BEERG Newsletter - France: Pension reform battle about to kick-off

This week will see the French government push ahead with plans to overhaul the costly pensions system by raising the retirement age, risking renewed street protests after unions announced their total opposition. The far left and the far right are also politically opposed. The government wants to bump up the retirement age from 62 to 64 or 65.

President Macron’s centrist alliance now holds 251 seats in the national assembly — short of the threshold of 289 needed to pass laws — so passing legislation has become harder. Polls show about 70% of people oppose raising the retirement age.

Revamping the pension regime was a key plank of Macron’s re-election campaign and comes after he tried a different version of the reform in 2019 that was abandoned during the pandemic. The president says raising the retirement age is the only way to preserve the system as the ratio of workers to retirees falls in the coming decades. He has ruled out other approaches, such as raising taxes, lowering pensions, or adding to the public debt.

The government also argues that raising the retirement age is needed to improve France’s relatively poor record on keeping older people in the workforce. Its employment rate for those aged 55-64 is 56%, compared with a 59% average in EU countries and 61% across the OECD group of advanced economies. Only about half of the French are still working when they reach 62.

The state pension system, which relies on workers funding retiree benefits, will have a slight budget surplus this year, according to a recent report from a governmental pension advisory panel. But deficits are forecast in the coming decade and beyond as the number of workers per retiree falls from 2.1 in 2000 to 1.7 in 2020 and 1.2 by 2070.