French Protesters Have It Right: No Need to Up Retirement Age

French Protesters Have It Right: No Need to Increase Retirement Age

 

By Mark Weisbrot

 

10/21/2010 12:55 PM

 

Center for Economic and Policy Research

 

Originally published by The Guardian Unlimited (UK)

 

October 20, 2010

 

http://www.guardian.co.uk/commentisfree/cifamerica/2010/oct/20/france-protest

 

The demonstrations that have rocked France this past week

highlight some of its differences from the United States.

This photo, for example, shows the difference between rioting

in baseball-playing versus soccer-playing countries. In the

U.S., 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 to defend hard-won retirement gains -

including large-scale strikes and work stoppages. French

populist rage is being directed in a positive direction,

unlike in the United States where it is most prominently

being mobilized to elect political candidates who will do

their best to increase the suffering of working and middle-

class citizens. (It must be emphasized, 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.)

 

I have to admit it was perplexing to watch the French elect

President Nicolas Sarkozy 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 mumbo-jumbo. 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. 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. (In the United States 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 program like

everyone else. The argument is that life expectancy is

increasing, so 'we all' have to work longer. However 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 percent. 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 much 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

U.K. = while simultaneously discouraging speculative trading

in financial assets and derivatives. The French unions and

protesters are demanding that the government consider 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 of the

arithmetic, but they can see 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 who do not rely on the public pension system

for most of their retirement income.

 

France has a lower level of inequality than most of the OECD

countries and is one of only 5 - out of 30 OECD countries --

that saw inequality decrease from the mid-80s 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. The country has until now resisted at least some of

the changes that have rolled the clock back for working and

especially low-income citizens in the high-income 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 (e.g. 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

right-wing reforms.

 

Polls show more than 70 percent support for France's strikers

despite the inconvenience of fuel shortages and other

disruptions. The French are already sick of right-wing

government, and that is also part of what is generating the

protests. France has a stronger left in than many other

countries, and one that has the ability and willingness to

organize mass protest, work stoppages, and educational

efforts. They are fighting for the future of Europe, and it

is a good example for others. Hopefully, here in the United

States, we will be able to beat back any proposed benefit

cuts to our much less generous Social Security system, that

are looming on the horizon.

 

This column was published by The Guardian Unlimited (UK) on

October 20, 2010.