Dites non à la retraite à 64 ans. “Say no to retirement at 64.” This is the message that millions of people have been telling the French government over the past three months. It all began after Parliament announced a debate over the French government’s new retirement reform bill.
The reform plan, which aimed to raise the retirement age from 62 to 64 years old, was proposed to ease the financial burden of France’s public pension system. It passed on March 16 with President Macron overriding Parliament after two failed votes of no confidence. However, the reform faced extreme backlash from unions and citizens, who took to the streets to oppose the bill and its reverberant consequences on France’s working population. Most recently, on March 7, over one million people participated in the demonstrations, which blockaded eight of France’s largest oil refineries.
The protests have bridged political divides and presented questions of working conditions and social welfare. In this way, France’s predicament highlights a growing issue on the global sphere: rapidly aging populations.
The World Economic Forum has recently estimated that the number of persons over 65 years old is expected to reach 1.6 billion by 2050. As such, providing care and support to seniors is projected as one of the next decades’ most pressing policies. With countries such as Japan holding the highest proportion of people over 60, at 28.7%, many countries’ demographics present a red flag to governments who will have to tackle what the International Monetary Fund has labeled the next long-term global crisis.
So how does France’s predicament apply to pensions and understanding how the global community will tackle their impending demographic pyramids?
The build-up to French reforms
The 20th century’s advancements in life expectancy, coupled with a decline in birth rates, has spurred an increasing number of older adults in comparison to younger populations. While people are generally living longer, healthier lives, the old-age dependency ratio, the proportion of young people working to support retirees, has steadily increased over the past 20 years. This means many countries have been left dealing with how to afford social security. Just in 2023, France was among the countries with the highest ratio, sitting at 55.8%, meaning there are less than two working-age people per aging individual.
This has made the question of sustainability the core of the French government’s rhetoric toward its proposed pension reform. Premier Elisabeth Borne presented that there have not been enough worker contributions to sustain pension spending, leading to large government expenditures in order to bridge the gap. In 2020, France’s spending made up 13.7% of its annual GDP, making the system among the most costly in Europe.
Yet, while France’s impending pressures are acknowledged, many labor unions claim the government has exaggerated estimations. According to a recent report by France’s Pension Guidance Council, although the pensions system will trend towards deficit in the coming years, it is currently in surplus. Therefore, citizens have proclaimed the government should find an alternative financing solution that will not have a detrimental impact on the older population.
Among the negative issues raised by protestors is that of the senior unemployment rate. France has one of the lowest employment rates among EU nations for individuals between 55-64 years, raising concerns over how the government will help support job opportunities for the elderly.
France’s system at a glance and the build up to reform
Currently, an individual in France needs at least 62 years of age to apply for a state pension. The country’s system operates along a continuum depending on when someone started working, their occupation and special circumstances accrued.
Citizens born after 1968 need approximately 41 years of working experience to obtain full pensions, which range at an estimated 1000-1200 euros. If the minimum contributions are not met, France provides old-age pensions to all citizens over 67 years old.
The schemes, however, are centered around a mandatory pay-as-you-go structure, where the current workforce helps maintain and pay contributions to retirees. The recipient’s pension amounts are centered around a points system, where individuals accumulate points based on their career experiences and salaries to gain additional benefits.
The most recent proposal stems from Macron’s movement to universalize the system and gradually remove the specialized pension schemes. All steps he believes will help stabilize the system and save the government over 12 billion euros. Macron claims raising the retirement age will increase the minimum pensions by an average of 800 euros and avoid worse measures such as increasing the contributions of current workers, raising payroll taxes or cutting funding from other government programs.
Nevertheless, unionists have proposed an array of different solutions which they believe more justly treats the older populations, such as raising taxes on businesses and employers to fund retirement costs. Although Macron has stated that he wants the government to work out solutions to push corporations to share more profits with workers and ensure corporations are taxed on super-profits, in a recently translated interview with the news outlet France 24, the French president avoided further comment on this proposal. Macron held that raising the retirement age was the only solution to balance spending.
Raising the retirement age is not a new phenomenon. Since 2012, over 82% of the Organization for Economic Co-Operation and Development (OECD) member countries have undergone increases. Just in 2011, Italy passed its retirement reform, which aimed to raise the retirement age to 67 years old.
Yet what France signals is a purview of policy issues that arise along with an aging population. Starting from social security and support, France opened Pandora’s box to possibilities regarding modernizing pension systems to support retirees.
One of the most commonly implemented measures to change the pension system, particularly in Asian and Nordic countries, is the introduction of Automatic Adjustment Mechanisms (AAMs). AAMs are a series of fixed rules to evolve pension systems to changing criterias. Popular AAMs include Notional Defined Contribution Scheme (NDCs), which alter pension benefits to life expectancy through a series of formulas in a pay-as-you-go system, and balancing mechanisms which calculate the minimum rate to finance the system for the next 75 years.
Automatic Adjustment Mechanisms were adopted by both Japan and Germany in 2004 to help maintain balance within their pension systems. Although they have been criticized in the past for depoliticizing the system, they are held to varying degrees in multiple European countries, excluding France, who does not have any.
There have also been proposals regarding private sector pension plans, which entails more substantial, structural changes to the system. Currently, France’s only private pension scheme is known as PER, where individuals can invest into their own retirement funds over the course of their career. In contrast, in the United Kingdom, private pension schemes are much more popular and emphasized by the government. While some have proposed this change would help lessen pressures, the private-centered model would require drastic changes, making this type of reform unlikely.
Macron’s decision marks a hard line countries face in moving towards the sustainability of social security. However, if raising the retirement age is harshly against public opinion, countries will have to invest in researching alternative solutions, structural or formulaic, to ensure the shifts will not place more weight on retirees.
In fact, there has been a push for countries to work towards reaching what has been coined the ‘silver economy,’ an economy geared more towards the elderly, through a series of policies to emphasize and grow the involvement of individuals over 60. This would include promoting more flexible working models to encourage a longer and more sustainable work period, as well as incentivising private investment in innovations, and making it easier for individuals to enter the labor force. Scholars believe that by increasing support and incentives for the older populations, countries can transition toward later retirement periods without large public disapproval, particularly among individuals with more labor intensive careers.
Ultimately, it remains to be seen how France’s reforms will develop. The proposal may have been pushed through parliament but protests are nowhere near ceasing. What France evidences is that it is not simply enough to propose raising the retirement age. Rather, countries need to implement more long-term investments and proposals to solve social security financing. If not, reactive measures, no matter how justified, will only fuel backlash from the public. Especially in a country where over 70% of the public opposes reform.