Is France's Pension Revolt Legitimate?
The legal retirement age in France will remain 62 with the new French retirement plan, but workers will need to work until 64 to get a full pension, French Prime Minister Édouard Philippe announced on Wednesday.Adam Nossiter of The New York Times also reports the Prime Minister vows France's pension changes won't affect older workers:
“We’ll maintain the legal retirement age of 62,” Philippe said, adding, “but we’ll encourage [the French] to work longer. The government intends to adopt the proposal of the high commissioner Jean-Paul Delevoye to introduce, above the legal age, an ‘age of equilibrium’ with a system of discounts and bonuses.”
In a speech at the Economic, Social and Environmental Council in Paris, on the seventh day of crippling countrywide strikes and protests, Philippe declared “the time has come to build a universal retirement system”.
He emphasised some of the concessions agreed to by the government, including that the overhaul would not apply to those born before 1975 (as opposed to 1963, as had been previously stated).
“We’ve decided to change nothing for those who have already contributed toward their retirement for at least 17 years, which means for those under the general retirement regime – those born before 1975 and who will be over 50 in 2025,” Philippe said.
The plan is part of Macron’s campaign promise to produce a simplified, universal system to replace the current 42 different pension schemes for various labour categories with a single, points-based system, while pushing the French to work longer before retirement.
Philippe sought to reassure workers in sectors that enjoy earlier retirement or more generous pensions that the changes would be gradual. The government's new universal pension system will cancel out special pension regimes, he said.
"The implementation of the new universal system will mean the end of specific regimes," Philippe continued, claiming that women would be the big winners of the new system.
Women's organisations disagree, however, saying many stand to lose out under the new regime.
Public workers have been on strike for seven days against the reforms and unions have called for more protests on December 12 and December 17 following two mass demonstrations on Tuesday and last Thursday.
A speedy resolution of the stand-off appears unlikely, with Philippe warning Tuesday of a lengthy battle ahead as unions vowed not to yield.
The rail workers’ largest union, the CGT, called for “stepping up the strikes” after the speech on Wednesday.
“The government is taking everybody for fools,” the head of the CGT, Philippe Martinez, said in reaction to the prime minister’s remarks. “Everyone will work longer – it’s unacceptable.”
The industrial action has paralysed public transport in Paris and disrupted national rail services and grounded many planes.
It is the biggest show of union force since Macron came to power in 2017 vowing to cut public spending and make the economy more competitive.
On Tuesday, 339,000 people took part in a second day of demonstrations over government plans to merge the country's 42 pension schemes into one, according to interior ministry estimates.
The numbers, which unions claimed were far greater, were markedly down from the first day of the strike on December 5, when more than 800,000 people took to the streets.
The government has angered unions by promising to scrap the more advantageous pension provisions enjoyed by some professions – including public transport and utilities workers, sailors, notaries, and Paris Opéra performers.
Those opposing the reform accuse former investment banker Macron of trying to roll back France's costly but highly cherished welfare state.
France's official retirement age of 62 is one of the lowest among developed countries and fiercely defended by the labour force.
Petrol refineries blocked
France's most militant unions have sounded an uncompromising note, insisting they will not call off the strike unless the reform is scrapped outright, while others are demanding sweeping concessions.
The action has revived memories of three-week-long strikes over pension reform that crippled France in 1995, forcing the centre-right government of the day to reverse course.
Teachers joined the industrial action Tuesday for the second time in a week, closing many schools.
Julien Sergere, a 38-year-old teacher who marched in Paris, told AFP he was worried that a proposal to standardise the way pensions are calculated would leave teachers poorer.
"Our wages are low and until now the advantage we had was that our pensions were calculated on the basis of the last six months of our career, which compensated a bit.
"But today, they're talking about the last 25 years, which could make our pensions fall by between €500 and €900 ($550-1,100) a month on average," he said.
Disgruntled hospital workers, firefighters, students and Yellow Vest anti-government protesters also took part in protests, reflecting the broad level of dissatisfaction with Macron's policies halfway through his mandate.
Striking workers blocked seven of France's eight petrol refineries Tuesday.
Public transport in the capital remained at a near standstill, causing much frustration for working commuters and tourists alike.
On Wednesday, 10 out of Paris's 16 métro lines will be offline, four will run reduced services, and the only two driverless lines (lines 1 and 14) will function as usual though with a high risk of overcrowding, according to operator RATP.
The head of commuter trains at SNCF, Alain Krakovitch, warned he expected the chaos to continue "until the end of the week", but some labour leaders have vowed to fight on until Christmas.
International trains will also be disrupted, the SNCF said.
Hoping to tamp down the transport strikes that are choking France, Prime Minister Edouard Philippe promised in a much-anticipated speech on Wednesday that the government’s planned pension overhaul would not affect older workers and would have a limited effect on those now in midcareer.This is all part of the $16 trillion global pension crisis I discussed last month. Pension tension has reached a boiling point in France as Macron's government is set to introduce much needed sweeping pension reforms.
But he again angered the unions on a crucial point — pushing the French to work longer — raising doubts about an early end to the strikes, which have also hit schools and government services, and setting up a possible prolonged battle between workers and the government of President Emmanuel Macron.
Mr. Philippe, the president’s stoic frontman for the pension plan, said that through incentives and penalties, the French would be encouraged to work until 64, past the legal retirement age, 62, one of the lowest in Europe. He also made concessions on the start date of the changes, which would go into effect in 2022, but only progressively, and at an even slower pace for those, like railway workers, who are currently in “special” retirement schemes.
But the new age target was too much for a critical moderate union, the French Democratic Confederation of Labor, or C.F.D.T., whose support the government needs and which had held back from the strikes.
“The red line has been crossed,” said Laurent Berger, secretary general of the C.F.D.T. Union.
The militant leftist General Confederation of Labor, or C.G.T. Union, which has spearheaded the strikes, struck an even harsher tone, an ill omen for government hopes of easing tensions.
“We’re obviously not at all satisfied by the government’s announcements,” Philippe Martinez, leader of the C.G.T., said after the prime minister’s speech. “They’re not taking us seriously, and they’re not taking seriously those who are in the fight today.”
The most hard-line unions like the C.G.T. want the government to withdraw the whole project. Others, like the C.F.D.T., are not opposed to an overhaul in principle, but are suspicious of the government’s plans and want guarantees that nobody will lose out.
France’s pension system, one of the most protective in the world, has been a traditional third rail in national politics, responsible for the downfall or weakening of successive governments. The current administration may not prove an exception.
Mr. Philippe warned his parliamentary representatives on Tuesday that he would not be waving any “magic wand” to end the strikes. And the disruption for commuters continued on Wednesday, with most subway lines in Paris still shut, and most medium- and long-distance trains canceled. Already, the effects on shopping, tourism and trucking are being felt.
In his speech, the prime minister notably excluded older workers from the pension overhaul. He also offered guarantees to those in a host of professions — including teachers, nurses, soldiers and police officers — that their pension benefits would remain intact.
But it quickly became clear that he had not backed down far enough to quell the social unrest plaguing Mr. Macron’s government less than a year after he brought tenuous calm to the “Yellow Vest” uprising that began over a gasoline tax and expanded into wider discontent over his policies.
Some unions quickly called for a redoubling of resistance to the government. The head of a major rail union, Laurent Brun, said a “toughening of the strike” was now needed in response to Mr. Philippe.
And Jean-Luc Mélenchon, head of the leftist France Unbowed party, said: “Those who are now 15 are condemned to this points system. The others are thrown into an incoherent and treacherous labyrinth.”
Mr. Philippe said that the full effect of the pension changes would be felt only by people born after 2004, and those born before 1975 would not be affected at all, he promised. For people born between those years, only the period they work after 2025 would be affected, he said. The prime minister also fixed the minimum pension at about $1,100 a month.
“We’re proposing a new pact between the generations, one faithful in spirit to that which the National Resistance Council put in place after the war,” he said, referring to the 1940s body that coordinated the actions of the French Resistance and outlined postwar social and economic policies that became the foundation of France’s social security model. “It’s a profound reform of the rules, to correct injustices and to take into account the new realities.”
But Mr. Philippe was firm on crucial points that brought tens of thousands into the streets and halted public transport: The “special systems” governing pensions for millions will be scrapped, replacing 42 plans with one points-based system for all workers. The new law would ensure that the value of the points would not diminish over time, he said.
The overhaul has been a central goal of Mr. Macron and Mr. Philippe, who have argued that getting the French to retire later and streamlining the pension system are necessary steps to put the system on a sounder financial footing.
Mr. Macron wants to unify the system and do away with the special pensions systems that date back decades, or even centuries in a few cases. He would give all workers points correlated to the number of years they work, and people would cash them in upon retirement.
Mr. Philippe argued that the government’s new universal plan was far more adapted to the contemporary realities of work: careers that are interrupted, that take place over several jobs and that start or finish at varying ages.
The government, he said, wanted to “guarantee the French a stronger and more durable social protection, because it won’t depend on the demography of professions, so that one’s professional choice won’t weigh on retirees. Our children will have less linear careers than ours. We’ve got to give them confidence that our system no longer seems to privilege some over others.”
Notice I said "much needed" exposing exactly where I stand on this issue, squarely with French President Emmanuel Macron and Prime Minister Édouard Philippe.
It's high time France which brought the world great philosophers like René Descartes start thinking logically about pensions and adopt sweeping pension reforms which will bolster its retirement system for decades to come.
But it seems like the cogito argument has fallen by the wayside when it comes to reforming France's antiquated pension system.
How antiquated is it? It reminds me of the Greek pension system, a bad mixture of pension systems where each professional group and non professional group contributes into a pension and there's little to no governance whatsoever as members are pretty much left in the dark as to how their pensions are being managed and what their true state is.
For me, it's logical, people are living longer, you need to reform pensions to reflect this simple fact.
And the concessions Macron's government has given to older cohorts are fair and the reforms being touted are gradual.
But just like in Greece, French public-sector unions yield enormous power, they can cripple the country in a matter of hours with their never ending strikes, and they're not shy to exert their power when disagreeing with Macron's government, a favorite pasttime of theirs.
Of course, I cannot totally blame them. The arrogance in Paris is quite astounding to the point where if you visit the French countryside, pretty much everyone is anti-Macron and rightfully so I might add.
The problem is the French pension system needs to be reformed and modernized and if it isn't, a Greek type debt crisis will hit France and external creditors will ram even tougher pension reforms down these unions throats.
I'm dead serious about this. Greece's powerful public-sector unions succumbed when the country hit the proverbial debt wall and so will France's unless they act now.
I'm not saying this to be a scaremonger, I'm stating a fact, take your pension lumps now or you will take an even bigger blow down the road.
Also, and equally important, France can introduce sweeping governance reforms to make their public pensions more transparent and accountable, just as we have done in Canada.
A universal pension system is a step in the right direction but also introduce legislation making sure these pensions adopt world class governance and are run like businesses, employing independent non-partisan employees who have one mission in mind, to make sure the French pension system is solvent over the long run and assets match liabilities.
In other words, get the government out of managing pensions altogether, legislate independent boards to oversee these pensions and make sure they hire and pay competent people to manage them, investing across public and private markets all over the world.
What else? The French should introduce conditional inflation protection in their public pensions to make sure retired members share the risk of these pensions.
Let the French unions scream "bloody murder", at one point logic must prevail, and this pension analyst doesn't see any logic in the anti pension reform movement in France (which is separate from the gilets jaunes movement which I am more empathetic to but see it as part of a larger global crisis in capitalism) .
Below, French lawmaker and former CIO of the Caisse de dépôt et placement du Québec, Roland Lescure, discusses his take on France's pension reforms (I completely agree with him):
Après @TV5MONDE c’est au tour de @CNN de s’intéresser à la réforme des retraites. My take on the demonstrations yesterday in France and the pension reform @CyrilCNN pic.twitter.com/LsXyEyWT2a— Roland Lescure (@RolandLescure) December 6, 2019
For another perspective, French economist Thomas Piketty discusses his views with Léa Salamé on French radio (in French). Piketty isn't against a universal pension system in principle but he does cite other important issues like stagnant wages and seems to sidestep important points on why pension reforms are desperately needed now (and yes, I understand perfectly the points he is raising).
Lastly, yours truly will be interviewed live by Ed Harrison on Real Vision Thursday morning at 11 a.m. so make sure you tune in to watch it here. It should be a great discussion.