Pension Reforms in France: What’s Next for President Macron?
In January 2023, the French government announced its intention to increase the legal retirement age from 62 to 64, as part of reforms to the country's pension system. President Emmanuel Macron is determined to push the changes through a divided Parliament, despite opposition from labour unions, low public support, and the risk of strikes and protests. In 2019, President Macron's previous efforts to reform the pension system were met with massive street protests and a prolonged transportation strike. The government had initially planned to streamline the system by consolidating 42 different programs into one, rather than raising the retirement age. However, this caused confusion and concern among many French citizens, who feared they would receive lower pensions. The plan was put on hold due to the COVID-19 pandemic.
France has a pension system that is seen as a part of the country's identity, offering generous retirement benefits. However, President Macron and his government argue that changes are necessary to address the financial sustainability of the system, as life expectancy increases and the worker-to-retiree ratio decreases. This proposal has been met with opposition from labor unions and other groups who argue that it unfairly burdens blue-collar workers and challenges their right to retirement. The two sides remain at an impasse, with Macron's legacy at stake. The proposal has triggered months-long protests, with over a million people estimated to have participated in demonstrations between January and March. Some of these protests have been disruptive, leaving people without transportation or electricity and causing garbage to pile up in the streets. Police have detained hundreds of protesters, and gatherings in certain public places have been banned to quell the unrest.
A Critical Background
In January, French President Emmanuel Macron revealed a plan to increase the legal retirement age in France from 62 to 64 by 2030, as part of efforts to reduce pension costs. The proposal also includes a requirement for individuals to work for 43 years to receive a full pension, up from 42 years currently. The average monthly pension payment after taxes is around 1,400 euros.
France has long been debating pension reform, given that it has one of the lowest retirement ages in the world and one of the highest levels of pension spending. Macron's finance minister has argued that raising the retirement age would prevent the need for other potentially unpopular measures, such as reducing pension payments or increasing taxes. A report from France's Pensions Advisory Council in September 2022 projected that the pension system would run a deficit over the next 25 years, with a deteriorating financial situation between 2023 and 2027. However, the report also projected a return to break even by the mid-2030s, even without reforms.
Despite the urgency of the situation, previous calls for reform have faced significant opposition. Many French citizens are resistant to changing a system that has helped keep the country's poverty risk for pensioners among the lowest in Europe. During Macron's first term, plans to reform the pension system led to massive protests in 2019, and transportation strikes that extended into 2020, but were eventually put on hold due to the pandemic. In the past, protests have successfully convinced the government to abandon pension reform plans, such as in 1995 when then-President Jacques Chirac's efforts to increase the retirement age for some civil servants were met with weeks of widespread protests.
The issue of pension reform has long been a contentious topic in French politics, with previous attempts in 1995 and 2010 resulting in large-scale protests. This is the second time that President Macron's proposed pension changes have met with strong opposition. In 2019, during his first term, Macron's attempt to overhaul France's pension system sparked widespread street protests and strikes, including one of the longest transportation walkouts in the country's history. However, he put those plans on hold after the COVID-19 pandemic hit.
One key difference between Macron's first attempt at pension reform and his current proposal is that his initial project did not involve raising the legal retirement age. Instead, he sought to streamline the complex pension system by merging 42 separate programs into a points-based system that workers could accrue and redeem upon retirement. However, this plan was met with confusion and concerns that it would lead to lower pension payouts.
To address France's pension funding challenges, Macron is now proposing to increase the retirement age from 62 to 64. While he argues that this change is necessary to ensure the long-term sustainability of the pension system, opponents see it as an attack on a cherished right to retirement and an unfair burden on blue-collar workers. The proposed reforms have once again sparked massive protests and strikes, with unions urging workers to "bring France to a halt" and police cracking down on public gatherings.
Political Renaissance in France
Macron's political stance is centrist, and he sought to distance himself from traditional conservative and socialist ideologies when establishing his own party, La Republique en Marche!, during his 2017 presidential campaign. He positioned himself as a solution to stagnant politics and extremism, winning comfortably against the far-right candidate Marine Le Pen in both the 2017 and 2022 elections. According to a recent survey, French President Emmanuel Macron's popularity has declined significantly since the proposed pension reforms, with almost 70% of respondents disapproving of him at the end of March compared to 61% at the beginning of the year. This has led to increased division in French society, according to political analyst Steinbach. However, with Macron ineligible to run in 2027, analysts predict a more uncertain future for French politics.
The French President had pledged to make France's welfare system more sustainable by introducing reforms to reduce the fiscal burden of pension payments on the state. The proposed changes include increasing the retirement age, as the government argues that rising life expectancy necessitates such measures. This is similar to the reasoning behind the introduction of India's National Pension System during the Vajpayee government. Macron's decision to use special legislative powers to push through the pension reforms has added to the wider dissatisfaction with the political system in France. This effort comes amid a period of increased social tensions, leading to concerns that pension-related grievances could escalate into widespread unrest similar to the Yellow Vest movement, which began as a protest against fuel tax hikes but evolved into broader demonstrations and upheaval during Macron's first term in office.
The Use of Article 49.3
In France, the government can pass a bill without a vote in the National Assembly, the lower house of parliament, using Article 49, paragraph 3 of the Constitution. However, lawmakers have the right to file a no-confidence motion within 24 hours of the decision. If the motion is approved by over half the seats, the bill is rejected, and the government must resign. If not, the bill is adopted and becomes law. Since the establishment of the Constitution in 1958, only one no-confidence motion has been successful, in 1962. France's strong presidential powers were established to ensure a stable political system following the post-World War II period of successive, short-lived governments. The prime minister, appointed by the president, is accountable to the parliament. Critics argue that Article 49.3 prioritizes the government's views over legislative power, and recent polls indicate that a majority of the French population opposes the procedure, denouncing it as undemocratic.
The reforms have been met with protests for 11 days, as many feel they are necessary to balance France's public finances. However, the government has faced opposition from lawmakers and citizens, and their use of Article 49.3 to pass the legislation without a vote has caused further anger. Economist Shahin Vallée, a former advisor to Macron, believes the reforms will polarise voters and could have disastrous consequences for the French public in the medium term. He also believes that the reforms will give a boost to more extremist parties. Moreover, opposition leader Marine Le Pen has spoken out against the pension reforms, proposing to keep the retirement age at 62 and lower it to 60 for workers who began their careers before the age of 20 during the 2022 election.
Pension Reforms 2023
The French government's latest attempt to reform the pension system aims to address its financial instability by increasing the retirement age, a move that has been met with opposition. However, the government maintains that the reform is crucial to ensure the sustainability of the pay-as-you-go pension system, which relies on mandatory payroll taxes from workers and employers.
Despite concerns over the impact on specific individuals, the French pension system will continue to provide guaranteed state-backed pensions. In fact, France has one of the lowest rates of pensioners at risk of poverty in Europe, and its net pension replacement rate is higher than the O.E.C.D. and E.U. averages. The need for reform stems from the fact that the system's funding structure is being challenged by rising life expectancies, which have led to a decrease in the ratio of workers to retirees. In 2000, there were 2.1 workers paying into the system for every retiree, but in 2020 that ratio fell to 1.7. According to official projections, the ratio is expected to drop to 1.2 in 2070.
Mr. Macron has deemed the pension overhaul as necessary and indispensable to maintain the system's financial stability without further burdening taxpayers. His plan involves gradually increasing the legal age for pension collection by three months annually until it reaches 64 in 2030, while also abolishing special pension rules for certain workers and increasing the number of years required to qualify for a full pension.
Why are Citizens Protesting?
Critics of Mr. Macron's proposed pension overhaul contend that he has overstated the projected deficits and has refused to consider alternative ways of balancing the system, such as raising worker payroll taxes, disconnecting pensions from inflation, eliminating corporate tax breaks, or increasing taxes on affluent households.
They point out that even the official watchdog that oversees France's pension system has acknowledged that there is no immediate risk of insolvency and that predicting long-term deficits accurately is difficult. Opponents argue that forcing people to work longer will disproportionately harm blue-collar workers, who frequently begin their careers earlier and have a shorter life expectancy than their white-collar counterparts, on average. The idea of delaying the retirement age has prompted sporadic walkouts by employees in schools, public transportation, fuel refineries, and other industries.
In January, Philippe Martinez, the head of France's second-largest labour union, C.G.T., stated that raising the retirement age to 64 is not feasible, as it would be unfair to blue-collar workers who often have physically demanding jobs with shorter life expectancies. Some individuals are also concerned about age discrimination in the labour market for older adults who want to work but may lose their jobs. The unpopularity of Macron's plan is also rooted in existing resentment against him, as he is perceived by some as an out-of-touch "president of the rich." Jean Garrigues, a prominent historian of France's political culture, believes that Macron's association with the project has only intensified the opposition to it, resulting in heightened theatrics.
The Road Ahead
In an effort to address opposition to the pension overhaul, the French government proposed measures such as exemptions for early retirees and assistance for seniors to stay employed, as well as an increase in smaller pensions. However, these concessions were not enough to satisfy unions and opposition lawmakers, who remained strongly against the increase in the retirement age. While the Senate approved the pension bill, Macron's party no longer holds a majority in the lower house of parliament, the National Assembly. To ensure the bill's passage, Macron relied on Article 49.3 of the Constitution, which allows the government to bypass a vote in the National Assembly but exposes it to a no-confidence motion. A no-confidence motion put forward by the far-right National Rally party failed, but another motion supported by a coalition of opposition parties fell just nine votes short of succeeding. The use of Article 49.3 has been criticized as undemocratic, and its use in recent years has become increasingly controversial.
Opponents of President Macron are exploring alternative ways to challenge the new pension law. Some lawmakers have initiated a referendum, which is a lengthy and complex process that has never been successful before. Others have taken the matter to the Constitutional Council, which is responsible for ensuring that legislation complies with the French Constitution. The key question is whether the government's use of parliamentary procedures reserved for budget measures to speed up the parliamentary process is constitutional. The government is confident that the law will hold up to scrutiny. Some lawmakers and union leaders are calling for renewed strikes and demonstrations to force Mr. Macron to abandon his pension overhaul. In 2006, the French government abandoned a controversial youth jobs contract after it became law due to popular protests. However, so far, President Macron has refused to back down on the pension reform.
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Pic Courtesy-Marc Szelat at unsplash.com
(The views expressed are those of the author and do not represent the views of CESCUBE.)
