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Thursday, 4 November 2010

Are the French Retiring?

Socialist French Retiring on the Cote d'Azur? Nah.

In France, 62 is the New 60

By Liliane L. Clever
[Writers Clearinghouse News Service]
So much and, yet, so little has been said in the US media about the controversial pension plan reform in France. One more time the media managed to summarize the event with headlines and titbits of information. It would have been helpful to have more details to better understand why the French citizenry has been so upset.

Retirement at 60 does sound like an amazing privilege to the average US worker. In America, unless disabled, one cannot collect Social Security benefits before the age of 62. So what is the matter with these French? Can’t they stay on the job as long as we do?

The reality is that they do. The US media would have us believe that most French workers can retire comfortably at age 60 and live happily ever after while sunning on the French Riviera. It's not so simple. Retirement at 60 is more a symbol of social advancement than it is a guaranteed financial security blanket.

Pre reform, a French worker in the private sector had to contribute to the state pension fund for 40 and half years to retire with full benefits. In short, only workers that had been consistently employed -- no layoffs or any other work loss -- since they were 18 years of age or younger were able to do so. That automatically excluded most professionals with advanced degrees, as well as anyone who had to stop working for any length of time.

The official retirement age, regardless of years of contributions, was -- is -- 65.

With the reform, no retirement benefits will be available before age 62 and workers will need to contribute for 41 and half years to get full benefits. The official retirement age, regardless of years of contributions, will be 67.

The reform includes token exceptions, at least for the next few years. It makes special provisions for workers with ‘long careers,’ meaning workers who have been working since the age of 14, 15, 16, or 17. These workers will still be able to retire at age 60 or before. Similarly, the reform takes into account working conditions. Workers with difficult and/or physically dangerous jobs, or workers exposed to asbestos, will be able to retire at age 60 as well.

Women who are presently 55 or older, and have raised at least three children, will continue to reach official retirement age at 65, regardless of years of contributions.

Additional financing to support the state pension fund will come from new taxes and an increase to the monthly mandatory payroll contributions. President Nicolas Sarkozy’s famous motto ‘Travailler plus pour gagner plus’ --'Working more to earn more' -- sounds more and more like a bad joke.

Social benefits in France, as in any other country, are not a given. For the most part, these benefits were hard-won and have been more than well paid for with taxes. No one should ever wish to lose any benefits, even if the benefit is symbolic.

Despite France’s perceived socialism -- as seen from the US, that is -- it has in fact a capitalist economic system which is quite friendly to financial institutions and large corporations. Private corporations rarely hire employees over 55 years of age, while only offering short-term, under-paid contracts to young people. These practices go mostly uncensored by the French government.

The new reform offers incentives to employers to hire seniors. Time will tell if these incentives are fruitful. Meantime, none of these working conditions, including the high rate of unemployment, contribute to a warm and fuzzy feeling about retirement at any age. French workers must contribute to a private complementary pension plan if they ever wish to have a comfortable retirement.

Most French workers understand and agree that some pension plan reform is needed. People live longer, fewer active workers are supporting and ever increasing number of retirees, and the cost of living is getting higher and higher. What they disagree with is the political process. President Sarkozy’s promise to meet with union leaders to draft a pension plan reform that would be fair to all was not kept. The reform became ‘my way or the highway.'

French workers took to the streets in protest to let the government know that they intend to fight to protect whatever social benefits they have left. The national health care system is most likely next on Sarkozy’s agenda. One worker, as quoted in The Wall Street Journal, noted, ”We’re in a downward spiral. If we don’t stop Mr. Sarkozy on the pension, he will take away all our hard-won benefits.”

The protests didn't stop the pension plan reform. The bill was voted into law on  27 October 2010.