French Strike Aims to Save an Envied, but Convoluted, Approach to Pensions


PARIS — Stéphane Vardon has worked as a conductor on France’s high-speed and suburban rail network for 20 years. It is hard work, he says, and he’d like to retire before he turns 58, a privilege he now fears President Emmanuel Macron is going to strip away.

So this week, when nearly one million French citizens demonstrated nationwide to protect pension benefits that are the envy of much of the world, Mr. Vardon, 46, was among them, marching through the streets of Paris.

“People will have to work longer and have less money for their retirement,” said Mr. Vardon, citing a common fear of Mr. Macron’s plans. “Macron isn’t close to the people. We know he won’t do anything for the workers.’’

While France’s official retirement age may be 62, the actual age varies widely across the country’s labyrinthine system. Train drivers can retire at 52, public electric and gas workers at 57, and members of the national ballet, who start dancing at a very young age, as early as age 42. That is to name just a few of the stark differences.

It is this sheer complexity that Mr. Macron has vowed to untangle, aiming to standardize 42 different public and private pension schemes into one state-managed plan.

At stake in the continuing standoff — much of France remained shutdown on Friday — is nothing less than the future of the country’s vaunted social safety net.

Elected in 2017, Mr. Macron has faced fierce strikes and street protests before as part of his attempts to add dynamism to France’s economy and make it more business friendly. But the pension overhaul is his biggest and most daunting test yet.

Unions are calling for another nationwide demonstration Tuesday, just before the government is scheduled to unveil fresh details of the pension overhaul. The transport strikes that incapacitated France this week have now been prolonged through early next week.

As Mr. Macron moves to overhaul the pension system, it is precisely workers like Mr. Vardon — those with the most generous ‘‘special schemes’’ — that he would like to address.

The country’s postwar retirement system was founded by Gen. Charles de Gaulle, who was intent on establishing a social safety net in 1946 following the liberation of France.

Amid the postwar tumult, he bowed to demands by France’s mainly Communist-led unions to let different professions control their pension plans.

Instead of a centralized system, railway workers oversaw their retirement system, as did sailors, lawyers, notaries, teachers and, eventually, even ballet dancers and actors.

Because of the arduous nature of some professions, workers could retire early, a framework that persists today.

Mr. Macron has called the tangle outdated, unfair and unsustainable. France spends a whopping 14 percent of its gross domestic product on the pension system, more than almost any European country.

The system is staring at a potential deficit of 19 billion euros by 2025 if no action is taken, according to a landmark report issued by France’s pension czar, Jean-Paul Delevoye.

So Mr. Macron says he wants to merge the disparate systems, public and private, into one state-managed system by 2025.

He also wants to keep the deficit from growing, which Patrick Artus, chief economist of Paris-based Natixis bank, said could be achieved if every worker works at least another six months before retiring.

Whether Mr. Macron can succeed in his plans is an open question. No French president has managed to achieve a radical overhaul of pensions.

Mr. Macron says he isn’t seeking to reduce France’s pension spending — a point the government hopes will placate protesters.

Nonetheless, the changes he has proposed could alleviate the burden of some of the most generous pensions, which falls heavily on the government.

To get there, Mr. Macron plans to pivot to a centrally managed points-based system similar to one used in Sweden, where workers accumulate points over the course of their careers and cash them in.

Mr. Macron says the system would be simpler and fairer, and would create better funding security for pensions as the population ages.

Currently, the public pension fund is a pay as you go system that works like a group insurance, with workers and employers paying contributions from their income.

Pension benefits are currently calculated, in the private sector, based on a worker’s 25 highest earning years, and in the public sector on the last six months, when workers are likely to be at the height of their earning power.

Full pension benefits are earned after 41 to 43 years of contributions, depending on when workers were born, but workers can retire earlier, although those who do won’t get full benefits.

All workers are also required to pay into supplementary pension schemes to complement public pensions, which pay retirees an average of around 75 percent of pretax earnings — among the most generous in Europe, according to the Organization for Economic Cooperation and Development.

The state would remain the main guarantor of pensions, continuing to provide workers with a safety net that is unheard-of in the United States, where about half of Americans have no access to retirement savings plans, and have little or nothing saved for retirement.

French unions say Mr. Macron’s plan is little more than smoke and mirrors and will benefit private-sector workers at the expense of teachers, railway workers, nurses, and other public-sector employees.

By valuing pensions on a lifetime of work, instead of the last six months, those in the public sector fear they will see their pensions slashed.

Mr. Vardon, the conductor, is among those worried about taking a hit. His base salary of 1,800 euros a month is enough for a decent pension under the current scheme.

But under the points system, his retirement check calculation would include the lower salaries he earned when he started working 20 years ago, so he’ll get less.

“It won’t be enough to have a retirement where I can live well,” he said.

As things stand, Mr. Vardon would like to retire at age 57 and a half, the threshold permitted by the national railway scheme.

In reality, he said, he will probably need to work until age 62 to reap his full pension. Mr. Macron’s changes could force him to work even longer — a thought that fills him with dread.

“We have difficult working conditions,” said Mr. Vardon, who assists passengers and manages work crews while maneuvering constantly on his feet as he crisscrosses the country at high speeds.

“We don’t eat at normal hours, we have short nights of sleep, which means that I am more tired and my body doesn’t have time to adapt,’’ he said. ‘‘I will age faster than someone who had a regular job Monday to Friday from nine to five.”

“Many of my colleagues died between the ages of 60 and 65,” he added, “So I’m worried I won’t make it.”

Economists agree that the biggest winners are likely to be private-sector employees. Because pension payments under the point system would be indexed to France’s nominal gross domestic product, private-sector workers will have their pensions revalued and likely revised up, said Mr. Artus.

“There will be winners and losers,” Mr. Artus said. While those losing out will face a painful transition, France’s overall pension system will be sounder in the long run, because a points system will make it easier to maintain balanced finances, he added.

A recent poll by Elabe, a French polling agency, shows that over half of French people are concerned the current pensions system isn’t sustainable. Still, the political challenges to streamlining it remain enormous.

The demonstrations are likely to go on as long as the French fear their pensions might suffer or they will have to work longer under any new system. French presidents have tended to back down from reform efforts in the past in the face of fierce public resistance.

Mr. Vardon is among thousands who have vowed to continue the fight. While the demonstrations may look raucous to the outside world, “We want people to live without having to work longer to have a retirement,” he said.

“Yes, we have a good system, but we think our system should be a model,” he added. “It allows people who have accidents, who are poor, who didn’t have any luck in life, to climb the social ladder and to continue — after a long career — to live, to feed themselves, to take a well deserved rest.”

“It’s a shame that other countries don’t have this,” he said.

Melissa Godin contributed reporting.

Source : Nytimes