French pension reform in a nutshell

The new pension law raises the retirement age by two years to 64. Compared to other western countries, this is not an unreasonable expectation. At the international level, there is no shortage of critics deriding the wave of strikes as a childish whim of lazy French and even praising Macron for his uncompromising stance. 

In many European countries, the retirement age is gradually increased and linked to the average life expectancy (for example, Germany, Belgium, and Spain). But in France, retirement will depend on contributions of 176 quarters (43 years). Retiring with the full-rate pension at 64 will be possible only for those who will have finished paying all the required contributions by that time. Others who fail to meet the condition will have to work until they have paid off all quarters or until they reach the age of 67.

While it seems to be a fair condition rewarding those who put enough effort into supporting the pension system, the French job market is not distinctively narrow and highly competitive. Despite the shifting perception of the retirement age, the approach towards work, which strictly promotes linear careers, remains unchanged.

In France, entering the workforce begins with the high school exit exam, after which young people build their professional profile by choosing a university major corresponding to their future careers. The educational system strictly limits the ability to gain first professional experience. Internships are only available to university students and must conform to the chosen major. Although the premise of this approach, to guarantee students the opportunity to practice their chosen career path, was well founded, in the light of the pension reform, it will put young people in a precarious position. Job offers almost always require candidates to prove the appropriate professional profile backed by relevant higher education and experience. Quite simply, this means that those who cannot secure a job in their profession become unemployed for months, sometimes even years.

In many Western countries, job markets are becoming more flexible, and employers accept self-education or candidates with various skills and experiences, proving their capacity to adapt. France is stuck with its old approach regarding only educational institutions as the only acceptable method of changing professions. But for those already past their student years, it’s often impossible to sacrifice another 2-3 years of their resume, not to mention the impact on the contributions. Still, some decide to self-educate and shift towards a different professional path. Nowadays, careers are rarely linear and uninterrupted, but the particularity of the French job market contributes to prolonged periods of unemployment. Any postponement of graduation, for example, because of exchange programs, will also delay retirement. Involuntary breaks in a professional resume are nowadays practically inescapable and have become more of a standard than an exception. Women will be particularly affected, as they are more likely to drop out of the labor market or take part-time jobs because of motherhood and gender inequalities.

In other words, the majority will not be able to retire until the age of 67 due to being unable to pay off the contributions before. Therefore, a small change, supposed to be only two years, suddenly becomes half of a decade, at least for most.

The pension reform will also negatively affect those entering the workforce in their teens. So-called “long careers” concerning people who started working before the age of 20 will allow retiring earlier, but the overall conditions are unfair. Regardless of the retirement age, eligibility for the premium for working longer begins after reaching the age of 64. That said, people qualified for earlier retirement will be disadvantaged if they continue to work to obtain bonuses. Another important note is that those exercising “long careers” often perform physically demanding work associated with a high risk that is not equivalent to office jobs. But to retire earlier and obtain the full pension, they will be equally obliged to have an uninterrupted career history. Physical workers might not meet the prerequisite due to seasonal breaks, accidents, and other health problems. Additionally, the capacity to remain professionally active in these professions naturally decreases with time because of the aging process, thus drastically limiting earning potential in the later stages of life, and their life expectancy is shorter.

The reform will be especially palpable for people born after 1960, who will be the first concerned. Le Monde examined several cases of such workers and how the reform will affect their retirement. Pascal, born in 1968, has worked as a hairdresser since he turned 18. He will be able to retire at 62 instead of 60. He will have to work one and a half years longer, and the contributions he will pay by that time will exceed the required amount (176 trimesters equal to 44 years of work). Emmanuel, an office worker born in 1965, will have to work nine months past his retirement age to pay off all the contributions and receive the full pension. Sylvie, born in 1962 and unable to work, will retire as expected, but her annuity will be slightly lower after the reform.

Contrary to popular opinion, it’s not just two years. For most people, it will be five. The pension reform wrongly relies solely upon the average life expectancy without taking into account the differences between particular professions or recent changes in the job market. Workers about to retire are justified in feeling deceived by a sudden change of rules, which in most cases will be unfavorable. But the dominant emotion is fear of those who perform “long careers” pushed to work unfairly longer by the new law. Anxiety is equally tangible in younger generations, currently entering the workforce, who realize how fragile careers have become by experiencing their first job huntings and layoffs. The aftermath of the pandemic that brought an enormous sense of instability also plays a crucial role in the judgment. Perhaps, pension system reform is an inevitable scenario, but it has to encompass the whole reality of the French labor market, not just the retirement issue. From the people’s perspective, the government rams through the unpopular reform without considering alternatives that could avert or lessen its negative impact. Critics of the new law, including the green party (Europe Écologie Les Verts), propose saving the pension system by eliminating tax exemptions for companies and taxing dividends. According to Le Monde, more than 460 tax exemptions cost the state budget nearly 90 billion euros each year. Other proposed solutions include a slight increase in contributions or pensioners’ taxes.

By avoiding public debate and trying to push through the reform at all costs despite criticism, the government has caused widespread outrage, which may weigh on the state’s future and democracy.