Monday, June 29, 2009
Chérèque Says No
The government's big push over the coming months will be to work toward an increase in the legal age of retirement. Among the unions, the CFDT has generally been the most favorable toward retirement reform as a necessary if somewhat painful step toward preserving the "French social model." The CFDT supported Juppé's abortive 1995 reform effort, Fillon's successful 2003 reform, and, in the main, Sarkozy's reform of the special regimes in 2007. So it is noteworthy--and, to me, somewhat surprising--that Chérèque now seems to be putting his foot down. Of the alternatives on offer--reduced benefits, higher payroll taxes and deductions, and higher retirement age--I would think that the last would be most palatable to labor, given the increase in longevity. France is out of line with most other countries in this respect as well. To be sure, adjustments would be required to deal with those lines of work in which the ability to perform beyond the age of 55 is in question--the so-called pénibilité issue. I'm not sure what Chérèque, who has until now been a realist on retirement issues, has in mind. But the signal to the government is an ominous one.
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Having been through "benefit reform" in my own state during the past legislative session, I don't think there's anything unrealistic about taking a hard bargaining position or representing his members' interests forcefully. No one ever asks why folks like the MdF / Chamber of Commerce aren't more "realist" when they propose things like abolishing health insurance for retirees.
Thats not so much an intelligent comment on French politics as my periodic impulse to object to the presumption that cuts to benefits for public service workers are necessary or desireable from an enlightened economic standpoint, as opposed to being a political goal sought by one small but very powerful part of society at the expense of another, less powerful part of society.
Greg,
Yes, taking a tough bargaining position can sometimes work, but it has to be a credible position. Chérèque and other CFDT leaders have previously argued that the status quo is not viable. If their position is that the 2007 reforms did all that was necessary to make the system viable, they need to set forth that argument more fully. Saying "no more" is not enough, because their past arguments will be raised against them, and the present bargaining position will appear to be a sham. There may be a fuller analysis out somewhere, but I haven't yet seen it. This seems like an odd place to draw a line in the sand, and probably an indefensible one--unless the CFDT is planning to switch its support to a more comprehensive retirement reform plan, such as the one put forward by Piketty and Bozio. I haven't seen any sign of that either, however. So I'm just puzzled by this move.
I think you underestimate how strongly "labor" people do wish to retire once they reach 60 - and how quickly they are pushed aside by their employers once they reach their fifties. Raising the retirement age is, literally, the least palatable option for the workers. People who are counting down how many years they have left...
Linca,
Interesting. I have encountered some expressions of strong resistance to increasing the retirement age in France, but perhaps I do underestimate the extent to which this is general. Nevertheless, I think that many in France underestimate how much of an outlier France is in this respect relative to other OECD countries. It's difficult to sustain both an open economy and a large differential in length of working life. There are limits to the gap that can be made up by enhanced productivity (or, to put it another, more provocative way, increased exploitation of the working-age population by the retired population).
I'm not all that sure about France being an outlier being such a problem - labor costs will remain comparatively high in France with or without longer working life.
And workers already voluntarily accept lower pensions in exchange for earlier retirement age when they retire at 60 without a full pension as many do - why the insistence in moving the one lever of pensions that is the least popular, age, and one that is the least likely to work, the French labor market being quite ageist ?
As to limits to the exploitation of the working age population by the retired one, pensions are only one of the means of that exploitation - high real estate prices, rising capital share of income are quite important too.
And I can't help but find it ironical that the current government making noise about raising the retirement age has been elected by retirees...
Linca, On the outlier issue:
Average age of workforce exit:
FR, 58.5
UK, 62.5
DE, 61.7
BE, 60.5
SE, 63.8
etc.
OECD figures from 2006.
Capital share has been relatively stable over a long period. Yes, France is ageist. Indeed, there is a widespread view that NOT retiring deprives the young of jobs. I don't think this is a healthy way to look at things.
I'm not denying France is being an outlier in terms of retirement age, I simply don't think it's such a problem, in the same way the higher age of entrance in the labour force in France (mostly because students don't take jobs) isn't really a problem either.
As for the share of capital being stable for a long time, long means long when discussing retirement policy : my parents who are just reaching retirement age saw that share move from 28% to 37% while they were contributing.
I tend to believe (and hope) that the secular trend of a general reduction of working time will not stop. Working until death isn't particularly healthy.
"Working until death" is a rather lurid way of putting an increase in the retirement age from 60 to 62 or even 65, when the typical 65-yr-old is expected to live to 85 or beyond. If life expectancy increases by 10 percent or more, can an increase of working life by 3, 5, or even 8 percent be considered unreasonable? If you insist on looking at the really long run for capital share, you have to look at the really long run for life expectancy. Demography, along with cultural expectations, is the core of the problem.
"Working until death" certainly is a lurid way of saying it, but it's indeed also a demographic reality : in the four years between 58 and 62, approximately a man in twenty dies.
Also, while browsing for that figure I found that actual retirement age (which is a different figure from workforce exit, and which is the figure on which reforms are being discussed) in France was 60.9 in 2003... Ageism is possibly as much of a problem as the actual retirement age for making France an outlier.
That graph tells it all : raising the retirement age is not the single lever we have, and the current way the discussion is led is not "asking" of workers to work longer, more like "demanding". The debate about which levers to use is not being made with much input from those most interested.
Linca,
Not to belabor the point, but I referred to the tradeoff described by the graph in my original post. I am not wedded to increasing the retirement age alone as the only possible solution. But what I meant when I described Chérèque as a "realist" is that he always showed awareness of the need to do something to preserve the system. If he now opposes one lever of action, then he needs to say to what degree he wishes to use the other two. My own preference would be to use all three, though I think, unlike you, that there would be greater opposition to reducing payouts than to either increasing the retirement age or increasing deductions/payroll taxes.
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