Backlash and Public Protests: Examining Macron's Pension Reforms

In 1717, France’s pension system encountered its first finances and debt crisis, as it was unable to be supported by public finances, foreshadowing a crisis in France today. Significant debt was left behind by Louis XIV as a result of the War of the Spanish Succession. During which, payments of pensions were suspended due to the cost of the war and France’s building debt. These pensions, after the War of the Spanish Succession, were reinstated afterwards to win the favour of the nobility and army who had rendered service to the monarch. These pensions were paid to the beneficiary until the event of their death, making this system an ancestor to the modern-day French Pension system. 

Currently, the French Pension system is once again in a period of upheaval as French President Emmanuel Macron, on April 15th, 2023, signed a controversial pension reform law. This reform has raised the French retirement age to 64 from 62, at a time when retirement reforms are highly divisive in France with mass Labour Day protests by trade unions taking place shortly prior to Macron’s reforms. Retirement age would be delayed by two years, moving from 62 to 64. This change will be implemented gradually, with the retirement age increasing in three-month increments, each year starting in September until 2030. 

 This highly unpopular reform has been fiercely debated, with supporters claiming that reforms are a necessity and critics claiming that reforms are anti-democratic.

Prior to reforms French Citizens born after 1968 need to work for approximately 41 years to earn their full pensions. If individuals do not meet the minimum contributions at the age of 67, France provides pensions for the elderly. This system utilizes funds contributed by active workers to finance the pensions of retirees through the proceeds gained through the investment of worker contributions, creating a cycle of worker-retiree solidarity. This system operates with a set of eligibility criteria, which includes “quarter requirements.” “Quarters” are earned if a worker contributes enough money to meet the minimum threshold in a quarter of the year. Before the reforms, to be eligible for a full pension, an individual born(?) after 1973 would be required to contribute 172 quarters or 43 years. Working past the minimum required quarters are incentivized with a bonus system that rewards delayed retirement.

Before the reforms, 14% of France’s GDP was spent on pensions, making France’s pension expenditure the third highest of OECD nations, with the average being 9%. The French Pensions Advisory Council’s projections anticipate that the share of GDP expenditure spent on pensions will increase by 0.5% to 1% over the next decade because future pension revenues depend on government contributions; rising pension expenditure risks yearly deficits that cumulate into public debt. Currently, deficits are expected to continue for 50 years, reaching 0.6% to 1.3% of French GDP in 2050. Macron has stated that his reforms are “necessary” to avoid pension deficits reaching a forecasted 13.5 billion euros by 2030. 

France’s aging population is a contributing factor to the projected deficits, as France’s dependency ratio is set to increase. In 2024, 21.5% of France’s population was over the age of 65, but this number will rise to 29% of the population by 2070. An increased number of retirement-age individuals raises the number of retirees and active contributors support. In 2004, this ratio was two working individuals to one retiree and has risen to 1.7 working individuals to one retiree in 2019. This ratio is projected to reach 1.5 working individuals for every retiree in 2040. The Union Nationale des Associations Familiales has stated that “the babies of 2023 are the contributors of 2043,” highlighting the stress that a dwindling birthrate and aging population places on the pension system. France’s pension system relies on worker-retiree solidarity, but with a fertility rate of 1.83 in 2020 failing to match the replacement level of 2.1, solidarity cannot guarantee sustainability. 

Aside from increasing the retirement age, Macron’s reforms include various alternative changes. One is a guaranteed minimum pension income of no less than 85% of net minimum wage. This translates to 1,200 euros per month currently, with this income being indexed yearly to inflation levels to guarantee higher pension income levels to individuals receiving the lowest pension. Additionally, the right to early retirement has been extended to public-sector workers in jobs deemed mentally or physically strenuous, such as police officers, prison guards, sewer cleaners, and air traffic controllers, who, before the reforms, could retire at 52. This means that even though these workers’ retirement age will be increased by the same number of years as the labour force, they will still be eligible for early retirement.

These pension reforms are expected to deliver positive impacts, not just on debt reduction, but on senior employment and the pensions of low-income individuals. France’s employment rate for individuals ages 60-64 is 33%, compared to 61% in Germany and 69% in Sweden. The age of exit in the labour market in France is 2.5 years below the OECD average and 1.6 years below the EU average. France’s rate of old age poverty is among the lowest in the OECD. Still, this gap is projected to shrink as the relative income of elderly individuals is set to fall 10% below the population average in 2050. This incentivizes the French government to raise the retirement age to a level comparable to OECD nations. Additionally, these reforms benefit French citizens at the lowest income levels. A 2.5% to 5% increase to the pensions of the lowest 30% of French earners. 

Despite these benefits, the reforms have been met with widespread backlash and protests. The French pension system is a cornerstone of the French social protection model, and altering the system has especially sparked outrage among unions and workers. Polling has found that 70% to 80% of French citizens are opposed to Macron’s reforms. As the bill's passing was announced, 7,000 people gathered to protest the reforms spontaneously on the Place de la Concorde in Paris, in the shadow of the parliament. Millions have protested the reforms before and after their passing, and mass strikes have been enacted in both transportation and education. 

Many have claimed the reforms are anti-democratic as Macron utilized Article 49.3 to pass the reforms, enabling the government to pass laws without majority support. At the announcement of the enactment of Article 49.3, French lawmakers broke out singing the French national anthem while some held signs protesting the reforms. Le Pen described Macron’s actions as “a slap” to the French people.

While alternative avenues to stabilize the pension deficits, many are unfeasible. Currently, the mandatory contribution rate is high, sitting at 28% of the average wage level. The OECD average is 18%, making levying higher contributions unfeasible for many individuals in the French economy as they cannot afford to contribute a higher portion of their incomes into pensions. Additionally, raising revenues through increased taxes on wealth remains unattractive as the tax wedge, defined as the ratio between the taxes paid by an average single worker and the corresponding total labour cost for the employer, in France is among the highest in the OECD,  ranking 4th and coming in at 46.8. Similarly to increasing the contribution levels, increasing the tax wedge may be too costly for French citizens.  

Despite protests, the necessity of pension reforms remains clear. An independent audit office found that failing to implement Macron’s reforms would cost 13 billion euros. Additionally, this audit found that the pension deficit would reach 15 billion euros by 2035 if action was not taken. Macron has stated that “this reform isn’t a luxury, it’s not a pleasure, it’s a necessity.” Reforms are an uncomfortable necessity that must be taken now to ensure individuals' pensions in the future.