We were in France last week. The big issue there is pension reform. Everybody talks about it. Everyone has an opinion. The Macron Government wants to raise the retirement age, generally, from 62 to 64. The idea is to ‘save the system’.
The French took to the streets in protest. Many of the protestors were so young, they had barely entered the system. It probably wasn’t the pension reform itself that got them riled up, but the idea that the government mightn’t take care of them, cradle to grave. We have machines to do the physical work — and immigrants to operate them. And now AI can do the thinking, right? Many young people must wonder why they have to work at all.
Most Western countries are in the same boat. Fewer people working. More people retired. All these programs were set up as variations of Ponzi schemes, where the first to get in would do very well. Later, the systems would run out of money.
What to do? There are only three possible solutions — raise taxes, lower payments to retirees, or raise the age of retirement. The Macron team chose the third option.
Points of view on it fall into two broad categories, pro and con.
For an introduction to the ‘con’ side of the argument, we turn to one of our favourite columnists, J Neilson, who writes, in English, for the Buenos Aires Times:
‘By the time men and women now in their 20s reach 64, they will live in a society which will be as different from the one they grew up in as today’s is from those of the final decades of the 20th century, when for every retiree there were over two workers who contributed to the system. In France there are now less than 1.7 and their number is rapidly dwindling.
‘Unsurprisingly, many feel let down by their political leaders who — like their counterparts throughout the democratic world — pretend they have “solutions” to the problems which are besetting voters but rarely manage to make things better.’
The alluring sales pitch behind public pension schemes was that the typical contributor would get more out than he put in. That was the case for many years. But now, with fewer young people entering the system…and growth rates falling…politicians can still promise. But they can’t deliver. So, the ‘con’ argument is very simple; like it or not, the benefits must be scaled back. At the very least, tough choices will have to be made.
Unjust and unaffordable
But wait. The other side of the retirement debate was taken up this weekend by Simon Kuper in the Financial Times. Mr Kuper is reliably on the wrong side of almost all issues, so we can assume that he is wrong again.
‘The French have led the world in creating a glorious new life-stage’, he writes: ‘the first decade of retirement’.
Can’t afford it? Nonsense. ‘Their system remains just about affordable. Everyone ought to learn from them.’
The typical Frenchman can now retire at 62 and enjoy another 20 years of life. The first 10 years of it should be great, he says, as retirees’ health initially improves (perhaps because they have more time to exercise?)…and…
‘French pensioners enjoy higher median living standards than working people’, writes Kuper, ‘if you take into account the fact that retirees typically aren’t funding children or mortgages’.
How to stop the losses in the French pension system? Mr Kuper:
‘Make the top 10 percent of earners work until, say 67. Since they are the highest taxpayers, that should help replenish the system. Let ordinary people have fun while they still can.’
The last to go
Which would you favour, dear reader — pro or con? Set the retirement age at 60…70…75? Make the rich work longer so the not-so-rich can frolic at 60?
What fun it must be to organise the lives of others — millions of them. Tell them when they should work…and when they should rest? Sure, why not?
But wait…is retirement anyone’s business but your own?
Of course, it is! In the modern world, pension systems are collectivised…and compulsory. And now that they have become hard to finance, we can expect to see more cuts, more compromises, and more claptrap. Government budgets are limited. So, if you want to retire at 62, for example, you might have to give up other great government programs…such as windmills, welfare, weapons, or war.
Given the choice, the common citizen would readily take pension and medical benefits, and give the rest the heave-ho. But he doesn’t run the government. The elite do. And since the elite get their grift money from welfare and warfare boondoggles, where the dollars can dissolve into corporate profits, think tank financing, speaking fees, and sinecures…they’ll be the last to go.
Pensions, which go to ‘The People,’ will have to be reduced.
For The Daily Reckoning Australia