lichfield.
Imagine a country which has 42 different state pension systems.
In this strange country, some workers, the lucky few, retire at 50. All, in theory, retire at 62. The average real retirement age is 63.
Some people, not necessarily rich, subsidise the pensions of others, who are not necessarily poor.
Certain state employees, such as railway and utility workers, ride on the cushions. Locomotive drivers retire at 50. Other railway and Metro and EDF-GDF employees leave work on full pensions at 55.
On the other hand, farmers and many other self-employed workers are, broadly-speaking, cheated.
Such a country exists. It is called France.
President Emmanuel Macron, not shy of a fight whatever else you may think of him, has decided that it is time that the French had a single state pension system.
READ ALSO
-
Macron's surprise idea for reforming the French pensions system
-
Six tasks the French government faces as it returns to work
Former president Nicolas Sarkozy's effort to reform the pensions system sparked protests in 2010. Photo: AFP
This is the country’s sixth pension reform in 26 years and the most radical since a failed assault on the system by President Jacques Chirac in 1995. That attempt collapsed after public sector trades unions, especially the railway workers, brought the country to a standstill.
The barricades are being erected once again. Lawyers, joined by nurses, doctors, pilots and flight attendants, have called a day of action to defend their own state pension régimes next Monday.
Two of the bigger trades union federations - France has a dozen of them, remember - have organised protests on 21 and 24 September. There will also be industrial action on Paris' Metro and RATP systems on Friday over the plans.
The steam pressure of public anger appears less than it was 24 years ago. That may change. The Gilets Jaunes and their Black Bloc allies, after an invisible summer, hope to recover this month by surfing on a wave of pension reform unrest.
Why is Macron doing this? And why now?
The purpose of the reform is not primarily to save money. Previous mini-reforms have already put the state pension fund on a more or less sustainable footing.
The aim is to make the system fairer and less opaque and to persuade French people that longer lives must also mean longer working lives. The present “official” retirement age of 62 will be preserved but will become meaningless.
In the original plan to qualify for a “full” pension, you had to retire at 64 (with exceptions for arduous professions). If you retired earlier, your pension would fall. If you worked longer, it would increase.
This so-called “pivotal age” has now been abandoned by President Macron in a concession to the biggest and most moderate of the union federations, the CFDT. He now suggests that a “full” pension could be earned by an agreed “full” period of contributions, which must be longer than the present 43 years.
Otherwise the plan remains the same.
Emmanuel Macron is determined to make the French pensions system clearer and simpler. Photo: AFP
Since the 1850s, France has had a “repartition” or “shares-for-all” system of state pensions in which the active pay for the retired. Macron wants to replace that with a “points” system in which each person builds up a personal pension pot during his or her working life.
He insists that only the rich will suffer and that many will benefit. This is misleading. Without changes, there will be more losers than Macron admits.
Under the present system, a state pension is based on the retiree’s best 25 years of earnings in the private sector and last six months of salary in the public sector. This would be replaced by a universal pension based on contributions made.
The unions point out, inter alia, that this will penalise people whose earnings grow with promotion or experience, such as teachers and nurses. The government should look for a solution to this and other problems in the public consultations promised before its draft law is presented some time next spring.
Macron is right to insist that sweetheart regimes for railway workers and other state employees - subsidised by all the rest - must be phased out by 2025. The SNCF, the state-owned railways, and the RATP, the Paris Metro and bus system, operate ten of the 42 different “state” pension régimes.
It is also reasonable that final-salary related pensions for high-paid executives and civil servants should be scaled back. The corresponding boost of “petits” pensions for farmers and other self-employed workers is long overdue.
Militant unions and public sector unions portray the changes as an attack on the public service. They believe that the end of the shares-for-all system is unFrench and capitalistic.
Macron sees the changes as part of his drive to correct one of the most serious but rarely mentioned structural problems in the French economy - a relatively small working population.
READ ALSO
Union bosses including Yves Veyrier have promised action against the reforms. Photo: AFP
French workers are individually productive but there are few of them. High youth unemployment, lengthy third-level studies and early retirement mean that wealth creation falls on a relatively small number of French people.
According to Eurostat, 64.2 percent of the 15 to 64 age group had a job in France in 2016, compared to 74.7 percent in Germany. The economist Emmanuel Lechypre pointed out this week that individual French people worked very hard but that France, as a whole, worked fewer hours than any other EU country.
Early retirement is only one explanation of this phenomenon but later retirement is essential to stop it from growing worse. As people live longer (good) the “active” part of the population will shrink (bad) unless people work longer.
The moderate CFDT trades union federation has spoken broadly in favour of the proposed reforms. So have the employers’ federation, MEDEF.
The two largest militant union federations, the CGT and FO, have called for nationwide demonstrations next week and the week afterwards - but have failed to agree on one date or a united programme of strikes or other action.
“If we have to strike, we will,” said Yves Veyrier, head of Force Ouvrière (FO). “The mood of members is exactly as it was in 1995.”
The government’s fear is that prolonged and bad-tempered pension protests could combine with other grievances and disputes - notably strikes in hospital emergency departments and free trade protests by farmers - to produce a mood of deep social unrest this autumn and early winter.
My best guess…
There will be a rocky few weeks. The Gilets Jaunes and the Black Blocs will, briefly, resurrect themselves. But this is not a replay of 1995.
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Imagine a country which has 42 different state pension systems.
In this strange country, some workers, the lucky few, retire at 50. All, in theory, retire at 62. The average real retirement age is 63.
Some people, not necessarily rich, subsidise the pensions of others, who are not necessarily poor.
Certain state employees, such as railway and utility workers, ride on the cushions. Locomotive drivers retire at 50. Other railway and Metro and EDF-GDF employees leave work on full pensions at 55.
On the other hand, farmers and many other self-employed workers are, broadly-speaking, cheated.
Such a country exists. It is called France.
President Emmanuel Macron, not shy of a fight whatever else you may think of him, has decided that it is time that the French had a single state pension system.
READ ALSO
- Macron's surprise idea for reforming the French pensions system
- Six tasks the French government faces as it returns to work
Former president Nicolas Sarkozy's effort to reform the pensions system sparked protests in 2010. Photo: AFP
This is the country’s sixth pension reform in 26 years and the most radical since a failed assault on the system by President Jacques Chirac in 1995. That attempt collapsed after public sector trades unions, especially the railway workers, brought the country to a standstill.
The barricades are being erected once again. Lawyers, joined by nurses, doctors, pilots and flight attendants, have called a day of action to defend their own state pension régimes next Monday.
Two of the bigger trades union federations - France has a dozen of them, remember - have organised protests on 21 and 24 September. There will also be industrial action on Paris' Metro and RATP systems on Friday over the plans.
The steam pressure of public anger appears less than it was 24 years ago. That may change. The Gilets Jaunes and their Black Bloc allies, after an invisible summer, hope to recover this month by surfing on a wave of pension reform unrest.
Why is Macron doing this? And why now?
The purpose of the reform is not primarily to save money. Previous mini-reforms have already put the state pension fund on a more or less sustainable footing.
The aim is to make the system fairer and less opaque and to persuade French people that longer lives must also mean longer working lives. The present “official” retirement age of 62 will be preserved but will become meaningless.
In the original plan to qualify for a “full” pension, you had to retire at 64 (with exceptions for arduous professions). If you retired earlier, your pension would fall. If you worked longer, it would increase.
This so-called “pivotal age” has now been abandoned by President Macron in a concession to the biggest and most moderate of the union federations, the CFDT. He now suggests that a “full” pension could be earned by an agreed “full” period of contributions, which must be longer than the present 43 years.
Otherwise the plan remains the same.
Emmanuel Macron is determined to make the French pensions system clearer and simpler. Photo: AFP
Since the 1850s, France has had a “repartition” or “shares-for-all” system of state pensions in which the active pay for the retired. Macron wants to replace that with a “points” system in which each person builds up a personal pension pot during his or her working life.
He insists that only the rich will suffer and that many will benefit. This is misleading. Without changes, there will be more losers than Macron admits.
Under the present system, a state pension is based on the retiree’s best 25 years of earnings in the private sector and last six months of salary in the public sector. This would be replaced by a universal pension based on contributions made.
The unions point out, inter alia, that this will penalise people whose earnings grow with promotion or experience, such as teachers and nurses. The government should look for a solution to this and other problems in the public consultations promised before its draft law is presented some time next spring.
Macron is right to insist that sweetheart regimes for railway workers and other state employees - subsidised by all the rest - must be phased out by 2025. The SNCF, the state-owned railways, and the RATP, the Paris Metro and bus system, operate ten of the 42 different “state” pension régimes.
It is also reasonable that final-salary related pensions for high-paid executives and civil servants should be scaled back. The corresponding boost of “petits” pensions for farmers and other self-employed workers is long overdue.
Militant unions and public sector unions portray the changes as an attack on the public service. They believe that the end of the shares-for-all system is unFrench and capitalistic.
Macron sees the changes as part of his drive to correct one of the most serious but rarely mentioned structural problems in the French economy - a relatively small working population.
READ ALSO
Union bosses including Yves Veyrier have promised action against the reforms. Photo: AFP
French workers are individually productive but there are few of them. High youth unemployment, lengthy third-level studies and early retirement mean that wealth creation falls on a relatively small number of French people.
According to Eurostat, 64.2 percent of the 15 to 64 age group had a job in France in 2016, compared to 74.7 percent in Germany. The economist Emmanuel Lechypre pointed out this week that individual French people worked very hard but that France, as a whole, worked fewer hours than any other EU country.
Early retirement is only one explanation of this phenomenon but later retirement is essential to stop it from growing worse. As people live longer (good) the “active” part of the population will shrink (bad) unless people work longer.
The moderate CFDT trades union federation has spoken broadly in favour of the proposed reforms. So have the employers’ federation, MEDEF.
The two largest militant union federations, the CGT and FO, have called for nationwide demonstrations next week and the week afterwards - but have failed to agree on one date or a united programme of strikes or other action.
“If we have to strike, we will,” said Yves Veyrier, head of Force Ouvrière (FO). “The mood of members is exactly as it was in 1995.”
The government’s fear is that prolonged and bad-tempered pension protests could combine with other grievances and disputes - notably strikes in hospital emergency departments and free trade protests by farmers - to produce a mood of deep social unrest this autumn and early winter.
My best guess…
There will be a rocky few weeks. The Gilets Jaunes and the Black Blocs will, briefly, resurrect themselves. But this is not a replay of 1995.
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