The Strategist

Why is France raising retirement age despite protests?

12/18/2019 - 09:43

The debate on pension reform came to the finish line in France. Despite large-scale protests, Paris will not refuse the reform. “There will be no magic announcements,” said French Prime Minister Edouard Philippe.

Ernst Moeksis via flickr
Ernst Moeksis via flickr
According to him, the pension calculation system will be brought to a single standard, privileges for individual workers will be abolished. Now there are 42 pension programs in France.

The more deductions will be made from income, the greater will be the amount of accumulated points and, ultimately, payments from the state.

At the moment, the age of reaching a well-deserved vacation in France is set at 62 years for men and women. However, the government plans to raise the bar to 64 years. Only at retirement at this age, the French will be able to receive payments in full. If you go on a well-deserved rest from 62 years, then the pension will be cut.

New standards will be introduced gradually. Those who were born in 1975 and later and begin to work in 2022 will fall completely under the reform.

In December, a surge of protests took place in France. Resentment was caused by the authorities' plans to abolish special pension categories for representatives of certain professions. They allowed them to go on vacation earlier than the law, or to receive increased payments due to difficult working conditions.

Not only France can go on raising the retirement age in the near future. This fate is destined for most European countries. The world's population is rapidly aging.

Public spending on social security for pensioners is growing: on average, these figures make up 6.9% of GDP, in Europe - more than 10% of GDP. The most difficult situation with demography is in the EU: the proportion of older people is growing amid declining birth rates and a reduction in the working-age population. It was not possible to solve this problem by attracting migrants. The fact is, population migration from poor countries did not contribute to an increase in labor, but entailed a significant increase in social costs. Since this causes a slowdown in economic growth, countries see no other way to solve the problem than to increase the retirement period.

The Federal Bank of Germany (Bundesbank) has long been persistently proposing to raise the retirement age for citizens of the country to 69.3 years. If the initiative is adopted, the changes will affect those born in 2001.

They propose raising the retirement age in the country by 2070. As noted, the situation with pension insurance in Germany has become "tense", in particular, due to unfavorable demographics. Thus, the birth deficit in Germany increased from 147 thousand in 2017 to 150-180 thousand in 2018.

Denmark is also on the way to raising the age for reaching a well-deserved rest. So, in the next decade, citizens of the kingdom will not face retirement at 65, but at 67. By 2035, the bar, when it will be possible to receive payments from the state in Denmark, can reach 72 years.

In Norway, men are currently retiring at 67 years old and women at 64 years old. By 2030, it is planned to equalize all rights in the country and make a single retirement age of 67 years.

All of Europe has already raised the retirement age, or is currently raising it in the course of the reforms. However, the results of the reform are not always pleasing to governments. For example, Spain, Greece and Italy shortly saved money on payments to pensioners. But, unfortunately, they all received a whole bunch of problems in the form of an increase in obligations to the elderly, who are now retiring later. Also there is a decrease in the quality of the workforce located in the occupied jobs, and an increase in the burden on healthcare and social services funds. 

Interestingly, a couple of years ago, the retirement age was lowered in Poland - for men to 65 years, for women - to 60 years. Earlier, in 2012, authorities adopted a program to gradually raise the retirement age for men and women to 67 years. The state considered this step economically unprofitable.


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