THREAT AGAINST PENSIONS IN FRANCE

THREAT AGAINST PENSIONS IN FRANCE

For a New Economic Policy

Didier BERTIN - January 2, 2020

I-CURRENT APPROACH: TOWARDS AN IMPASS

1-General considerations

The reform of the pension system currently underway is based on an empiricist and trivial approach which eliminates fundamental problems and real priorities. This approach is exempt from all moral considerations which are a characteristic of economic liberalism which is opposed to the notion of Fundamental Human Rights yet taken into account "symbolically" by the European Union. The obsession of the political class by the short term financial balance through a simple accounting view generating superficial steps is a deviation from its main role which should first to take into consideration the model of society desired by the citizens in accordance with principles and values of the French Republic and then to build a corresponding funding system if needed.

The following main aspects may be noticed in the current context: Economic slowdown, increase in precariousness of jobs, priority given to the entrepreneurial sector, corollary loss of the authority by the state due to economic liberalism and globalization and the resulting demographic decrease. A short-sighted policy leads instinctively the political to propose a substantial reduction of pensions and rising the retirement age, that is to say to treat the effects and not the causes. First of all it is irresponsible to request from seniors to exhaust themselves in working longer when companies are reluctant to offer them jobs and also immoral regarding the shortening of life expectancy that such an obligation may involve.

There are a lot of talks about medical progress with the help of artificial intelligence and gene therapies but this is still in an experimental phase.

2-Practical considerations

The current proposals of French government aim to significantly reduce the amount of pensions as had already been done in the past and this will eventually lead to the use of speculative pension funds to supplement pensions which will become insufficient, which is out of the French principles based on solidarity. The proposed mechanism for reducing pensions is as follows:

a. Calculation of pensions: determining a point value is not problematic if the right to retirement continues to be calculated effective period of work by quarter of year and not by accumulation of points only specially because the calculation by quarter gives more flexibility to take into account particular cases.

b. Wages taken into consideration: The ten best years of wages have already been replaced by the best 25 years, and then it is now question of taking into account the wages of all the years of work in order to reduce pensions far away of the usual way of life of beneficiaries in their last years of work with a clear risk of pauperism. Pensioners should thus suffer the fact that a pension is only a share of salary and in addition the reduction effect on pension of considering their smallest wages when they started to work.

c. Duration of contribution: The extension of the retirement age to 62 and then to 64 in 2027 (in negotiation) to avoid a very heavy penalty will considerably amplify the fall in pensions due to the effects (a) and (b) and by the reject of seniors out of the job market. Companies often do not want seniors because of their physical form and also because they do not want to pay the price of professional experience because the immediate accounting effect prevails. Current proposals may thus also aggravate the risk of impoverishment from the age of 50 in case of loss of work.

Far from French principles the state abandons citizens to the private realm, which is only driven by short-term accounting considerations.

II - SOCIETAL CONSIDERATIONS

1-Work

It is a constraint linked to the biological needs quickly integrated into an economic system allowing beyond these needs to create wealth for those who dominate this system. Social struggles have given the nation’s representatives a duty to moderate the entrepreneurial appetite. The state, overtaken by economic liberalism and globalization, has gradually abandoned its power in favor of the private realm devoid of moral conscience. Reducing labor costs has therefore become a priority, which also includes the progressive loss of the right to pension. The state, which has also become powerless due to a lack of conviction and ideas, is no more than a bystander. The last protective and fragile limit for workers is the need for businesses of consumers who form the market allowing the maintenance of the economic cycle.

2- Lifespan

Human beings have created the progress of science and medicine and therefore they should benefit directly of resulting life expectancy increase in average value. The attempt of diversion of what human beings have created for themselves for the benefit of certain economic entities would be a perversion of science.

The political class is assumed to represent the interest of all citizens but includes in its decision parameters speculation on their death that they name "life expectancy" in order to decide what part of life should be sacrificed to work. This is all the more shocking since there are other obvious alternatives. In this case, we are close to a society which would determine the right to retirement on the basis of a regular individual remaining life assessment.

3 – Progress in the production of goods and services

Since the industrial revolution, there has been a meteoric progress in productivity, that is to say the human production capacity has been constantly multiplied thanks to human genius.

This change could have been immediately perceived as an opportunity to gradually liberate people from work, but greed masked this opportunity and therefore the increase in productivity was mainly devoted to producing more at the lowest cost to increase the return on capital. .

Social improvements such as purchasing power increase and work time decrease were won by hard struggles while the idea that most of the waking life as long as the state of health allowed it had to be spent for production, remains still today. This principle is based on the belief that economic growth keeps the system alive even if it moves away from the notion of improving human well-being.

The positive points are that thanks to the increase in productivity and the development of automation and information technologies which are in particular at the base of artificial intelligence which multiplies human capacities, one can produce much more with much less labor. This opportunity would therefore make possible a reduction of work with a better distribution to reach full employment and earlier retirements depending much less on demographic evolution. The problem is that the political class is not mature to organize a new society including solidarity between workers and employers.

The volume of profits of the world's leading companies gives an idea of ​​the magnitude of wealth resulting from better productivity and better management. Wealth therefore exists to allow greater well-being with the limit of the planet's resistance to economic growth.

III - SOCIAL MODEL - PENSION FINANCING AND CONCLUSION

1-Social model

Government economic mismanagement has clouded people's prospects. The political class, lacking in ethical references, has only tackled the effects and not the causes of the problems. Before considering a reform of pensions and their financing, it is therefore necessary to define the type of society desirable to maintain well-being in a democratic, ethical and solidary framework according to the values ​​and principles of the French Republic. Four important but non-exhaustive points are indicated below:

A-Limit of the time of presence at the workplace: It should be noted that many countries include the lunch break in working time and moreover, travel time to the workplace must also be taken into account. A quality society must provide its citizens with a minimum available daily waking time outside of the time devoted to work and this should indicated in the Charter of Fundamental Rights of EU.

B-Age of retirement: This should not exceed 60 years given the sharp increase in productivity, the benefit of which is to be distributed equitably. The idea of ​​making seniors work beyond the age of 60 when they are rejected by the job market is out of the realm of reality and would contribute to an unacceptable shortening of life expectancy.

In order to put aside life-threatening ideas, the retirement age of 60 at the latest should also be indicated in the Charter of Fundamental Rights of EU.

C-Inclusion in working time of Higher Studies and continuing education: To free human beings as much as possible from work, innovation, automation and the development of information technology are essential and require a strong investment in training and higher education. Studies are to be considered as work for the benefit of the general interest.

The low number of patents filed in France and the latest mediocre results of OCDE’s PISA test (2019) underline the fact that France does not have the leaders it deserves because it is not part of the group of the main innovative nations and this is more worrying than the time lost due to an awkward and untimely attempt at pension reform.

More time must be devoted to innovation, automation and remote work in order to produce better with the least manpower possible so that we can continue to reduce working time in improving well-being. The key issue is that of a fairer distribution between workers and companies of the benefits from these technological improvements.

D-Lawsuits against companies that build their growth on planned obsolescence: These companies create artificial profits, reduce the purchasing power of consumers and damage the planet with unnecessary waste.

2-Funding pensions

It appears that a social model based on innovation could improve human well-being by reducing dependence on work. The resulting productivity gains could form the basis for funding pensions provided that a sufficient part is transferred from the private to the public realm.

Solidarity must in fact concern workers as much as businesses. The sole 40 French included in the stock exchange index CAC40 generated 88.5 billion Euros in 2018, while the average annual pension deficit over the 2025-2030 period would be around 0.5% of GDP i.e. around 13.8 billion Euros (GDP 2018). This is an indication of the capacity of only 40 French companies to cover the pension deficit with a small part of their profits. Apart from these 40 companies all French businesses could largely compensate for the needs of the French social system.

It is up to the public authorities to adapt the resources adequately to applications. This is another point which could be mentioned in the Charter of Fundamental Rights of EU as part of the right of citizens to good governance.

A modification of the social and fiscal system can only go through the harmonization of all of those of European Union countries or a significant part of them considering their GDP. In case of reluctance of certain members two subgroups may be constituted within European Union. As a matter of fact negotiating with large companies would be more efficient on the basis of a large market.

Brexit should make things easier since the UK has only been a mediocre member of European Union regarding the social policy and is the heart of economic liberalism in Europe.

The safeguarding of European social systems could also permit to slow down the growing success of the nationalist parties which build their propaganda on a vain nostalgia of the past not adapted the new globalized context. In order to succeed, the political class must be convinced of the priority of protecting social systems and be competent to conduct difficult negotiations at European level, which seems to be a weak point in France. The fact of having had to elect a President in France only to avoid the populist Front National taking the power and not for his program is a kind of regression of democracy and should lead the young French President to keep a low profile.