Why the French must embrace pension reforms

Driverless cars are just one aspect of an AI-disrupted future that means that unions can no longer stand in the way of much-needed changes to France's over-complicated pension system, writes political commentator and historian Simon Heffer in his latest column for Connexion

27 November 2019
By Simon Heffer

One could hardly blame President Macron if he put his head in his hands and asked what on earth he has to do to keep the people of France happy.
The anger manifested by the gilets jaunes last winter more or less died out – not least when the media became bored by it.

However, it resurfaced in mid-November, on the first anniversary of the movement, apparently as a reminder that the current of social dissatisfaction that triggered the anti-elitist, anti-metropolitan movement in the first place remains strong, despite tax cuts and other inducements costing €17billion.

Then the President became determined to reform France’s state pension system: an unwieldy, expensive and ultimately ruinous set of 42 different plans, according to the occupation of the claimant.

The pensionable age in France is 62, but some trades retire as young as 48, something not only economically unsustainable but also, in an era where people live longer and are fitter for longer, utterly absurd.

The proposed reforms are hardly draconian. Mr Macron says the maximum pensionable age for those now in the workforce will remain where it is; but new entrants may have to work longer and for less money.

This has appalled the organised left in France, who have called for a strike on December 5, and appealed to civil servants and transport workers especially to join in; and have argued that in some cases the industrial action could last for longer.

For a country struggling to keep its debt within limits dictated by the European Central Bank, the prospect of a pensions deficit rising to €10billion a year by 2022, and growing disproportionately thereafter, was hardly the legacy Mr Macron would want to bequeath to a successor.

Yet some Républicains, such as Valérie Pécresse, have also criticised the reforms, the French right putting point-scoring above the need to modernise the economy.

Industrial action caused by the pensions proposals, happening simultaneously with a new upsurge by the gilets jaunes, risks further harm to Mr Macron’s popularity rating, now at a record low of 33%.

Yet it is hard to know what more he could do. France must reform: a society that has changed dramatically in the decades since the formation of the Fourth Republic at the end of the Second World War must accept that it cannot be governed as though it were still 1946.

Compared with other successful European societies, aspects of France’s economic settlement are rigid and prehistoric.

Nicolas Sarkozy promised to reform them but backed down in the face of trade union opposition.

His successor, François Hollande, did not want to try to make reforms, but as France haemorrhaged competitiveness and fiscal stability he had no choice, and effectively killed his party in the process.

Mr Macron seemed to want to coax France into accepting that, as the world had changed, France must change too – but large swaths of French society seem determined not to listen.

The fact that, all over the developed world, people are living (and working) much longer is just one reality France must adapt to.

In Britain the pensionable age for both sexes is incrementally being raised to 67; it is unlikely to stop there. The main danger of leaving things as they are is that in time the numbers in work and paying taxes might be fewer than those not in work and claiming benefits.

And that brings us to another problem that France’s over-unionised society should start contemplating.

Around the rest of the developed world there is growing concern about the potentially highly disruptive economic and social effects of artificial intelligence (AI).

To take one example: the ride-hiring service Uber – which is now established in France but had an immense struggle becoming so – has a constantly high share price even though there is no sign of its making a profit. Why? Because the company’s model is based on the advent, within a few years, of the driverless car: which will strip out around 70% of their costs. It will also render tens of thousands of people unemployed.

Driverless vehicles will cause job losses far farther afield than just Uber: in the road haulage industry, public transport and then, whatever the SNCF (whose cheminots are in the vanguard of the opposition to the pension reforms) think, there will be driverless trains.

AI is a genie that can’t be put back in the bottle. Its proponents argue that just as in the industrial revolution workers moved from handicrafts to working machines, and that when machines learned how to run themselves their former operators re-trained and learned to use computers, so too will those displaced by AI find new work to do. 

That may well be so: but it will depend on governments and organised labour working together to exploit opportunities and flexibilities, and recognising change is inevitable.

That is the sort of relationship successive French presidents have failed to strike up with the French people.

The AI revolution, which will gain pace over the next decade – through the rest of Mr Macron’s first term and a second one, if he wins it – is something French political leaders are going to have to get used to.

The pensions reform question is, in this respect as well, an important test for Mr Macron. In modernising, he is doing the right thing; where he is failing is by not having a proper conversation with his people about the nature of reality in a world where it is no longer 1946.

As for the French, they can keep obstructing presidents, such as Sarkozy and Macron, who attempt to mould their society in a way that allows it to flourish.

But if they do, they must accept that at best stagnation, and at worst ruin, lies around the corner.

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