France: Macron’s Pension Reform Project in 10 Questions and Answers

The history of our pension system, its dismantling, the successive “reforms” and the discourses that justified them are essential to understanding Macron’s project, the latest version in an uninterrupted series of attacks since 1991 by governments of the right and the “left”. La Commune offers its dossier in 10 questions and answers.

1. How does the current system of retirement by distribution work?

It is part of the Social Security system established in 1945, as a result of workers´ conquests in the wave of insurrectionary strikes during the immediate postwar period. It is based on two principles:

• Not receiving immediately part of the salary. We´re talking about deferred wages: the net salary is paid to the employee at the end of each month, once the part of the deferred salary (contribution) is paid to Social Security. The sum, net salary and deferred salary, is the gross salary. This gross salary belongs to the workers: exempting employers from their contribution to social security, transforming it into a tax, means robbing the workers!

• Placing that deferred salary in a common fund to cover every worker in each moment of their life (illness, unemployment, retirement, family leave) according to the principle of workers’ solidarity: each union contributes to all and all to each union. Every worker contributes according to their salary and receives according to their needs: therefore, health care or retirement benefits do not correspond to the individual contribution of each worker (as opposed to pension funds or “points system” retirement).

2. How did it work before 1945?

Before 1945, those who could afford it saved money in private financial institutions: therefore, it was a system based primarily on capitalization. Only those who worked in certain sectors had specific pension plans since the 19th century (1858 for gas workers of the Parisian Company; 1860 for railroads of certain companies; 1890 for all railroads; 1894 for miners). It was the social struggles and the correlation of forces that imposed the establishment of pension plans to respond to poverty wages and great difficulties.

After the economic crisis of the 1930s, most retirees lived in poverty and destitution if they could no longer work or be accommodated and fed by their families.

3. What previous attacks were there to the current retirement by distribution system?

Under the pretext of preserving the distribution regime, ensuring its sustainability and financial viability, the state has allied with the employers to carry out dismantling operations. Since 1991, the aim of various reforms has always been the same: to reduce the pensions by distribution and develop capitalization pensions!

For thirty years, the state has not stopped interfering in the management of the income (contributions) and expenses (social benefits) of the Social Security budget, which is greater than its own, to control it, dispose of it and suffocate it.

• The first attack dates to 1991: Rocard advocated generalized social contribution (CSG), a mandatory tax to participate in Social Security financing and, since 2018, in unemployment insurance, instead of salary contributions. The CSG rate went from 1.1% of income to 9.2% in 2019!

• In July 1993, the Balladur-Veil law imposed 40 years of work (instead of 37.5) and a calculation based on the best 25 years (instead of the best 10 years) on private sector workers. Retirements, de-indexed from wage increases, are now aligned with inflation.

• In 1995, the Juppé Plan attacked the special regimes and faced the November-December 1995 strikes that defeated him.

• However, following the attack on Social Security initiated by Rocard´s CSG, the Juppé government imposed the principle of Social Security financing laws in February 1996 and, to do so, changed the Constitution: “Social security financing laws determine the general conditions of their financial equilibrium and, considering their income forecasts, sets their spending objectives, in the conditions and under the reserves provided by an organic law”. Also, in 1996, the ARRCO-ARGIC (complementary retirement) agreements, signed especially by the Labor Strength union center, reduced pensions in the private sector.

• The ruling “plural left” (PS-PCF-Greens-PRG) continued with several measures that distorted the distribution system: in 1999, the creation of the Reserve Pension Fund, and in 2001, the Fabius law on wage savings…

• In 2003, Fillon’s law aligned public employees with the private sector´s 40 years and provided a gradual increase in the contribution period of 41.5 years for all (except special regimes).

• The 2007 Sarkozy reform aligned workers of the special regimes (rail, public transport and electricity and gas industries) to the 40 years requirement.

• In 2010, the Woerth reform took a whole series of measures, the most emblematic being the rise in the legal age of retirement (from 60 to 62) and the rise of the retirement age without discount (from 65 to 67 years).

• The PS returned in 2013 with the Hollande-Touraine reform, which imposed an increase to 43 years of contributions by 2035.

4. Is the current system not inequitable? Isn’t the universal system a good idea, instead of 42 different regimes?

Until 1929 and the first retirement laws, the first so-called special regimes (created in the 19th century), are considered a reference: leveling is done upwards. When there is uniformity (in 1919 for the retirement of the mail, tobacco, matches and coins sectors, in 1922 for railways), it is carried out according to the model of the most favorable and advantageous regimes.
It was not until 1991 that different governments began to talk about inequality, privileges (special, state regimes) in order to level down the different regimes and gradually reduce pensions for all.

5. So, what is the government’s objective with this reform?

Always the same! To reduce the pensions administered by the distribution system and develop capitalization regimes.

For thirty years, the employers’ chamber Medef and the government have wanted to recover that part of the salaries that are beyond their control and have not stopped implementing measures to exempt the employer contributions, called “social charges”.

Successive governments since Rocard´s have introduced a progressive replacement of social contributions with taxes to make the reality of deferred wages disappear and put Social Security under the tutelage of the state. The result is clear: in 2018, contributions only represented 54.2% of Social Security revenues (against 77% in 1959).

Reducing contributions and, therefore, expenses: this is how Macron’s reform foresees limiting retirement spending to 14% of GDP. For that, all means are good: age reference (of retirement), calculation of the pension amounts based on the wages of the entire career, ending the special regimes…

6. What consequences will this reform have for workers?

A general decrease in pensions for everyone. Unions and citizen groups have carried out simulations that allow this to be seen quite clearly:

• A private sector worker, born in 1961, receives a retirement equivalent to 73% of his last salary under the current system; a private sector employee, born in 1990, with Macron´s points system will only receive 56% of his last salary;

• For an administrative or technical assistant (category C) in public employment, the monthly loss varies between 280 and 336 Euros between the current system and Macron´s points system; for an administrative or technical secretary (category B), between 232 and 352 Euros; for a certified teacher, between 426 and 626 Euros; for an administrative assistant with average premium (category A), between 454 and 538 Euros.

These losses, calculated before the announcement of the age reference at 64 years, must be reevaluated even more!

7. Yes, but is reform not necessary due to financing problems?

This is, in fact, the recurring argument of various governments over the last thirty years: there would be too many retirements compared to active staff… The Retirement Guidance Council (COR) estimates that by 2025 the system will have a deficit that ranges from 8 to 17 billion Euros.

This deficit is a construction, the result of conscious choices by successive governments and their “reform” expenses. The expenses (about 340 billion for retirement payments paid each year) are quite stable. On the other hand, revenues are decreasing due to austerity measures and tax exemptions that have been granted to employers by the state.

This is how the reduction in the number of state-owned companies (and, therefore, in the amount of contributions paid by the state and communities) and the policy of exemption from social charges have increased the deficit.

The same goes for Macron´s reform, which far from restoring the balance, will expand the deficit. To give just one example, the decrease in the maximum limit of income subject to contribution (from 27,000 to 10,000 Euros per month) will significantly weaken the financing of the distribution system: this will mean almost 4,800 million Euros less in contributions for year, though it will be necessary to continue paying pensions calculated on very high incomes for several decades!

8. Yes, but with the extension of useful life, should we not work more?

This supposed common sense argument, like the one about the deficit, used by different governments during thirty years, clashes with the economic reality suffered and lived by 50% of workers over 60, who suffer layoffs and / or illnesses: Increasing the retirement age does not allow workers to work longer, but forces them to wait longer in unemployment, sickness or with a minimum allowance before they can retire. And even more: that percentage of 50% corresponds to an average because if, at age 35, an executive can expect 34 years of healthy life, for a worker, that is reduced to 24 years…

9. Shouldn’t financial income be taxed to pay pensions?

That is part of the false “good ideas” presented by the CGT and the parties that say they are left-wing. That is equivalent to charging the wolf to take care of the sheep, that is to put the financial, stock and banking institutions in charge of financing Social Security.

We insist: our system is based on workers ‘solidarity, independent of the employers’; Our retirements must continue to be financed only by contributions in relation to wages.

To perpetuate and finance the current system, simple solutions can and should be implemented. To increase wages is to increase income for retirement; prohibiting layoffs means fewer unemployed people and billions more in retirement…

10. What do unions and employers say about it?

The employers’ organizations are mostly in favor of the government´s project and have understood that, for them, there would be less deferred wages to pay.

All trade union centers have agreed, without exception, to discuss with the government during twenty months. Only the radicalization and absence of pacts with the working base forced them to change their position. The decision of the public transport unions to propose to the workers to declare an indefinite strike on December 5, 2019 until the project is withdrawn, and the success of that call, which extended beyond transport and the railroad, forced the leaders of the CGT and FO to get in tune and demand, under threat of rejection of their authority, that the project be withdrawn.
Those leaders were forced to hide their eternal requests to negotiate “another reform” or a “good reform”. The obstacles they tried to place in front of the workers were blown away like dust: the treacherous call by the CGT on the night of December 18, 2019 to manifest for just one day on January 9, did not affect the morale or the determination of the workers, who overpowered the bureaucratic leaders…

Isabelle Foucher
12/31/19, updated 1/13/20

Our position: neither law nor reform!

Everybody on strike for:

• The withdrawal of Macron´s project
• The restitution of Social Security on its foundational 1945 bases: repeal of the 1987 decrees and the Balladur, Fillon, Sarkozy and Hollande laws.
• Recovery of all social contribution and no more exemptions.
• The return to the correct retirement age at 60.
• The return to 37.5 years of contributions for a full or private full-time retirement.
• The return to the calculation of private sector retirement based on the 10 best years.
• Indexation of retirement payments to asset salaries.
• Continuity of the Civil and Military Retirement Code and all special regimes and the harmonization of all pension and retirement schemes.
• No pension below the minimum wage and a minimum salary of 1,800 net Euros.
• 400 Euros increase in minimum wages and social benefits; equal pay for women and men.
• Law for the prohibition of lay-offs.

1] “Social Security pays 470 billion Euros in benefits per year, more than the state budget: 350 billion Euros. This is equivalent to 25% of national wealth: GDP is around two billion Euros” (on, What is the Sécu? Key figures).

[2] Article 34 of the Constitution.

[3] Estimates of the group Our Retirements, cited in Retirement Reform: the real figures, by Dan Israel, in Mediapart, 9/5/19.

[4] UFSE notes on simulations of the Macron reform compared to the current state-owned regime in the Delevoye Report, 9/9/19 (on the web

[5] Pension reform: the revelation of high salaries, by Dan Israel, in Mediapart, 12/30/19.

[6] Retirements: no, not all seniors can work longer, by Dan Israel, in Mediapart, 9/24/19.