April 5, 2020

Letter From Paris: France is Embroiled in a Pension Reform Crisis, But Seems to be Doing Fine … or is it?

Nicole Prévost Logan

Reform of the retirement system was at the core of French President Emmanuel Macron’s 2016 campaign. He wanted to simplify the system and make it universal. The reform is so highly sensitive – one might even say explosive – that several prime ministers have fallen in similar attempts (1986, 1995, 2008.) Although close to 60 percent of public opinion is favorable to the reforms, the opposition is orchestrated into an angry movement by the unions and the Left.  

In a nutshell, the objective of the reform is two-fold: first, to prevent the system from being in the red in the 2020s and second to achieve social justice. This latter aim is being sought by suppressing the 42 régimes spéciaux (special systems), which grant privileges to certain groups of the population, such as civil servants, train workers (SNCF) bus and subway employees (RATP), personnel of the Paris Opera, members of the two legislative assemblies, etc. Some of these benefits include calculating the amount of retirement after the last six months of employment rather than the last 25 years.  And not surprisingly, these régimes spéciaux cost the French government billions every year.

The pension system in France is based on “repartition,” meaning that the active population pays for the retired one.  The problem is that in 1950, there were four working people for each retiree. Demography will soon reduce the ratio to 1 to 1.  In the US, the retirement system is based on “capitalization,” that is, individuals are free to invest their accumulated capital in a pension fund or other types of investment as they wish.  The Scandinavian countries use both systems – “capitalization” and “repartition”- simultaneously. 

For an American reader, it must be hard to comprehend the over-regulated retirement system in France, which applies not only to the 5.6 million civil servants  but also to the private sector.  A special dispensation is even required for retirees to be allowed to work.

The Macron plan is based on a points system.  Throughout one’s professional life, each hour’s work is translated into “points.” Variables – such as the political or economic environment – may impact the points’ value.  Employers and unions will determine together the value of each point.  Hence the anxiety of the people regarding this unfamiliar system.

France has the most generous retirement pension in Europe but it’s costing the country dearly. Photo by Hans Ripa on Unsplash.

France is the ‘Etat-providence’ (Welfare State) par excellence and the most generous in Europe.  The retirement age is 62 in France as compared to 65 in the UK.  It can be as low as 52 as in the case of train conductors.  More than 13 percent of the Gross Domestic Product is devoted to funding pensions.

The French government announced its plan to reform pensions on Dec. 5, 2019.  The reaction was immediate:- a general strike of all public transport. That meant no subway in Paris, except for two lines (which are automated), no buses, and very few trains.  That ordeal lasted for weeks without even a respite during the Christmas and New Year vacations.  Life for working people, who had to commute from the suburbs, became a pure nightmare.  Videos showed stampede scenes at stations.

On Jan. 28, 2020  the Gare de Lyon was packed as usual with passengers waiting for TGVs and suburban trains.  Suddenly a deafening sound resonated under the glass and steel structure.  Several explosions followed and pink smoke filled the station.  It turned out that dozens of the men getting off the train, wearing black parkas with yellow stripes, were firefighters on their way to join a demonstration at the Bastille. They were just getting warmed up, using their talents with pyrotechnics to blast powerful fire-crackers. 

After 50 days, the strikes had partially stopped.  The street demonstrations continued and have become a way of life in the city.  The left-wing unions and radical groups keep the momentum going and direct their actions to strategic areas such as blocking the main ports or shutting down oil refineries .

Tens of thousands people in black robes marched near the Bastille on Feb. 3.  They were some of France’s 70,000 lawyers, who have been on strike for five weeks – an absolute first.  The atmosphere was peaceful.  Not a single policeman in sight, no police vans nor water guns. 

I went down to take pictures.  ‘Why are you on strike?’  I asked a young lawyer. ‘We have our own retirement system,’ she answered, ‘which is autonomous and, furthermore, has a surplus.  Now the government has announced that the contributions toward the pension fund will double from 14 to 28 percent.’ Actually, what she said is not entirely accurate — the increase will be gradual: it will not start until the late 2020s and will not apply to all equally. 

French President Emmanuel Macron.

The launching of this crucial pension reform is like stepping into an anthill.  Wherever the government goes, it cuts into well-entrenched benefits, provoking an outpouring of protests.  Every time the government helps one group financially, this assistance has to be paid for by depriving another group.  This in turn feeds the popular mistrust for the government . 

After consultation with all the unions at the Hotel Matignon (seat of the Executive Power), an agreement was reached with the CFDT (Confederation Française Democratique du Travail), the most reformist of the unions.  For Laurent Berger, the CFDT leader,  the “age pivot” (retirement age) of 64 was a “red line” not to be crossed.  The Prime Minister agreed to pull back from it and replace it with a “cocktail of measures” to generate 12 billion Euros in order to balance the pension system. 

A parliamentary commission  of 80 deputies from all parties from the RN (Rassemblement National of Marine LePen) to LFI (La France Insoumise of Jean-Luc Melanchon) was appointed.  The government’s proposal was met with a ridiculous number of 22,000 amendments, (19,000 by LFI alone.)  Their obvious strategy was total obstruction of the process.  A general debate in the Parliament will follow.  If time runs out because of the municipal elections in 36,000 towns on March 15, the Prime Minister may resort to Executive Orders. 

In this crisis, I believe both sides are to blame: the government’s project may not have been prepared well enough and appeared confusing.  The opposition consistently refuses to enter any dialogue.  It is a French cultural trait:- first you flex your muscles then – possibly – you may be willing to come to the negotiating table.  But keep in mind that compromise is a dirty word in France.

The proposed retirement reform has somehow triggered other requests.  Seeing an opportunity, demands for higher wages and benefits are snowballing.  Some teachers in public schools are striking for pay raises.  These school students take their cue from their teachers and march in the street, or block their classrooms to protect their future pension rights — an odd sight indeed for 12- or 13-year olds!

The unrest (accompanied by violence) is dragging on.  There does not seem to be an end to it.

France appears to be functioning on two different levels — on the one hand, there is a France of  angry people, who feel very sorry for themselves. On the other, there is a dynamic France doing rather well, which has become economically attractive to foreign investors thanks primarily to labor market reforms. 

At the same time, Macron has chosen to keep above the in-fighting and focus on his role as the president of the only nuclear power of Europe, strengthening its defense and security while seeking a more integrated European Union.

Editor’s Note: This is the opinion of Nicole Prévost Logan.

Nicole Prévost Logan

About the author: Nicole Prévost Logan divides her time between Essex and Paris, spending summers in the former and winters in the latter. She writes a regular column for us from her Paris home where her topics will include politics, economy, social unrest — mostly in France — but also in other European countries. She also covers a variety of art exhibits and the performing arts in Europe. Logan is the author of ‘Forever on the Road: A Franco-American Family’s Thirty Years in the Foreign Service,’ an autobiography of her life as the wife of an overseas diplomat, who lived in 10 foreign countries on three continents. Her experiences during her foreign service life included being in Lebanon when civil war erupted, excavating a medieval city in Moscow and spending a week under house arrest in Guinea.

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Comments

  1. John Heckman says

    In the United States, 20% of people living off social security/pensions are living below the poverty line. In France, 5% of people living off social security/pensions are living below the poverty line.
    Which system is better?

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