In his first parliamentary address in mid-January after coming to power, France's Prime Minister, François Bayrou, offered the chance to renegotiate the contested plan to increase the retirement age from 62 to 64.
France has a retirement age lower than many of its European neighbors, but many French people view an early retirement as sacrosanct. It was part of the social contract developed at the end of World War II in which the government would look after you in your retirement if you worked a fixed number of years.
But today, it's an expensive system, threatening to break the economy.
France has a retirement age lower than many of its European neighbors, but many French people view an early retirement as sacrosanct.
President Jacques Chirac tried to overhaul pensions in 1995 but then scrapped plans because of massive strikes. In 2010, President Nicolas Sarkozy raised the minimum retirement age from 60 to 62, despite people taking to the streets in protest. This latest change was introduced by President Emmanuel Macron using constitutional powers to push through the law in April 2023 rather than putting it to a government vote, resulting in months of protests on the streets from Jan to June 2023. The wounds are still open and raw.
It's all about the maths
France has a pressing need to spend less money. Its deficit will likely reach 6% of GDP in 2024, breaching EU rules that state a country’s deficit should be no more than 3%.
The French government hopes to get to 3% by 2029, but giving people another two years of retirement won't help improve spending when, as Bloomberg says, the country spends more than 25% of its budget on social welfare.
It isn't just the spending. Productivity is falling in France. Since 2019, labor productivity in France has fallen by 8.5%. And the country also has declining demographics. In 2024, 663,000 babies were born in France. That's 2% less than in 2023 and 10% fewer than in 2010. The birth rate has been at its lowest level since World War II. The average age for first-time mothers is 31.1 years, giving an average of 1.62 children per woman. Luckily for the economy, there has been a rise in population, up to 68.6 million people, but that's down to migrants. However, as in other EU countries, immigration is a political hot potato.
These demographics will only get worse. Aging populations tend to result in younger generations who are financially less well off and who, in turn, have fewer children. Birth rates then decline even further.
The easy way to fix the math is to keep people working longer.
Finding a fair solution?
But it isn't just because people want more time in retirement. The debate is testy because it involves grievances about social inequality and fairness.
Should someone who works in a challenging career, physically or mentally, be subject to the same rules as an office worker? Should someone who started working at a remarkably young age be forced to wait to take retirement at the same age as someone who started later? There's also the issue of gender equality in pensions that could be better addressed.
Several solutions are possible. France could change its employment rate, especially for the 55-64 age group, which is low compared to other countries. Just 58% of this age group are employed compared to 73% in the Netherlands. However, this would be complicated as it requires a commitment from companies and a complete reorganization of work.
The French business newspaper Les Echos calls the retirement issue "un casse-tête," a headache. That's because François Bayrou is offering a tiny window for all parties to agree without breaking the pension insurance deficit. It's an olive branch to both the right and left-wing, who both want a deal from a government that doesn't have a majority and needs some goodwill.
The French business newspaper Les Echos calls the retirement issue "un casse-tête," a headache.
People have been given till the summer to agree, but if they cannot find a way forward, then the existing law, brought in by President Macron, will stand.
