As this newsletter hits your inbox, the streets of France may well be alive with the sound of strikers protesting President Macron’s move to raise the retirement age from 62 to 64.
The proposed law was unveiled last week by Prime Minister Élisabeth Borne. It will also require workers to pay into the system for 43 years instead of about 41 now if they are to qualify for a full pension. The minimum pension will be bumped up from €900 a month to around €1,200 a month.
Borne said the system had to “evolve to ensure its future”, stressing that other European countries had raised their retirement ages. “I know French people are worried about the changes, and we want to explain it and convince them.” But polls show that 70% of French people oppose the reforms.
Frédéric Souillot, head of the Force Ouvrière union, said that the unions were willing to shut down the economy to stop the pensions law. “If for Emmanuel Macron this is the mother of all reforms, then for us it is the mother of all battles,” he said. For its part, the most left-wing of the unions, the CGT, has threatened to cut power supplies to members of parliament who support the proposed legislation.
Since pensions are funded by active workers, the alternative to raising the retirement age is raising pension contributions. Currently, workers pay seven percent of their salaries to the state pension fund and three to eight percent to an occupational pension plan. Employers also pay a share. That adds up to an effective rate of 28% on average earnings, the highest in the world after Italy.
France has 17 million retirees, a quarter of the population. By 2040, there would be 20 million pensioners. The working population is projected to remain stable at 30 million. Twenty years ago, there were two workers for every retiree. That ratio has fallen to 1.7 and would drop to 1.4 by the middle of this century. Inevitably, the pension fund has sunk into the red. A deficit of €13.5 billion is projected by 2030. With an increase of the age to 64, the system should be back in the black by then.