Yesterday was unusually quiet here in France profonde. Almost no traffic. Most people stayed home if they could. We slept in late. This impromptu vacation day was thanks to the national strike against pension reform.
I wanted to have a light, happy post today after last week’s Debbie Downer rant. But yesterday’s strike, which is continuing today, is inescapable. Even if you don’t live here, you probably want to retire one day, so read on.
The French system is pretty generous, but demographics–folks live longer and have fewer babies–mean that while there were five workers for every retiree in 1960, today there are three. While pensioners and those close to becoming one argue that they paid for their retirement, the system is like many others, including Social Security in the U.S.–those working now pay for those retired now. It isn’t an account like a 401(k) where you put in your money and you have it later.The problems with 401(k)s are that (1) most people don’t save enough, (2) those who do save don’t invest the money wisely, being either too risky or too conservative and (3) if the market drops when you want to retire, you might not be able to afford it. As with any investment, you could lose everything.
A broader system offers better protection for the average Jacques. Also, because it’s run by the government, workers don’t have to worry about their employer going belly-up and their retirement disappearing in a poof of smoke with it. Remember Enron? A few greedy guys made some sour deals and cooked the books, bringing down the company. More than 9,000 employees had retirement plans based on Enron stock, which became worthless. The problem in France lies in the details, as is often the case. There’s retirement for a special few, and then retirement for everybody else. President Emmanuel Macron wants to get rid of the 42 régimes speciaux, which cover only 3.4% of the working population. Most French think the exceptions should be abolished–most of them don’t benefit. Probably many of those with an exception think the other 41 régimes are unworthy, but don’t even THINK about touching theirs. And some fear a domino effect–if one exception is eliminated, then the others will eventually go as well.
I have a friend who retired in her 40s. Seriously. She was a secretary for a notaire, or notary. In France, notaries are inescapable, necessary for formalities for property purchases, wills, etc.–more like lawyers than like a notary public in the U.S. The notaries created a special retirement regime in 1937, before the general one, and their exceptions got grandfathered in. Granted, they pay in a lot more than regular workers do. In general they retire if they are 55 and contributed for 25 years, but there’s an exception to the exception, which my friend enjoyed: If you worked 15 years for a notary and you have three kids, you can retire at any age you want.
Ballerinas at the Opéra de Paris (but not ballerinas elsewhere!), can retire from age 40 to 60, having paid in for 10 to 15 years (there are subcategories to this subcategory). Extra credit for having kids. It’s true that being a ballerina is physically taxing, poorly paid and not something that translates to other professions. If you have an injury and can’t continue, your options could be limited.
We know somebody who was a train conductor (as in ticket taker, not driver). Yes, decades ago, working on a train was dirty and dangerous. But today they are electric and automated. He says, “When I was hired, I signed a contract with the terms that I would retire when I was 60. They have to honor that.” I pointed out that when he joined the railroad, life expectancy was 73. Now it’s 83. The contract was based on calculations for the lower life expectancy, even if that wasn’t stated explicitly. Was he willing to live (or die) up to his side of the bargain? He sputtered and admitted that people living longer in retirement would require more money, but that should come from somebody else, not him. Younger people should pay more. Not so easy. Youth unemployment is high–almost 21%–for a bunch of reasons. One is that workers enjoy some protections from being fired, so employers try to make do without hiring rather than get stuck with a bad apple. That also is changing, with protections being chipped away–sometimes for the better, sometimes not. The bane of gig jobs is creeping in, like kudzu or some other invasive species. But changes to worker protections did help lower unemployment overall to 8.5% from double digits a few years ago.
People say, well, older workers should retire and make way for younger ones who need jobs. But this is bad for the economy. The French call retirement “les grandes vacances”–the big vacation–but it’s really more akin to unemployment: It’s taking money from working people and giving it to non-working people. The more people who work, the more the economy hums, and the more jobs there are. In the case of Japan, where 30% of working-age women don’t work, every one percentage point increase in work participation by women would boost the economy by half a percentage point. It makes sense–you turn to services to make life easier, maybe ordering takeout or going out, having the house cleaned and laundry done, looking good by having haircuts more often. It doesn’t have to be all about consumption of stuff.Raising the retirement age is inevitable–retirement initially was based on an age that most people wouldn’t reach. So yes, you would work until you died. The idea wasn’t for a big vacation but to prevent the elderly, no longer able to earn a living, from becoming destitute.
In effect, broad-based pensions are demographic Ponzi schemes that worked until the baby bust. This is not an argument for more babies–far from it, the global population is big enough–nor is it an argument against government pensions. It’s an argument that nothing is set in stone, and that programs have to adjust. It isn’t sustainable to have people work for 30 years and be retired for 40. Even a 40-40 split doesn’t work. Retirement has to be shorter. Retiring later beats dying earlier.Working longer is easier said than done. I know so many people who have been laid off (not in France, though), even as their employers advertise job openings. I suspect my friends have been culled because they’re too expensive. They are all extremely sharp and diligent, so it isn’t because of their productivity. Their employers are profitable and hiring. Employers increasingly look at workers as disposable, even in sectors that need “knowledge” workers. With job applications now almost entirely online, it’s hard to cut through the algorithmic filters, even if you don’t fill in your graduation dates or if you drop off a decade or two from your résumé. If they want 5-7 years of experience for a “senior” job, then you’ll be spit out if you have pared down your experience to 10 years. Older people (anybody over 50) are considered slow, lacking innovation and tech-savvy.
It all means the problem is thornier than just changing the age, and look at what that step provoked. 800,000 protesters across France yesterday. I really love the way the French take to the streets to show what they believe in–Je Suis Charlie, Nous Toutes, the environment. On the other hand, I often disagree with their causes. The Gilets Jaunes originally were mad about a pollution tax. And with the pension strike now, it’s about people saying “I want mine even it it costs you.” Every French person under age 50 who isn’t part of the 3.4% enjoying special status should be out in the streets protesting in favor of change. They’re the ones getting stuck with the bill.