Friday, April 11, 2008

Something Completely Different

Antoine Bozio and Thomas Piketty have proposed a complete overhaul of the retirement system (full report here; the link at the end of the Le Monde article is incorrect). Although they don't use the words, what they are proposing is to reject the "Bismarckian" retirement system that is currently one of the pillars of the "French social model" in favor of something closer to a "Beveridgian" system. The former has decentralized management, wage-based contributions, and is linked to employment; the latter is managed by the state, financed by broad-based taxes, and is not tied to a particular employment. The classic analysis is Gosta Esping-Anderson, The Three Worlds of Welfare Capitalism. Thus far, I've only glanced at the report, which looks promising. It seems, however, that they don't address the most important obstacle to the kind of reform they are proposing: the vested interest of employers and unions, who manage the existing system according to what is called la gestion paritaire, in preserving the status quo. They will not give it up easily, particularly the unions, which are dependent on the subsidies they receive from participation in paritary management. Unless that political problem is solved, no amount of finesse in the analysis of the benefits to be expected from reform will suffice to make the program attractive. Bozio and Piketty probably hope that their report will be taken up as a platform plank by some political party. Piketty supported Royal in the last election, but it seems to me that it would be harder for the Left to take up this idea than for the Right, unless I miss my guess about how the unions are likely to respond. But perhaps, as the limits of pushing further in the direction of the 2003 Fillon Law begin to appear with opposition to the move from 40 to 41 years of required contributions, the interest of a complete overhaul will become more apparent.

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