Pension Reform, Part Deux: The Good, the Bad, and the Ugly

Retirement reform is a third rail in French as it is in American politics. In both countries, the issue is the same: will old age be synonymous with poverty? And the generational aspect (Pay as You Go), that is to say the idea that current workers are paying to support retirees, and will in turn be supported by the next generation, is also the foundation of the French system–or rather, of all 42 of them.

The French would not want to hear this, and likely would not be reassured by it, but the pension reform plan proposed by Macron is similar to the social security plan of the United States. Everyone, regardless of profession, pays in, and then takes out, according to their work record, when they retire. There are some adjustments for women who have worked as housewives, for the disabled, for minors, and there is a minimum for those who did not, for whatever reason, pay in. There is an age you have to reach to get full benefits (66 in the US, as opposed to 62 in France; the average lifespan in the US is about 78 years, compared to 82 years in France). When a demographic adjustment is needed, the US government raises the amount of taxable income, as they are doing this year: social security taxes, currently paid on $132,900 of earnings, will now be collected on $137,700 of earnings (USA Today, January 17, 2020). The system works well, and is based on what one might call the solidarité of all Americans. In France, each of the 42 existing systems goes out of demographic or financial balance between contributions and distributions on occasion, which means that different occupations contribute on a different scale any given year.

At the same time, successive French governments have tried to encourage individual savings, as well as investment in mutual funds (capitalisation) by providing a number of relatively attractive options, most recently with the PACTE law, passed under Macron. Unfortunately, as is the case throughout industrialized economies, wages have failed to keep pace with the rising economy. Many would undoubtedly like to invest in retirement savings, but (in the United States) they wind up paying for their children’s schooling and for eldercare. That is not entirely the case in France: the public health system, and virtually free universities, have removed some of those burdens. Nevertheless, many French either cannot or do not wish to invest in retirement savings, believing that one of their 42 individual pension plans will protect them. If the French adopt the Social Security system, they like the Americans will inevitably have a problem with the Republicans (Les Républicains) who will always want to cut “entitlements,” but I’m confident that the French could rise up, if necessary, against that danger.

Seen from this angle, the “point” system seems an unnecessary mystification that should not have been front and center. Certainly it was a real source of concern, as signs reading “No retirement by points” were part of every procession (now more likely to be replaced by a reference to “Macron’s reform,” as the fight has become bitterly personal).

In mid-December, when the General Strike was at full strength, Les Echos, the financial newspaper, interviewed Marisol Touraine, the former Minister of Social Affairs and Health under the Socialist government of François Hollande (2012-2017).   Asked about the reform as a whole, as well as the point system, she noted that she did in fact believe that the existing system required serious change, because it was hurting France’s economy and its image: “The universal system has the merit of promoting the fluidity of professional careers, and allowing those French people on the margins some choice; increasingly we pass from one sector to another, a bureaucrat becomes self-employed, etc.”  She stated that she would not have chosen a point system, but that it was nevertheless merely a method of calculating: “It merits neither the excessive honor nor the indignity which it is accorded by those who have made of it a totem.” She was however very critical of the importance the government had given to the financial aspects of the reform, which led to the suspicion that the government was trying to save money by cutting the standard of living of the retirees.  She suggested that Macron should go back to what he had said as a candidate in promising a simpler system, one that was “modernizing, emancipating,” and more suitable to individual needs (Les Echos, December 16, 2019).

Indeed, Les Echos speculated that in terms of reaching equilibrium (contributions and payouts) the reforms would not make much of a difference. The cost of pensions amounts currently to about 14% (actually 13.8%) of the PIB (which means GDP). The comparable figure in the US is about 5%. With the reform as currently (January 24, 2020) described, the percentage would go down to 13.3% in 2040, as compared to 13.5% without reform. Raising the retirement age to 64 years in 2027 would have decreased the percentage cost, but this proposal has been temporarily fudged to provide a certain cover to the CFDT, the one union that is friendly to the reform (Les Echos, January 24, 2020). This will not, in short, be a money-saving reform–unless the retirees get less.

The proposal has yet to face the full weight of the National Assembly and Senate. There is a possibility that the government might use Article 49-3 of the French constitution to pass it quickly, by making the bill a vote of confidence. This option, available for the passing of a Finance Bill or Social Security Financing Bill, simply means that without taking a formal vote, the prime minister states that the bill has passed. Opponents then can bring forward a motion of no-confidence. If the motion passes, the cabinet must resign; if it does not, the bill is passed (Constitution of the Fifth Republic, English version).

This process can save the majority party from having to go on record in favor of an unpopular bill. It also allows for greater speed and a shortening of the debate. As things now stand, La France Insoumise (LFI), the “Left of the Left,” are engaging in overt obstructionism. Of the 22,000 amendments brought forward on the law, 19,000 of them have come from this small fraction of the National Assembly (17 seats, out of 577). These are not, it almost goes without saying, good faith amendments.

Gérard Larcher (LR), the president of the Senate, recently urged the government not to use 49-3 because “that always ends badly.”  No one, Larcher pointed out, had yet had time to digest what the reform said.  He roundly blamed the government’s process: they had put the proposal together over the course of two years without answering the essential questions about age of retirement, contribution level, or pension level.  They had issued very little information, and some of what they did issue had proved to be inaccurate. They had not done the financial projections needed to make an informed choice; and then they wished to push the bill through both Chambers in three months. He noted that the Conseil d’État, which had recently condemned the draft proposal it had seen, had also singled out the inadequate financial projections.  As for the 22,000 amendments, he urged the government not to confuse the serious work of the Senate and Assembly with “caricatures” of amendments, strongly implying a condemnation of those 19,000 pur forward by the LFI. But because of the mishandling of this “essential” reform, people had moved from support to suspicion to rejection (Le Journal du Dimanche, February 1, 2020).

One need not even find fault with the process, flawed as it seems to have been, to see a reason for the protests. To put it most simply, pension changes scare people to death (almost). The fear of not having enough in old age is real. In an era (now lasting some forty years) of cuts, austerity, tax policies that favor the wealthy “job creators”–of social policy “reforms” that always go in the same direction–people simply do not believe that they won’t lose something in this change too. The other issue is demagoguery.

So here, for what it’s worth, and in midstream of the process, are the good, the bad, and the ugly of pension protests.

THE GOOD

The dancers of the Paris Opera, hands down. No contest. They took advantage of their parterre to give a public performance of Swan Lake; below, the closest and longest uninterrupted segment I could find:

They were aided by their fellow performers, the Opera singers and the orchestra:

Their “special regime” goes back to 1698, under Louis XIV, who allowed for their retirement at the age of 42 with full pension.  Le Monde suggested that the king’s decision took account of the “pénibilité,” or harsh physical conditions of the profession–one of the subjects in play currently, in the overall reform discussions–as well as the inevitable physical decline that comes with age (Le Monde, January 25, 2020).

At the beginning of the strike, Le Monde journalist Michel Guerrin published an excellent summary of the “special regime” of the Paris Opera.  Children are admitted to the école de danse of the Opera at the age of 8, and train for at least ten years, when they can compete to obtain one of the 6 to 8 places that open every year.  Then they have to “rise through the ranks,” if they can. The gross salaries range from 2,932 to 6,000 euros (and more, for stars) per month; the current monthly minimum wage in France is 1,539 euros per month.  At the age of 42 (or even sooner, in cases of injury), their pension is calculated on their three best-earning years, varying among dancers according to length of career and of pay. They have their pension to rely on, as they seek out a second career, often in teaching.  

But Guerrin also noted that in the harsh world of professional dance, the Paris Opéra was relatively  “privileged.” Out of the some 4,000 professional dancers in France, only about 500 have permanent employment, and the pension system and retirement age applies only to the Paris Opera; the dancers of the municipal ballets of Lyon, Nice, Toulouse, Bordeaux, Avignon, Metz, and Mulhouse do not have these sorts of protections, including the early retirement with pension.  Further, Guerrin contradicted the Minister of Culture, Franck Riester, who had stated that most of these provincial dancers would remain employees of the city; they have no such arrangements (Franck Riester on Jean-Jacques Bourdin, November 29, 2019).  

Beyond the dancers of the Paris Opera, there are also musicians, singers, and technicians–a total of 1,875–who share the same retirement fund, though varied according to their particular posts, salaries, and job stresses.  The retirement fund of the Paris Opera is currently 14 million euros in debt, approximately half of their expenses; the state has provided a special subvention to put them in balance, as it has for a number of other special regimes (Le Monde, December 13, 2019).

American ballet dancers are in precisely the situation that Paris Opéra dancers fear–no pension until retirement age in the 60s, combined with a relatively unremunerative career that also includes the risk of serious injury, and a difficult transition into a new career, to which they are largely expected to find their own path (The Atlantic, March 7, 2014)

Just before the end of the year, the government offered the opera dancers a clause du grand-père, by which the reform would apply only to those dancers recruited from 2022 on; there was some vague language about arrangements for the post-2022 dancers, who could of course not be expected to dance until the age of 62 (or 64); pénibilité was also on the table (Les Echos, December 26, 2019).

The dancers said no.

The message posted here says, in part: 

The elimination of our retirement fund, which incarnates the union of all the generations of our more than 70 professions, in order to force us into a regime which does not correspond to our needs, would finish by destroying the fragile equilibrium of our work collective. . . .

The Ballet is a difficult profession, which demands that one consecrate oneself to it, body and soul, from earliest youth.  The pension we receive after the age of 42, added to the often modest salaries of our second careers, allow us–if we’re lucky–to preserve a reasonably stable standard of living when we can no longer dance. . . .

It has been proposed that we might escape the measures personally, only to see them applied to the next generations.  But we are only a small link in a 350-year-old chain. This chain has to go far into the future. We cannot be the generation who will have sacrificed those who follow us.  Even with the best will in the world, we cannot acquiesce to what you have demanded of us.

So why are they THE GOOD? Because they have, in a beautiful way, reminded us of the wear and tear on the body that makes some long for early retirement; because of their generous performances to the public, which have also drawn attention to their cause; because they embody the historic culture of France, and are attempting to be true to that, even as they realize that they are also workers.

THE BAD and THE UGLY to follow.

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