French Protesters Have It Right: No Need to Raise the Retirement Age

THE DEMONSTRATIONS THAT have rocked
France this past week highlight some of
its differences from the United States.
The photo below, for example shows
the difference between rioting in baseball-
playing versus soccer-playing
countries. In the US, we would pick up
the tear gas canister and throw it, rather than kick it,
back at the police.
More importantly, the French have decided to take to
the streets in the millions—including large-scale strikes
and work stoppages—to defend hard-won retirement
gains. (It must be emphasised, since the media sometimes
forgets to make the distinction, that only a tiny percentage
of France’s demonstrators have engaged in any kind of
property damage and even fewer in violence, with all but
these few protesting peacefully.) French populist rage is
being directed in a positive direction – unlike in the United
States where it is most prominently being mobilised to
elect political candidates who will do their best to increase
the suffering of working-—and middle-class citizens.
I have to admit, though, that it was perplexing to watch
the French elect Nicolas Sarkozy president in 2007, a man
who campaigned on the idea that France had to make its
economy more “efficient“, like America’s. In reality, he
couldn’t have picked a worse time to peddle this mumbojumbo.
The housing bubble was already bursting in the
United States and would soon cause not only our own
Great Recession, but also drag most of the world economy
into the swamp with it. So much for that particular model
of economic dynamism.
But Sarkozy had a lot of help from the major media,
which was quite enchanted with the American model at
the time and helped promote a number of myths that
formed part of his campaign. Among these were the idea
that French social protections and employment benefits
were “unaffordable in a global economy“, and that
employers would hire more people if it were easier to fire
them, and if taxes were cut for the rich.
Sarkozy has recently abandoned one of his most politically
unpopular tax cuts for the rich, but there may be others.
But he had also promised not to raise the retirement
age for the public pension system. This has contributed to
the mass outrage at his current proposal to raise it from 60
to 62, for those taking the reduced benefits, and from 65
to 67, for full benefits. (Under the US social security system,
most people opt for the reduced benefit that is available
beginning at age 62; full benefits are available, for
those born after 1959, at 67.)
Once again, most of the media thinks the French are
being unrealistic, and should just get with the programme
like everyone else. The argument is that life expectancy is
increasing, so we all have to work longer. But this is a bit
like reporting half of a baseball score (or soccer, if you prefer).
On the other side is the fact that productivity and
GDP also increase over time, and so it is indeed possible
for the French to choose to spend more years in retirement
and pay for it.
France’s retirement age was last set in 1983. Since then,
GDP per person has increased by 45%. The increase in life
expectancy is very small by comparison. The number of
workers per retiree declined from 4.4 in 1983 to 3.5 in
2010, but the growth of national income was vastly more
than enough to compensate for the demographic changes,
including the change in life expectancy.
The situation is similar going forward: the growth in
national income over the next 30 or 40 years will be much
more than sufficient to pay for the increases in pension
costs due to demographic changes, while still allowing
future generations to enjoy considerably higher living
standards than people today. It is simply a social choice as
to how many years people want to live in retirement and
how they want to pay for it.
If the French want to keep the retirement age as is,
there are plenty of ways to finance future pension costs
without necessarily raising the retirement age. One of
them, which has support among the French left (and
which Sarkozy claims to
support at the international
level), would be a tax on
financial transactions. Such
a “speculation tax” could
raise billions of dollars of
revenue – as it currently
does in the UK – while
simultaneously discouraging
speculative trading in financial
assets and derivatives.
The French unions and protesters
are demanding that
the government considers
some of these more progressive
alternatives.
It is, therefore, perfectly
reasonable to expect that as life
expectancy increases, workers should be able to spend
more of the lives in retirement. And that is what most
French citizens expect. They may not have seen all the
arithmetic, but they grasp intuitively that as a country
grows richer year after year, they should not have to spend
more of their lives working.
An increase in the retirement age is a highly regressive
cut that will hit working people hardest. Poorer workers
have shorter life expectancies and would lose a higher proportion
of their retirement years. Workers who have to
retire early because of unemployment or other hardships
will take a benefit cut as a result of this change. And, of
course, this cut would not matter to the richest people in
society, who do not rely on the public pension system for
most of their retirement income.
France has a lower level of inequality than most Organization
for Rconomic Cooperstion and Development
(OECD) countries and is one of only five – out of 30
OECD countries – that saw inequality decrease from the
mid 1980s to the mid 2000s. It also had the largest
decrease in inequality in the group, although all of it was
from the mid 80s to the mid 90s.
France has, until now, resisted at least some of the
changes that have rolled the clock back for working people
and, especially, low-income citizens in the highincome
countries. The European authorities (including the
European Commission, European Central Bank and International
Monetary Fund) are
currently accelerating these
regressive changes in the
weaker Eurozone economies
(such as Greece, Spain and
Ireland). All of these institutions
and many politicians
are trying to use the current
economic problems of
Europe as a pretext to enact
rightwing reforms.
Polls show more than 70%
support for France’s strikers,
despite the inconvenience of
fuel shortages and other disruptions.
The French are
already sick of their rightist
government, and that is also
part of what is generating the protests. Despite the recent
electoral weakness of the Socialist party, France has a
stronger left than many other countries do, and one that
has the ability and willingness to organise mass protest,
work stoppages and educational campaigns.
The French are, in effect, fighting for the future of Europe
– and it is a good example for others. We can only hope that,
here in the United States, we will be able to beat back any
proposed cuts to our much less generous social security system,
with attacks on benefits looming on the horizon.