“We must save our pay-as-you-go system, and we must save it together,” declared French Prime Minister, Jean-Pierre Raffarin, in a rousing oratory to France’s economic and social council on February 3.
The rhetoric will have been lapped up by the 300,000 plus protesters who had just taken to the streets of France to demonstrate against government pension reform proposals, despite their being little in terms of a concrete reform agenda on the table.
Indeed, few people in France, whether union members or employers would have disagreed with the sentiment – striking as it did at the heart of the egalité and fraternité that still mobilises much of French society.
It may have seemed more puzzling to outsiders who have looked at France’s holy cow – the répartition (pay-as-you-go) retirement system – and deemed it bankrupt in the face of impending demographics.
France is well aware that répartition alone will not meet the country’s pension commitments in the 30/40 years ahead, as Raffarin himself acknowledged in his speech: “Today, retirement, this pillar of our social equality, is destabilised by an unfavourable demographic against which we have to take full measures.”
France’s ‘full measures’, however, differ dramatically from the transfer of responsibility to the individual seen in the UK or US.
The French would call their approach more ‘holistic’, involving as it does suggestions of minor contribution increases, slightly longer working lives, reduction of early retirement, and, in true French style, having more children to beat back the demographics!
Nonetheless, Raffarin was serious that action had to be taken soon.
He pointed out that maintenance of the current French retirement system would, by 2040, mean either that everyone worked for six years longer, contributions would be increased by half, or the level of pensions would have to be reduced by a third.
Proposing to come up with some form of legislation before the summer vacations this year, he outlined three objectives for action: contribution levels, contribution durations and pension levels - all of which, he noted, would have to be addressed by social dialogue in the coming months.
While everyone may agree that the system of répartition needs saving in France, the sous-entendu of Raffarin’s proposals is not to everyone’s liking…
Public sector unions believe the government is trying to increase the duration of contributions for public-sector workers to 40 years. In turn, the unions oppose any plans to make people work past the age of 60 before receiving a full pension. For this reason, Raffarin has to tread carefully.
In his speech he referred constantly to a ‘progressive’ reform – meaning nothing that would jolt the unions into any defensive postures. Furthermore, he reiterated constantly that French retirement levels would not drop and that generational solidarity would not be affected – mess with these two issues and you’re not likely to survive to a second term.
There were signs of liberalisation in his approach, however. Raffarin alluded to plans proposed by the UK government, whereby individuals could choose to work beyond the set retirement age if they so desired, as one possible path to be explored. He also reiterated plans to introduce Anglo-Saxon type top-up plans for individuals wishing to save more.
The timetable for reform was also laid out precisely. By March, Raffarin said, there would be discussion with social partners to get a ‘convergent’ view.
The government would then present its pensions ‘project’ during the spring with a vote in the French Parliament to come before the summer. It remains to be seen whether the reform will be as practical and effective as the Prime Minister’s rhetoric was polished and reassuring.