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  • Writer's pictureJamie Clark

France: lifting the retirement age from 62 to 64 - fair or foul?

Updated: Nov 28, 2023

Invoking article 49.3 - a unique power in France where the elected party can pass the National Assembly without having to have the bill be approved through the House of Parliament - is blatant usurpation - and all solid democracies should very righty be opposed to it.

It is only natural to ponder - now Macron is impacting the retirement age, what other freedoms could the government change next?

This area of uncertainty and fear in the public is completely understandable - and all good democracies around the world would sympathise with the French during this turbulent period.

But for one moment, let's try to put that aside and just analyse why the government has elected to impose this bill so aggressively.

For general context, France’s pension system relies primarily on a pay-as-you-go structure in which workers and employers are assessed mandatory payroll taxes that are used to fund retiree pensions. The government has not stated any intention in reforming this financing system for retirees.

The system in a simple visual:

So - with no apparent intent to change the formula - it then just boils down to the profit and loss numbers.

Here are two key trendlines to consider:

Life expectancy in France has grown to over 82 years old.

Macron's government argues that rising life expectancies have left the system in an increasingly fragile state.

And most importantly, in 2000, there were 2.1 workers paying into the system for every retiree; in 2020 that ratio had fallen to 1.7, and in 2070 it is expected to drop to 1.2.

For a pension fund that is relying on the same financing system as before - it is logical that Macron's government is concerned about its sustainability and longevity.

But then really is lifting the retirement age from 62 to 64 just a band-aid solution for a wider financial problem?

France in 2023 will run at a deficit of a 1.8B€ loss and 14.5% of the annual GDP directed toward the pension plan. Increasing the retirement age to 64 will most likely not play a significant role in relieving the deficit, and solving the ongoing pressures with the pension system.


France, is it time to innovate?

A prudent approach for France would be to consider implementing new financing mechanisms for workers so that they can all retire without such heavy dependence on state pensions. For example, there are countries such as the US and Australia that do this with high success - ultimately just moving the sense of ownership of retirement from public responsibility to a personal one. With personal retirement savings accounts enforced by law empowers people to build their wealth for later stages in their life. Indeed, it puts more pressure on the companies to pay an additional 10%-11% to their employees, but private companies are far more capable of supplying this additional money rather than public government funds.

It is evident that reform needs to happen - but the true solution lies in innovative new financing models for retirement, rather than trying to fix a broken system that is clearly unsustainable.

Ultimately, irrespective of whether the law is implemented, Macron is fracturing his legacy and this debacle will inflict cultural damage throughout France.


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