Wednesday, June 6, 2012

Retirement Reform Redux

Retirement reform in France is a bit like the peace process in the Middle East. An endless saga, negotiations over the most minute details (will women who bear children get credit for one or two extra semesters of contributions? do "long careers" begin at 17 or 18?), and in the end, not much happens. So 110,000 additional people will be allowed to retire at age 60 if they choose, and it will cost the state an additional €3 billion to be covered by a hike in cotisations of "only" 0.5 points, according to Marisol Touraine.

This is the "managerial socialism" that Pierre Rosanvallon lamented in his conversation with François Hollande, to which I linked the other day. Little bits are changed around the edges to permit the left to differentiate itself from the right. The essential vision remains unchanged. The necessary overhaul of the whole retirement system is deferred if it is even so much as considered. The whole structure of remuneration and its effects on competitiveness are not discussed. Disillusionment with the mainstream parties increases. Friends to my left chide me: "But what did you expect?"

To be honest, this is what I did expect, but I reserve the right to be disappointed. Crises are supposed to concentrate the mind. Evidently things are not yet bad enough for any real thinking.


brent said...

Speaking more about the American than the French retirement issue--but the core issues are similar-I have doubts about this "necessary overhaul of the whole system" which has become a rhetorical staple. What really needs to change? Contributions need to be greater--in the US that means the ceiling on taxable income needs to rise. Maybe age of full benefits needs to increase, though most who say this overlook the class analysis of longevity, which suggests that the complex evaluation of hardship occupations in the French system (but not the US) are on the right track--though no doubt endlessly negotiable. In short, both countries need to tinker "around the edges" to preserve the basic human right to retire with dignity, and I fear that the loudest voices in the US for a major overhaul are actually hoping to rescind that human right and keep the lower end of the social order working till they drop. I fervently hope that France and Europe will continue to present a counter-example of solidarity and decency, and if that requires "managerial socialism," good for them!

Mitch Guthman said...

Let's be honest: France is increasingly becoming an irrelevancy. When France relinquished monetary sovereignty to Germany and the ECB it made a fatal error, one which it evidently intends to compound by now surrendering budgetary authority to them as well. A nation which controls neither its budget nor its own money is nothing.

The French can argue about the future of socialism or retirement reform or whatever else they like in the Parisian salons but the decisions about France’s future will be taken in Berlin and Frankfurt and not Paris.

As long as France remains in the Euro, it will be a nothingburger. Only by leaving the Euro can France regain its leadership role in Europe.

FrédéricLN said...

I agree in full with the post (as very often!).

True, the government could not pass now a serious change of the system, because there is no elected Assembly to vote it. Only minor changes could be decided.

BUT… we heard nobody announcing major changes for after June 17th. Nobody but, as usual, Mr Chérèque of CFDT who, like our party (MoDem), advocates for a Swedish-style universal and lifelong pension system.

Which UMP did not want to happen, and what PS doesn't want either. The present multi-offices, multi-Boards, multi-inequalities, pensions system, includes many advantages for those who know how to take advantages of it.

Our only satisfaction is: not to have the American system, with its enterprise-based benefits system and the Enron affair. Pensions should definitely depend on social solidarity, not on individual businesses.

Hilary Barnes said...

Christophe de Voogd, who teaches history of political ideas at Science Po, discovered that he is one of the beneficiaries of the changes that the new government has made in the previous government's pension reform, reducing the age of retirement from 62 to 60 for those who began working when they were 18 or 19.

This set him wondering who the real beneficiaries of the reform are and why the government was so anxious to implement by decree and not be the usual parliamentary process..

It is not, he argues at Atlantico, the bricklayers, farm hands and road sweepers who will benefit. Back in the 1970s, these would usually have left school and started working when they were 16 or 17 and these "workers of long duration" were taken care of by provisions in the previous government's reform.

Those who started work at 18 or 19 in the 1970s, he suggests, were élèves fonctionnaires, or students enrolled at a wide variety of special schools with a view to becoming civil servants, broadly defined. Their education, which can last for up to 10 years but is more normally two to three years, is paid for by the state and during this time they are categorized as employees.

The reform-of-the-reform fits this considerable army (precise numbers unknown), which includes many teachers, like a glove.

And as to being quick about implementing the reform? Well, there is nothing like encouraging the troops to say thank you in the elections for the legislature this month!

Cincinna said...

Match, Sadly, you are right. Unfortunately the window of opportunity Is closing quickly.

The welfare entitlement state's days are numbered. The money just isn't there.

Cincinna said...

 It would be nearly impossible to "raise contributions" as you suggest. Self employed people, i.e. small businesses already pay 13% of income and others pay 6.5% with their employer paying the other 6.5%
Raise the retirement age? Bill Clinton raised the retirement age for those born after 1960 to 67 years old. 

 Many people do not want to hear the truth, but Social Security is a Ponzi scheme, a classic pyramid scheme with the large number of people on the bottom paying in and the small number at the top taking out.
With an aging population, eventually, sooner rather than later,  there will be more people taking out than paying in.
  When SS was begun, the life expectancy was 66, now it is 80+
In France, life expectancy is even longer, so if one retires at 60, one will be collecting money for 25+ years. 
  The coffers in both countries will soon be empty, and the pyramid collapses.   

To clarify a few things about the US retirement benefit Social Security system. In the US one can start collecting full Social Security Retirement Benefits at age 66 if you were born between 1943-1954
Born after 1960, at age 67
All those eligible for social security benefits can be enrolled in Medicare at age 65 which pays 80% of all medical costs. A supplement to pay the other 20% can be purchased. 
One also has the option to begin collecting SS benefits at age 62 with a 20%-30% reduction in benefits. 
  You can continue working while collecting SS. nobody is forced to retire.
  Private pension plans have differing age requirements which are totally unrelated to SS. 
  The maximum benefit for SS for 2012 is $2513 per month. $30,156 per year. More than $60,000 per year for a retired couple. 
  How much you collect depends on how much you pay in. 
  The rate called the FICA tax, deducted from your paycheck is 13%. If self employed you're stuck paying the entire 13% yourself. If you work for someone else, you and your employer share the cost. 
 Only the first $110,000 is subject to FICA. 
Please remember that the FICA tax is in addition to Federal, State, and City income tax, and property taxes, school taxes, etc.
Tea anyone?