The French Pension War

Commentary

When a million people protest on the streets of Paris and most major French cities, you know there is a serious problem in French society.

The protests, which had been going on for four days, culminated on Feb. 11 in Paris, where reportedly half a million people participated. The vitriol directed at the president during these protests was uncivilised and contemptuous of government reform proposals.

Reminiscent of the Yellow Vest Revolution in 2018, which was initially directed at a hike in the price of fuel, it soon morphed into a demand to raise the minimum net wage in France, which is now around €1,679 (US$1,800) per month.

The recent proposal, which earned the wrath of the protestors, concerns President Emmanuel Macron’s plan to raise the pension age from 62 to 64. It is a response to the dire situation of the French pension system.

In France, retirees might be paid 50 per cent of their income, with a maximum of €41,136 annually. The state scheme is financed by “social security contributions”—a payroll tax that burdens French businesses.

It could be argued that the French president’s proposal constitutes a justifiable attempt at containing the burgeoning cost of the pension scheme, which otherwise would become unsustainable.

That the pension scheme is economically untenable is an unavoidable consequence of changes in French demographics.

In 1910, when the first pension law came into effect, life expectancy was 51.3 years, whereas now it is 82.4 years. Also, the population has increased exponentially since 1910 and now stands at around 65 million, compared to around 39 million in 1910.

The present situation means that the younger generation, who make up a much smaller percentage of the population, has to support an ever-increasing number of older people. From an economic point of view, the present retirement age is unsustainable.

People Hold Onto Their Privileges

The French protests disclose that once a privilege has been extended to people, it is exceedingly difficult to remove it, and it becomes nearly impossible to attempt reform. In Western democracies, it appears that people have lost the ability to distinguish between a “privilege” and a “right.”

A “right” exists independently of any societal consideration unless it conflicts with the right of others, but a “privilege” is merely a temporary benefit extended to people, and the legislature could repeal it.

An example of people’s inability to distinguish between the two can be seen in the blockade of French highways in 2015. French farmers used to the “privilege” of receiving high prices for their agricultural products, blockaded roads from Germany and Spain to stop the importation of foreign meat, vegetables, and dairy products to protest the falling prices for their own products due to cheap imports.

Angelique Chrisafis, writing in The Guardian, described these protests in the summer of 2015 as “a summer of agricultural discontent.”

In 2005, Elise Feller argued an article: “French wage earners today are so strongly attached to their retirement system that they react viscerally whenever it is called into question. Many commentators accuse them of being incapable of reform, willing to go to any length to preserve their retirement privileges.”

The current protests certainly confirm the validity of Feller’s opinion. Indeed, television stations broadcast interviews with enraged protestors who asked rebelliously, “why should I work beyond 62?”

Big Government, Small People

Many younger people joined the protests in the name of “solidarity,” even though they disproportionally carry the burden of financing France’s pension scheme.

But the protests also disclose another and ultimately more dangerous societal development. The expectation that people will be able to benefit from the government’s largesse has facilitated a climate of dependency and diminished the people’s will to contribute to the nation’s economic well-being.

Apart from the fact that meaningful work gives people a sense of purpose and fulfils an aspiration to realise their potential, it could also extend life expectancy and healthy living.

Indeed, boredom and loneliness are often unintended consequences of retirement that may well lead to premature death and poverty.

As people still want to achieve their life’s objectives, reliance on government welfare may well create an army of discontented retirees dependent on government handouts.

It is a social welfare system that elevates the all-powerful state at the expense of people, who will gladly grasp any benefit that comes their way instead of taking their life’s destiny into their own hands. Such a mentality enables governments to treat people like children in a nursery.

Hence, if these ruminations on the welfare state have any validity, an extension of the pensionable age to 64 (or later) appears to be the only way to reduce the incidence of government dependency and to sanitise the pension scheme that otherwise would become unsustainable.

Pension Issues in Other Countries

Of course, the French pension problem is not unique in Europe. For example, neighbouring Belgium has tried to reform its pension system for the last 30 years.

Each incoming government pledges to reform the pension system, but they abandon these lofty proposals when they discover the complexity of the system and the unpalatable electoral consequences of any reform.

However, at present, the pensionable retirement age in Belgium is 65, gradually increasing to 67 for those retiring on or after Feb. 1, 2030.

In Australia, there is also a debate, especially at the time of the delivery of the Budget, about the sustainability of its pension scheme. But the problem is not nearly as cantankerous as in Europe.

The absence of nastiness may well be a consequence of the valuable reform of former Prime Minister Paul Keating, who introduced a superannuation scheme. While the super scheme comes with its own set of problems, it at least enables people to look after themselves when they retire. Only the very needy have to rely on a government pension.

Perhaps it is time for France to consider supporting its workers who want to boost their retirement savings by working longer?

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.