After three weeks of strikes over the reform of the pension system in France, there is a temptation to conclude to the near impossibility of implementing any significant policy initiative in a society often perceived as overly rigid. After all, this conflict is one of a long series which erupt periodically, to the dismay of many observers who wonder why a country with a relatively high standard of living opposes changes which, on the surface of them, seem fully justified.
A deeper look at this new episode, however, paints a different picture. Because, first of all, the principle of a reform as such is not challenged. The alleged goals are to make the system universal (at present it is fragmented into no less than 42 different regimes), facilitate portability of benefits by introducing a points-based scheme which can be accumulated throughout career, irrespective of the job performed, and adapt the main parameters to demographic change.
These objectives have been broadly endorsed by the independent body in charge of both monitoring pension trends and making reform proposals (the highly respected Conseil d’orientation des retraites), as well as employer organisations and some trade unions. There is indeed growing awareness that the labour market is undergoing a major transformation, as a result of both improved longevity and technological change. As in other countries, the digital economy and automation are transforming jobs, thus entailing more and more labour mobility and requiring more portability of pensions. Also, new forms of work are spreading, from platform jobs and freelancing, to nomad work and dependent self-employment. The challenge for pension systems is to ensure that all forms of work are covered in similar ways, something the new system is supposed to do.
While these goals are shared, the conflict arises as a result of the way the government intends to operationalize them. A huge bone of contention is that the points that form the basis of the calculation of benefits is left undefined, thereby leading to considerable uncertainty regarding what the actual level of the pension will be. In fact, official estimates of pension rights based on the points-based model reportedly yield erratic results, understandably exacerbating a suspicion that the real, hidden intention of the government is to cut spending, rather than adapting the system to the new realities of the world of work.
This impression has been reinforced by government’s plan to increase the minimum retirement age, from 62 to 64. Such a move would somehow contradict the logic of a point-based system, which is designed to make retirement decisions transparent and financially sustainable. To many, indeed, this is another sign that the may purpose is to reduce the public deficit.
In face of these difficulties, the government has proposed to delay the implementation of the reform, so that it would only apply to new generations. For instance, in the case of public transportation, workers aged before the mid-1980s would be exempted from the changes. However, this concession has only eroded trust among social partners, with the result that the conflict is taking deeper root.
A possible way out of the impasse would be to revert to the initial spirit of the reform and focus of the unification of the fragmented structure of the pension system. This would be a major leap forward on its own. In addition, the points-based system could be made more predictable, by specifying ex-ante the value of each point (for instance as a proportion of earnings or some other tangible reality), with a view to removing any ambiguity. In addition, future adaptations of the system would be carried out in cooperation with social partners.
Nevertheless, the conflict also raises general lessons regarding the reform process, not only in France. First, policy makers should take into account perceptions of intensified economic insecurity. Right or wrong, more and more people think that their governments are not capable of protecting them against an uncertain future. This means that policy makers should refrain from weakening the predictability of the welfare state, including pensions, which is the backbone of social cohesion. They should also avoid putting the burden of adjustment on vulnerable groups.
Second, all too often, reforms are justified on the basis of the need to adapt to external factors like globalization, climate change, new technology or “Europe”. However, experience shows that such a discourse tends to erode confidence in the ability of national governments to solve people’s problems. And, lack of trust paves the way to populist solutions, counterproductive as they are, as they tend to negate those external factors or respond to them through in-ward looking solutions.
For sure, President Macron drew these lessons from the crisis of gilets jaunes. Let’s hope that he displays the same listening capacity and adapts his pension reform accordingly, before submitting it for approval to Parliament next February. Because unless social anxieties about the future are properly heard, even much-needed reforms may not see the light of day.