By Leigh Thomas
PARIS (Reuters) – French President Emmanuel Macron may have pushed through his unpopular pension reform but only at great cost to his political capital, which he is now seeking to repair by offering talks with trade unions on other issues.
Given that his pension plan, which raises the statutory retirement age from 62 to 64, merely puts France more in line with its European Union neighbours, some foreign commentators have wondered what all the protests and public anger were about.
But that fails not only to grasp why the French saw the 62-year retirement age as a cherished social benefit but also the concerns of the many workers whose personal situations meant they were excluded from it and now face later retirement.
CAN THE FRENCH RETIRE EARLIER THAN OTHERS IN EUROPE?
In theory, yes. Along with Greece, France currently has the lowest statutory retirement age in the European Union, where the average across the 27-nation bloc is 64.8 years.
Comparatively lower retirement and high life expectancy mean that the French do indeed spend longer in retirement than many other countries, according to data from the Organisation for Economic Cooperation and Development.
The OECD calculates that a French man typically spends 23.5 years in retirement, second only to Luxembourgers’ 24 years and well above the 20 years that men in Britain and Germany spend retired.
ARE THEY BETTER OFF THAN OTHER PENSIONERS?
French pension payments as a share of pre-retirement earnings are comfortably higher than elsewhere. A French retiree’s pension post-tax income comes in at nearly three-quarters of their pre-retirement earnings compared with 58% in Britain and nearly 53% in Germany, according to the OECD.
Such largesse comes at a cost. France spends nearly 14% of economic output on its pension system. That is nearly double the OECD average of 7.7%, with only Italy and Greece spending more than France.
But such high spending helps keep France’s poverty rate for retired people among the lowest in the developed world at only 4% of the population compared with an OECD average of 13% while inequality rates are also lower than average.
DOES EVERYONE BENEFIT?
Not exactly. While France stands out for its low standard retirement age, the picture is less clear cut than it first seems because when a worker retires also depends on how long they have made contributions to the pension system.
The period workers are required to pay in is gradually being raised from 42 to 43 years, and Macron’s reform brings forward the 43-year target to 2027 from 2035 previously.
More than one third of French workers already leave the workforce later than 62, according to the Conseil d’Orientation des Retraites, an independent panel that provides pension analysis for the government.
Often people who started working late because of higher studies or who took time out from their careers to raise children have to work well past 62. Anyone can now and after Macron’s reform retire at 67 with a full pension regardless of how long they pay in.
The OECD estimates that the normal retirement age for a Frenchmen who started work at 22 is 64.5 years, fractionally higher than the EU average of 64.3 but behind Germany’s 65.7 years.
However, because many countries allow exceptions for early retirement and some people retire before a full pension is earned, the average effective age is in many countries lower than the standard legal age.
In France the average effective age people leave the labour market is 60.4, well below the OECD average of 63.8.
NOW WHAT?
In a prime-time televised address on Monday night, Macron explained to the French that “working a bit longer, as our European neighbours have done”, will create more wealth for the economy and allow greater levels of investment.
Opposition parties and unions say that Macron’s plans are a brutal attack on the country’s welfare model, where hefty taxes and pension contributions fund generous social services.
Macron’s government says that raising the retirement age will plug a 13.5 billion euro shortfall the pension system would otherwise be running by 2030.
However, a study published on Tuesday by the Rexecode economics think tank suggested that the government’s expected gains were overly optimistic and a shortfall would likely remain.
(Reporting by Leigh Thomas; editing by Mark John and Nick Macfie)
