PARIS—France may be in for months of social unrest, as French President Emmanuel Macron plows ahead with his controversial bid to reform one of Europe’s most generous pension systems, unfazed by the 1 to 2 million protesters that took to the streets last week as part of a first wave of paralyzing strikes.
It’s a make-or-break moment for Macron, whose legacy as a reformer will largely depend on his ability to overcome France’s powerful trade unions and impose a wildly unpopular bill that would force many French to work longer. Much of the developed world faces a similar dilemma, striving to keep retirement schemes afloat in the face of aging populations amid fierce debates about who should foot the bill.
Macron “wants to show that he is capable of transforming French society, that he’s not just handling the day-to-day business,” said Luc Rouban, a political scientist at Sciences Po in Paris.
PARIS—France may be in for months of social unrest, as French President Emmanuel Macron plows ahead with his controversial bid to reform one of Europe’s most generous pension systems, unfazed by the 1 to 2 million protesters that took to the streets last week as part of a first wave of paralyzing strikes.
It’s a make-or-break moment for Macron, whose legacy as a reformer will largely depend on his ability to overcome France’s powerful trade unions and impose a wildly unpopular bill that would force many French to work longer. Much of the developed world faces a similar dilemma, striving to keep retirement schemes afloat in the face of aging populations amid fierce debates about who should foot the bill.
Macron “wants to show that he is capable of transforming French society, that he’s not just handling the day-to-day business,” said Luc Rouban, a political scientist at Sciences Po in Paris.
Some of the proposed measures, such as beefing up minimum pensions and merging France’s dozens of different retirement schemes, go down well with many people. But the government is also planning to gradually increase the minimum retirement age for most people from 62 to 64 by 2030, a move that has infuriated trade unions and the left as it would disproportionately hit low-pay workers who didn’t get a higher education and entered the job market early in life.
French pensioners are taken care of better than almost anywhere else in the world. They spend more time in retirement than in any other European Union country except Luxembourg and have roughly the same income as the French population as a whole, against an Organization for Economic Cooperation and Development average of less than 90 percent. Only 4.4 percent of French over age 65 live in poverty compared to 9 percent in Germany and 23 percent in the United States.
The French pension system consists of a variety of regimes into which workers and employers pour a hefty percentage of each paycheck, with every year’s contributions being used to fund that year’s pensions. Although the books are largely balanced for now and total pension payments are projected to remain stable as a percentage of GDP, the mechanism is expected to start running a deficit in 2023 for the next quarter of a century, meaning that the state coffers will need to make up the difference.
Many conservatives accuse this mechanism of being unsustainable and of burdening workers and businesses with excessive costs. “The British have Ireland. The Americans have guns. We have pensions,” former right-wing Prime Minister Édouard Philippe recently told AFP news agency.
The government says it wants to fix the system to save it and that pushing people to retire later is necessary given the steady increase in life expectancy. The ratio of older adults to working-age people is expected to jump from 37 to 100 in 2020 to 55 to 100 by 2050. According to French Finance Minister Bruno Le Maire, the reform would avert a deficit, saving some 18 billion euros ($19.6 billion) in 2030 alone. For critics, however, the government’s fixation on eligibility age is the result of a precise political choice: balancing the books at all costs, preferably by dipping into the pockets of the working class.
“The tax brackets in France are completely unfair; there is money to be found at the top,” said Alain Laute, a 75-year-old former metal worker who took part in a left-wing rally against the pension reform over the weekend. “What Macron calls modernization, we call dismantling the welfare state.”
Even as it is, the French pension system is a far cry from fair. Workers’ pensions are proportional to their salaries, but the poor live shorter lives and end up paying for the wealthy’s longer retirements, said Antoine Bozio, an expert on pensions at the Paris School of Economics. “Macron’s reform does not resolve this inequality issue, nor does it try to,” Bozio said.
With median-age and retiree-to-worker ratios on the rise all over the developed world, the French government is hardly the only one with difficult decisions to make. In the United States, U.S. President Joe Biden and the Democrats are facing pressure from the Republicans to cut social security and medicare, two popular programs American seniors heavily rely on, as part of negotiations over the debt ceiling. (Neither program is funded primarily through the general budget since they have specific funding sources of their own, and the programs have no bearing on the budget battles.)
Germany, Spain, the Netherlands, and Belgium are all lifting the minimum retirement age to 67 over the coming years, and the United Kingdom is lifting it to 68. In Italy, freshly elected Prime Minister Giorgia Meloni promised to soften a pension reform bill passed at the peak of the financial crisis a decade ago, whose harshness brought the very minister who had conceived it to tears. But for now, confronted with the reality of a country drowning under sky-high public debt and one of the fastest demographic declines in the world, even the populist Italian leader has found herself forced to tighten the belt, limiting eligibility for an early retirement scheme for women.
Pension systems’ self-reliance is hardly the priority everywhere though. Hungary and Poland have recently expanded benefits for pensioners, creating financing gaps that taxpayers will have to make up. Mexico, too, has massively beefed up minimum pensions and old-age safety nets over the past few years, with funding coming at least in part from the state budget.
In France, even without a reform, the pension system’s deficit is expected to remain relatively manageable over the coming years. (In 2027, only about 11 billion euros (almost $12 billion) out of a total of 350 billion euros ($381 billion) of disbursed pensions won’t be covered by workers’ contributions.) And some economists point out that there are other ways to tackle it, whether bringing back a recently scrapped production tax on businesses or changing a rule that exempts employers from pension contributions on higher salaries. But the government seems keener to reduce spending than pour fresh resources into the system. “This reform’s main objective is budgetary sustainability,” Bozio said.
The bill is part of a wider government effort that entails both tax cuts and fiscal consolidation, and many experts see it as a pivotal moment for Macron’s political identity. The market-friendly French president has always refused to be boxed into the traditional left-right categories: One of his first measures in office was scrapping a long-established wealth tax, but during the COVID-19 pandemic, he vowed to spend “whatever it takes” and put in place one of the most generous economic relief programs in the world.
But after winning reelection last year largely thanks to well-off voters, “Macron is clearly placing himself in the right-wing camp now,” Rouban said. “His reform is a long-standing demand of the economically liberal right.”
Thanks to the backing of the Republicans, France’s main conservative party (which Macron largely hollowed out in the last presidential election), the French Parliament is expected to greenlight the bill in a matter of months. But like with the French pension reforms of years past, the fate of the government’s project will be decided in the streets, which already saw a first wave of protests against Macon—and more are in store.
In 1995, then-conservative Prime Minister Alain Juppé was forced to back down from his attempt to delay retirement in the public sector after a general strike hurt train and metro services for three weeks, but a version of that reform was ultimately imposed by another right-wing government a few years later. Macron himself already embarked on an ambitious pension overhaul—though with a different, more redistributive approach—between 2019 and 2020. That attempt, too, triggered a wave of mass protests before being shelved when the pandemic struck. Now, his latest reform is opposed by 66 percent of the French. Buoyed by last week’s turnout, trade unions have called for a new day of nationwide protests on Jan. 31.
“The problem is that the government is focusing on financing and budgetary issues while the French are focusing on social rights,” Rouban said. “They are not speaking the same language.”
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