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ORIGINAL FRENCH ARTICLE: Augmenter la durée de cotisation : tout sauf une évidence

by Yves Housson

Increasing the Dues-Paying Period: Anything But Self-Evident

Translated Thursday 5 September 2013, by Gene Zbikowski

The French government seems to think that increasing the number of quarters beyond the present 166, at the risk of reducing retirement pensions, is generally accepted.

While the French government seems to be hesitating on several aspects of the coming reform, one point is, in its view, generally accepted: continuing the policy of its right-wing predecessors, it intends to make it more difficult to retire by lengthening the period during which one must pay into the retirement fund. The period, which today is 41.5 years (166 quarters) will be raised to 41 years and three quarters in 2020, in strict application of the 2003 Fillon law, and will be extended still more after 2020. But, in following the Moreau report, the pace might also be accelerated, to reach 44 years (176 quarters) for those born in or after 1966.

A few days ago, the minister of labor, Michel Sapin, proclaimed that such a measure is “an obvious fact.” The argument is not new: “You’re living longer, you’ve got to work longer.” This is a way of denying the increasingly active role played by retirees in civic, social and association life. It is also a formula that “forgets” an essential parameter: over a given working life, productivity continually increases, and it should be possible to dedicate this increase to financing social protection. It also “forgets” the fact that, if life expectancy has increased, this is owing to, among other things, improved social conditions, including … the right to retire. Finally, it “forgets” a new datum: according to the latest studies by the INSERM, while the French and the Europeans are living longer, their good-health life expectancy now tends to remain the same, or even to decrease. “The extra years of life are lived with limits on activity,” Jean-Marie Robin, a research director at the INSERM, emphasized. The workers, however, evidently hope to enjoy retirement in good health as much as possible.

On the other hand, the continued lengthening of the required dues-paying period comes into contradiction with changes in the job market. The average working life is around 35 years today (according to Eurostat). According to the French National Fund for Old Age Insurance, the workers who retired in 2012 had, on average, worked 145 quarters – as against the 165 quarters that are legally required to obtain a full pension… It is also a known fact that, due to the bosses’ management of jobs, one worker in two is no longer working when he retires. And all of the measures that have been taken these past years (lengthening the dues-paying period, raising the legal retirement age), contrarily to the proclaimed goal of increasing active work among seniors, has above all had the effect of increasing the number of unemployed seniors.

Confronted with a dues-paying period of 42, 43 or 44 years, workers will have this queer choice: waiting to be able to retire, at the cost, if they no longer have a job, of experiencing unemployment and living on the minimum guaranteed by welfare, or else retiring before reaching the required number of dues-paying years, and hence of submitting to the penalty, that is to say, a reduction in their retirement pension. Thus, for many, the undeclared objective of this kind of measure is truly to reduce, indirectly, the amount of pensions and to make retirees pay the cost of the policy of reducing the budget deficit.

Finally, the continuing increase in the dues-paying period is pregnant with another danger: undermining young people’s confidence in the PAYGO system, and pushing them towards private insurance schemes. Today, at age 30, a young person has only paid into the retirement fund for 30 quarters. This is the cost of the prolonged period of schooling and the problems in landing a first job. Asking them to pay into the retirement fund for 44 years amounts to telling them to retire at … age 66. How many will live that long?

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