Wednesday, August 28, 2013

Pension Reform, Again

The Ayrault government has finally announced its long-awaited pension reform proposal. As one would expect from this government, it's a bit of a wet squib. The plan does nothing to reduce the opacity of the overly complex French pension system. It is entirely directed at trimming the deficit. I use the word "trimming," rather than, say, "eliminating," advisedly. There is not even a pretense that the increase in the system's revenues will be enough to restore equilibrium. But to get even this far, the government has been forced to ratify what the previous government (of the Right) did. It will reduce neither the payroll tax nor the number of quarters of contributions required to earn a full pension; in fact, it will increase both. Although the so-called "legal retirement age" of 62 is maintained (even though many who voted for the left wrongly believed that Hollande promised to reduce it to 60, where Mitterrand had put it long ago, they are wrong: he made no such promise), it is in large part a fiction that ought to be abolished. With the quarters of required contribution increasing from 41.5 years to 43 years by 2035, only those who begin work at age 19 and suffer no periods of unemployment will be able to retire at 62 with full pensions.

The proposed reform does break some new ground. There are provisions to assist workers in particularly arduous jobs, women, those who endure extended periods of unemployment, etc.

On the whole, however, this is a disappointingly timid effort. What is really needed is a sweeping reform to unify and clarify the entire system, so people know what they are paying in, what they can expect to get out at whatever age they choose to retire, and what options they have at every stage of their career. What they got instead is a reform that is carefully calibrated not to get anyone too angry, that will pare back the existing deficit by just enough to satisfy Brussels, and that makes a few gestures toward remedying the most serious inequities of the last several reforms. That's not nothing, but it's also not as much as one might have hoped from a government of the Left.