Dear readers,
Already in spring 2022, opinion polls showed that by announcing his intention to shift the retirement age from 62 to 65, Emmanuel Macron faced a sound opposition by most of the French population. This opposition is, to some extent, unprecedented and wide-reaching, including the pensioners who are not directly affected by the proposed measure.
Looking for a workable compromise, the Government lowered the proposed retirement age to 64. Yet this move was unsuccessful to appease tensions. With more than 1.2 million of protesters in the streets, a crucial and symbolic milestone has been reached. According to the last inquiries, most of the population not only refuses the proposed reform, but also sympathizes with the social mobilization.
The trend is robust, it is a hard, if not impossible, bet to expect a reversal of the public opinion in the short term.
At the same time, there is little doubt about the outcome of the parliamentary debate. Emmanuel Macron and the Government led by Elisabeth Borne should succeed in passing their reform, as the French Constitution allows him to override the lack of a majority or parliamentary obstruction.
Parliamentary success will, however, not be enough. Retirement reforms are always bearing a high social and political weigh in France and leave important marks in the sand. The 1995 reform not only cost the conservatives their parliamentary majority but is still quoted as an example of social conflict in modern France. Nicolas Sarkozy passed his reform in 2010, but the tensions which spread in the streets was among the reasons leading to his defeat against socialist candidate François Hollande, two years later.
If the Government is perceived as offending a country where equality and social justice are always vivid sources of debates, the current situation could weaken its image on the longer term and its ability to pass further reforms.
Hence, the fundamental question is what will be the ability of Emmanuel Macron and of the government to act once the reform is adopted. The political cost of the pension reform could indeed sound the death knell for President Macron's ability to carry out other reforms for the remainder of his second five-year term. Thus denting his presidential power and credibility for the remainder of his mandate.
Yves-Marie CANN, Managing Director
France Under Pressure
The pillars of the French social system
It is commonly agreed that a social model is a system of institutions and legislation that allow a state to create national solidarity, equal opportunities among the population, access to education, employment, social protection, health, housing, retirement, etc.
Inspired by the National Council of the Resistance led by General De Gaulle at the end of WWII, the French social model is designed as a compromise between the welfare state and the market economy. As such, it is structured around three main axes: the right to a pension for all workers (1946), free health care (1946), and unemployment insurance (1958). The model is also accompanied by several social developments such as the recognition of trade unions, the status of the civil service, assistance to the disabled, family policy, the minimum hourly wage (SMIC), work welfare benefit (RSA), assistance to the elderly, etc.
As such, the French social system, fully founded on the notion of social justice, is the unique translation of the French political imaginary and a core principle of the French Republic post WWII. The establishment of a developed welfare state was made more concrete in 1945 by the creation of the social security system based on a Bismarck model, with as a main feature a mandatory social insurance system.
Undeniably, social security is the cornerstone of the French social system. France is the European country that spends the most on social protection; 33.3% of its GDP in 2021, that is 834 billion euros, according to the French State’s Directorate for Research, Studies, Evaluation and Statistics (INSEE).
France’s social security is divided into five divisions (health, family, occupational injury and disease, pension and autonomy). It is mostly based on social contributions deducted from wages and salaries rather than through taxes. 65 million French people are insured, whereas households and companies are the main contributors.
Although France’s social system is often praised as being one of the most redistributive, it was paradoxically established later than in most Western countries. Indeed, debates around such a prominent public system unsurprisingly sparked opposition and criticism from different social groups. Even so, the French population have a strong attachment to the system.
Flaws and limits of the French social system
Such a complex system does not come without criticism
The traditional argument against the French social system is that it is heavily financially dependent on employee and company contributions and has, over the years, become the main hurdle for business entrepreneurship development. Indeed, with lower growth, higher unemployment rates, and growing demographic challenges since the 1970s, the general level of contributions has grown, and the system has accumulated deficits for years.
In the early 1990s, there was an attempt to split the bill with via direct tax contributions with the creation of the General Social Contribution (CSG)’ a tax levied through flat rates on all revenues (up to 9.2% for certain categories of revenue). This tax gathers more than a €100 bn every year to cover the deficit, and, overall, with other taxes allocated to social protection it contributes almost to 30% of the total spending. In addition, in 1996, a temporary tax called “contribution for the Reimbursement of the Social Debt” (CRDS) was introduced, with a flat rate of 0.5% on all revenues. This was designed, to mitigate the debt created by successive deficits. Initially, this initiative was supposed to last 13 years, but, with little expectation that this will disappear anytime soon, we can look forward to celebrating its 30th anniversary soon in 2026.
Moreover, the system is frequently criticised because of massive inefficiencies. Despite a strong attachment to it, polls indicate that there is a widespread dissatisfaction among the population, driven by quality of services provided or ability to access them, especially regarding when we look at the healthcare system. There is also a strong belief that the situation is worsening and there are calls for increased financial contributions to level-up services. In the meantime, on the opposing side, some believe the system is overly generous in its support for certain segments of the population, with a strong political narrative growing around “assisted culture” (“l’assistanat”), a ‘welfare state’.
Managing, and even worse, trying to reform such a complex system that triggers such strong public opinion, is the ultimate challenge. Indeed, as with any evolving society, the system must also adapt, and there is a growing feeling in France that, though constantly under reform, this is with little or no positive effect. Many governments have squandered their political capital in their reform attempts and it has broken many a political career. But it seems that wiping the slate clean is not an option in French politics. So, the question is - why reform the social system, and how?
Reforming the social system – President Macron's chosen ambitions'
Looking back at past reforms carried out
Although President Macron is not seen as a leading politician on social issues, several reforms have been carried out in this field since its first election, in 2017. There has been no major “big bang” moment. Or at least not on the scale of the pension reform presented earlier this year.
So, what has Emmanuel Macron done in the field of social policy to date and to what end? Three key reforms of note are:
“ZERO OUT-OF-POCKET” HEALTHCARE
As a key promise of his first presidential campaign, the “zero out-of-pocket” healthcare initiative was implemented shortly after the 2017 election. To ensure that cost does not drive French people to avoid medical care, the reform aimed to eliminate out-of-pocket expenses for care deemed to be of primary importance, such as dental care, eye care, and hearing aids. Praised by public opinion, this reform was considered a success and a step forward for access to healthcare for disadvantaged people.
CREATION OF A FIFTH DIVISION OF THE SOCIAL SECURITY SYSTEM: AUTONOMY
Faced with the continuous increase in expenses for elderly care due to the ageing of the population, the government established a dedicated division in the social security framework. While considered a step forward, opposition parties claimed that this reform was nothing more than a reshuffle of the administrative scheme, with little real-world impact on the rights of elderly.
In support of this new division, a bill on “Old Age and Autonomy” was to be presented during the previous mandate to prepare the country to face the surge of people in need for elderly care. Yet, for unclear reasons this reform faded from the government’s political agenda.
UNEMPLOYMENT BENEFITS REFORMS
The latest reform on unemployment benefits was a major shake-up of the system. In response to a growing labour shortage in the country, the government changed the unemployment benefit system with a greater emphasis on encouraging people to return to work. The guiding principle for the new system made the link between level of economic activity and the level of benefits received. In a period of high economic activity, the compensation is lower and when economic activity decreases, the compensation increases.
This reform has provoked various reactions. It was welcomed by employers who argue that the generosity of unemployment benefit is responsible for the labour shortage. On the other hand, trade unions and left-wing politicians have opposed this reform, which they see as an attack on workers' rights.
The pension reform, Round 2
Reforming the pension system has been President Macron's major social project since his first election in 2017. During his first mandate, his project to create a universal points-based system and merge the dozens of existing systems into a unique one was well underway. However, the project’s parliamentary journey was brought to a halt by the Covid pandemic.
Some people argue the system operates as a "Ponzi scheme", as indeed its survival relies on the fact that more and more active people are needed to support more and more retirees. Demographic issues and the aging of the population are the key policy arguments in support of the reform.
But the rationale behind the reform has been criticised on a number of fronts and has failed to attract wider public support. According to an OpinionWay recent poll for Les Echos and Radio Classique, 61% of French people approve of the trade unions mobilization against pension reform.
This reform is considered unfair on two major grounds:
1. Supposedly heavier on the most precarious employees and not taking sufficient account the physically demanding nature of certain types of jobs.
2. Young people no longer trust the state to provide for their retirement; according to a recent study by Le Cercle de l’Epargne, 78% of 18-24 years old and 83% of 25-34 years old believe that the system could go bankrupt in the next decade. This mistrust is not in favour of the pension system, which operates on a pay-as-you-go basis, and therefore on solidarity between generations. Finally, maybe the French have gotten used to being landed a hand. The reform comes after years of 'whatever it takes' stimulus policies; the French have become accustomed to seeing the state deploy aid plans to limit the social impact of measures.
Reforms under pressure
The historical perspective – how reform triggered social movements
The current pension system is a “pay-as-you-go” pension system. Over the past 80 years, France has seen its pension system transformed continuously, from a gradual implementation to a tightening of conditions in the latter half of the last century.
If for more than half a decade, the pension system was adapted slowly, it is fair to say that France’s approach to reform has been turbocharged – France is now facing its 6th reform in over the last 30 years. Overheated public debates, protests, and social tension within the country on pension policy is prevalent in public discourse.
This acceleration of reforms is driven by the consequences of aging after the end of the Trente Glorieuses (“The Glorious Thirties”), a greater life expectancy and an aging population with less working people than before. The French Government then aimed at increasing the legal retirement age. As a political symbol and with an important position in the history of French labour, the extension of the legal retirement age has always been a major ‘snag’ for governments.
The French government has always faced hurdles when focusing on the public sector. Why? Because this sector has high levels of union representation compared to the private sector. In 1995, a series of general strikes were organized in France, mostly in the public sector, as part of a larger social movement against the reform agenda led by Prime Minister Alain Juppé. These strikes constituted the largest social movement in France since May 1968 and were a turning point for the role of social movements in the country; many organisations were created in the aftermath of these strikes.
During the 2007 presidential election, Nicolas Sarkozy’s mantra was “work more to earn more”, which resulted in a shift towards greater public acceptance in challenging the principle of a 35-hour work week. This shift in attitude was in stark contrast to the position of Unions where, for example, the CGT (second largest French union) declared Sarkozy’s mantra a provocation towards unemployed people. A further social reform at the centre of France’s social agenda under Nicolas Sarkozy was the rise in the retirement age from 60 to 62. Again, France’s streets strong widespread protests in opposition to the reform. In this context, Former Prime Minister Pierre Mauroy, a figure of French socialism, declared in a famous anaphora that “retirement at 60, it is a life rope, it is a rope of suffering at work, it is a rope of demand, it is a rope of hope”.
Finally, France further encountered an unprecedented social movement in late 2018 with the Gilets jaunes – “Yellow vests” protest. This movement was: unprecedented in its mobilisation, which took place outside any existing organisational framework; unprecedented in its longevity (national demonstrations on a weekly basis for over a year, halted only by the pandemic); and unprecedented in the variety of channels through which opposition was expressed.
And to the streets we go again: Analysis of the ongoing protests against the pension reform
Reforming pension has always triggered fierce opposition in France. Since 1981 and President François Mitterrand’s lowering of the retirement age from 65 to 60 years old, the pension scheme has been considered an important social achievement. But while France ranks first among European Countries’ social expenditures, successive pension reform has generated significant opposition from Trade unions.
2003, 2010, 2013 all saw massive demonstrations against reforms designed to reduce the cost of the system for public finances. And yet in the face of protests, all these three reforms were passed.
This time could be different. Two main features that are distinct to these ongoing protests:
All unions in France are united against the reform, with support of all the six main confederations
Grass root opposition to the reform is growing among the population, reaching 65% (an increase of 4% in just over a week). Even more worrying for the Government is that the support, including strike action, has also increased to 73% (over 2% in a week) according to the ELABE institute.
What is also interesting is the form that opposition to the reform is taking. Over the last few years, together with the “yellow vests” movement, violent and unorganized social protests have appeared across the country. The first episodes of mobilisation against the pension reform demonstrated a return to more traditional forms of action, disregarding violence and favouring organized mobilisation.
Should the movement continue in this vein and succeed, it would constitute a pivotal point for unions in justifying their strategy, previously disregarded by younger protesters in favour of violence.
Union strategy in France can be seen as threefold:
The mass effect: Contrary to grass root mobilisation, unions favour large and disciplined demonstrations. They rely on and favour organization over direct action, in a move to aggregate endorsers and to secure the support of the population.
Unity: A key objective is to have broad and diverse support, encompassing organisations from the more revolutionary and anti-capitalist line to the more reformist. To broaden the opposition, unions will do everything it takes to secure unity and to find a compromise among its members.
Cracking the wall: All in all, the goal is to build a mass, united, movement to exert a constant pressure on the Government and MPs. Unions are betting that with opposition raising they could turn a part of the conservatives and majority members of Parliament against the text – or even simply abstain – and thereby stop the vote of the text in Parliament.
Le mot: “Charges” vs “cotisations”
They are two sides of the same coin, and yet at the same time are political opponents. Their use depends on whether fiscal policy leans towards the demand or supply.
Their legal name is “cotisations“ (contributions) and they are presented as a common and shared wealth. Calls to protect or to increase them often come from the left side of the political spectrum.
But, at the same time, since the 1980s these contributions have been ever more frequently called “charges” (burdens in English) in the political debate, especially on the right side of the political spectrum. This reflects the fact that they are perceived by some as a major ‘drag’ on growth from which the country must be “relieved”.
As always, words matter. And perhaps more so in France than anywhere else.
