11 January 2023

Will pension reform be Macron’s Waterloo?

By Gavin Mortimer

Yesterday may come to be remembered as the most significant date in the ten year presidency of Emmanuel Macron. It was the day when his centrist government, fronted by Prime Minister Élisabeth Borne, announced the reform of France’s pension system. From September 1st this year, the age of retirement will rise from 62 to 64.

Macron intends it to be the most important measure in his overhaul of the French economy, the fulfilment of the promise he made when he was voted into office in 2017.

His strategy is to sell the reforms as an urgent necessity. The country is massively in the red (the public debt to GDP is 113.7%) and in 2021 the pension system cost the state 14% of its GDP. A recent report by the Pensions Advisory Council stated that between 2023 and 2027, ‘the pension system’s finances will deteriorate significantly, reaching a deficit of between 0.3 and 0.4% of GDP’, equating to approximately €10bn a year.

Borne said that it would be ‘irresponsible’ of the government if they did not address the deficit. ‘It would lead inevitably to a massive increase in taxes, a reduction in pensions and would pose a threat to our pensions system,’ she explained.

The reforms will raise the retirement age but there are other measures, including, from 2027, an increase in the annual contributions made by workers before they are entitled to a full pension. It will be 43 years, said Borne, adding that: ‘Working more will allow future retirees to get higher pensions. By 2030, our system will be financially balanced.’ 

There will be also be the cessation of special pension privileges for new employees in some sectors – notably public transport workers.  

Some professions – police officers and firefighters, for example – will still be able to take early retirement, as will people whose working life begins in their teenage years. People who start working at 16 will be able to retire at 58. 

Conversely, people who begin working later in life, or women who put their careers on hold to raise families – will have to work until 67 if they wish to retire on a full pension.  

There are also sweeteners in the reform bill, such as an increase in the minimum pension for low-income workers to 85% of the net minimum wage. This will be also apply to people in that category who have already retired.  

The government is also restoring the phased retirement system for civil servants, which was abolished a decade ago, whereby state employees can start working part-time two years before they retire. 

The government’s main argument for the reform is the fact people now live far longer than they did half a century ago, and the pension system is sustainable only if this longevity is extended to their working lives.  

A swathe of the country agrees. The centre-right Republican party support the bill, as do many economists, who for years have been warning that the state must reform the pension system. An online poll in Le Figaro, France’s equivalent of The Daily Telegraph, asked readers if they approved of the reforms: by Wednesday morning nearly 100,000 people had responded and 61% were behind the government.

Other polls tell a different story. One, published at the start of the week, found that 80% of people polled were opposed to any change to the age of retirement. To reach for a crude generalisation, one might say this is a blue-collar vs white-collar issue; the WFH middle-classes, who see no problem with working a couple of years longer in their comfy, well-paid jobs against those on low wages who don’t work in warm offices. 

The reform bill will be presented to the Council of Ministers on January 23, four days after a day of protest strikes. The date was announced on Tuesday evening by France’s eight main trade unions, the first time in 12 years that they co-ordinated industrial action.  

One union leader, Frédéric Souillot, of the far-left Force Ouvrière, has promised the ‘mother of all battles’ over the reforms. Political leaders of many stripes are also spoiling for a fight with the government, from the left-wing La France Insoumise (LFI) to the Greens to Marine Le Pen’s National Rally, which is right on social issues but left economically. ‘The French can count on all our determination to block this unjust reform,’ tweeted Le Pen on Tuesday night. 

There is fear among the police that the reforms, combined with the cost of living crisis, particularly soaring energy bills that are putting households and small businesses under great strain, could be the spark for serious social unrest. A leaked Intelligence service memo last week expressed concern that protest movements unconnected to trade unions – similar to the Yellow Vest uprising of 2017 – pose more of a threat to law and order than organised industrial action.  

The unions and the workers are confident that they will force the government to back down, as they did in the autumn of 1995, the last time any meaningful reform was attempted. On that occasion the newly-elected president Jacques Chirac surrendered to the street protests. But Macron is in his second and final term of office, and he believes the influence of the unions has diminished this century. He also thinks that deep down most French people, while they might not like the idea of reform, accept it is a necessary evil.

He’ll find out soon enough if he’s right. 

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Gavin Mortimer is a writer based in Paris.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.