The streets are rebelling: protest march against President Emmanuel Macron’s planned pension reforms.
Photo: Christophe Ena/AP/dpa
In France, hundreds of thousands have again demonstrated against President Emmanuel Macron’s pension reforms in the past few days. According to surveys, almost two thirds of the population are against the planned increase in the retirement age. The government defends this increase with the argument that this is the only way to guarantee the financing of the pension system. However, that is only one aspect. Because the pension reform is part of the government’s overall strategy with the aim of allowing as many French people as possible to work more – the young, the old and everyone in between.
The government in Paris wants to raise the retirement age from 62 to 64 by 2030. In order to receive full pension benefits, one must have worked for 43 years instead of the previous 41.5 years, according to the plan. According to Labor Minister Olivier Dussopt, this is necessary for the “survival of the pension system”. According to the government, if everything stayed the same, a deficit of 15 to 20 billion euros would pile up in the pension fund over the next few years. However, Macron’s project goes beyond securing the pension fund and is aimed at a more fundamental socio-political change, which the President formulated in his New Year’s speech: “We have to work more.”
Not only in France, but in almost all industrialized countries, politicians are trying to increase the national labor reserve: unemployed, non-working women, young people and older people are to be brought into the labor market in order to counteract demographic change. Because every hour of work that companies demand but do not receive due to a lack of labor corresponds to a loss of economic output. In a system built on growth, lost growth equals cost.
“The potential of employable people is an important factor for a country’s growth potential,” explains DZ Bank. Internationally, Japan is a cautionary tale, where the labor force began to shrink as early as the 1990s. Since then, “as a consequence, potential growth – i.e. the economic growth that can be achieved over the long term if production capacities are fully utilized – has slowed significantly,” according to Commerzbank.
This fate also threatens Europe. An analysis commissioned by the EU Parliament from September 2019 explains the mechanism: »Aging and demographic change have a negative impact on all three drivers of long-term economic growth: potential employees, capital accumulation and productivity. Fewer employable lower the prospects for economic growth. Lower growth reduces profitable investment opportunities and aging leads to lower productivity.«
France lags behind Germany
For the benefit of its growth potential, France no longer wants to afford non-workers in the future. “Pension reform is central to the government’s goal to increase the employment rate of older workers and achieve full employment,” Marc Ferracci, a labor economist and a member of Macron’s party, told Reuters. The employment rate for 60 to 64 year olds in France has risen from eleven to 36 percent since 2002. But with the competitor Germany, it increased from 23 to over 60 percent. While in France 56 percent of the 55 to 64 year olds are employed, in Germany it is 72 percent. While in France a man lives an average of 21.5 years as a pensioner, in Germany it is only 18.6 years.
In order to bring France up to the level of its competitors, Paris now wants to introduce a “Senior Index” to control the proportion of working elderly. According to Allianz calculations, raising the retirement age could add 1.6 million more people to the French labor market in 2050.
Other adjustments are also being made: the government in Paris has reformed unemployment insurance. The unemployed will face cuts designed to increase pressure to take up work, particularly during periods of low unemployment. If this falls below nine percent, the duration of unemployment benefits shrinks by a quarter. According to Unedic unemployment insurance, 840,000 people – 38 percent of all unemployed people – can expect their unemployment benefits to be reduced by an average of 20 percent.
In addition, Paris has reformed the education system. Young people are faced with longer internships with fewer classes. The aim is to increase the number of interns, which was almost a million last year. According to the trade unions, the companies received cheaper workers and at the same time poorer quality of training. Macron, on the other hand, has received praise from the International Monetary Fund: The reforms would “help strengthen the labor supply,” according to the fund, and the government has “made significant progress in increasing the economy’s growth potential while reducing costs.”