Why the French Have Gone on Strike Again
Pension reforms are notoriously hard to sell. The French president owes workers a clearer explanation of exactly what he’s got up his sleeve.
France went on strike Thursday with transportation disrupted, some roads blocked and many schools closed. But the reason for the protests isn’t really there yet: Though President Emmanuel Macron has vowed to reform the country’s pension system, he hasn’t presented a specific bill describing how this will be done.
That the French are protesting against a plan that has yet to be finalized shows Macron was right to some extent in 2017, when he called France “not a reformable country” and last year, when he referred to the French as “Gauls who are resistant to change.” But there’s a more generous explanation, too: As is often the case with Macron, he has teased ambitious changes without properly explaining how they would impact those affected by them. The strikes are as much about Macron’s haste and perceived distance from people’s everyday struggles, as they are about his generally sensible ideas on changing France’s complex and expensive retirement benefits system.
Today, the system has 42 mandatory, sector-specific pension plans, of which the average worker has contributed to three. One-third of workers are entitled to payouts from more than four of them. They often have trouble working out how much they’re owed.
Just as it's hard for workers to understand the system, it’s difficult for the government to keep track of its financial sustainability — and it's on the hook for covering deficits. It pays out 5.5 billion euros a year ($6.1 billion) to cover the shortfalls in just three schemes — those of the state railway company SNCF, the Paris metro operator RATP and state utility companies.
This year’s Mercer Global Pension Index rates France’s pension system on the same level as those of the U.K. and the U.S., but lower than those of the Nordic countries, the Netherlands, Germany or Canada, saying it “has some good features but also has major risks and/or shortcomings that should be addressed” to make it sustainable.
One of Macron's election promises was to replace this jumble of schemes with a universal points system. It’s a popular idea: According to a recent poll, 64% of the French support it, and that goes up to 80% among Macron voters; there’s no majority for the proposals only among the backers of far right leader Marine Le Pen.
A year ago, the government's High Commission for Pension Reform presented some guidelines for the proposed changes. All public and private sector workers would use their pension contributions to buy pension points, whose number will determine the eventual pension. Extra points would be allocated for children, arduous and hazardous work and other special cases. There would be a transition period: People born before 1963 won’t be affected.
But lots of key parameters are still up for discussion. For example, the commission has proposed paying full pensions starting from the age of 64 and applying a discount if a worker wants to retire at 62, the current retirement age for most French people. The rules for indexing the value of a point are also still unclear; it’s proposed that pensions increase in line with nationwide salary growth, but some kind of role for “social partners” — employers and unions — also is envisaged.
Under a universal plan, France’s powerful labor unions would have much less negotiating power than today. That irks the more left-wing ones, which, not coincidentally, represent most public sector workers. They are the ones who are leading the strike that began on Thursday.
Macron, of course, has faced down the unions before, when he reformed France’s convoluted labor code to create easier ways to hire and fire workers and make low-wage jobs more attractive than receiving unemployment benefits. The measures have largely paid off, contributing to lower unemployment and fewer short-term contracts. This time around, however, Macron faces powerful resistance even before it’s clear exactly what he’s about to do. The turnout on Thursday, and how long the strike lasts, will determine whether he’s forced to deal with the ghosts of 1995, when mass protests forced then Prime Minister Alain Juppe to abandon pension reform plans.
It may appear contradictory that while a majority of French people back the principle of Macron’s reform, 58% also support the strikes against it. But it isn’t, really.
In September, the government launched consultations with stakeholders and a public discussion of the proposed reform’s key principles, keen to show its willingness to listen to all of the stakeholders before taking final decisions. The process is meant to last until the end of the year. But so far workers have no easy way to compare the pension due to them under the current system and under Macron’s. Prime Minister Edouard Philippe is expected to unveil the details as soon as next week. In the meantime, the dearth of information allowed one of the labor unions, CGT, to claim that pensions will fall dramatically and to call on members to defend the key achievement of the current pension system — one of the world’s lowest poverty rates for people under 65. Neither the union nor the strikers are deterred by the government’s promise that the minimum pension will be 1,000 euros for everyone, while today, 38% of women and 22% of men receive less.
Given the government’s intention to provide for a relatively long transition period, it could take a little more time to write the actual draft legislation and present it, along with a publicly accessible comparison calculator. Pension reforms are notoriously hard to sell, and the proposals must be precise and universally understandable to reduce the risk of mass protest. Three months are probably too little time for a proper explanatory campaign and a bargaining exercise with the unions.
Yet, as he’s often done in both domestic and European affairs, Macron appears to be rushing things, seemingly convinced that everyone else should see what’s obvious to him. But it’s very difficult to win that argument without putting all of the cards on the table. Macron should show his hand and make a greater effort to convince the French that he’s not out to make them poorer in their old age.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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