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Pensions' advice to the French Pensions' advice to the French
by Joseph Gatt
2019-12-09 09:48:14
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The French have a unique retirement pension system. Unlike most, if not all other countries where the retirement pensions system is based largely on the number of years spent working or contributing money to the pension system or both, in France, four things are considered. First is the number of years spent working. Second is the amount of cash contributed to the pensions system. Third is the “nature” of the job, usually a mixture of risk factors on the job, incidence of accidents on the job, incidence of health risks on the job and the like. Finally, fourth, and rather uniquely, is how your labor union negotiated the pensions system with the government and the “caisse des retraites” or the pensions fund.

So there are some absurdities in the system. Government workers are famous for having strong labor unions, and often get much better retirement pensions than private sector workers, even though government workers often work under less pressure and stress, and have more job security than in the private sector.

frenret01_400Other absurdity, some government workers get incredible amounts of pension money. Bus drivers for example can retire after 23 years of service and can get up to 4,000 Euros in retirement money, when they tend to be paid in the 1,800 Euro-2,800 Euro range. Private sector factory workers on the other hand also get paid in the 1,800-2,800 Euro range, but have to work for 36-40 years and in some cases get less than 2,000 Euros a month in retirement pensions.

But the French government led by president Macron has been very poorly advised. Most of Macron's economic advisers are what I call the “Americanists.” These economists, influenced by American liberal economists, tend to believe that “your income goes up as you grow old” and “you start off as a factory worker but after 10 years you eventually start a business and double or triple your income.”

But the American economist circle, led by pragmatists like Thomas Sowell, Joseph Stiglitz, Milton Friedman and Friedriech Hayek, and Ludwig Von Mises among others, know that in the US all you need is to sign a couple of papers before you start a business.  That is far from the case in France.

Macron's advisers believe that the French are “slaves” to their retirement pensions and don't take “career risks” out of fear of losing their pensions. So Macron wants French workers to take more risks by changing the retirement pensions system.

Macron wants a system where only cash contributions are taken into consideration. Years of experience, nature of the job and labor union negotiations will not be taken into consideration for retirement pensions. The problem with that is, the French way of life is the French way of life and nothing will ever change it.

Let me say this to the French government. Every time an idea is imported from America, it fails miserably. “Open space offices” were a disaster in France, and led to workplace violence to go up from 25% workers suffering from harassment in the 1990s to 50% workers suffering from workplace harassment in the 2010s. Open space offices also means that the percentage of French people who felt like they had “no idea what they were doing on the job” went up from 34% in the 1990s to 74% in the 2010s!

Other American import: startups. In the US, a working for a startup is a good way to boost your career. In France, working for a startup is a sure way to kill your career. Young college graduates in France who tried their luck with startups often complain that their experience is completely undervalued in France, and that by working for a startup they will be stuck working for SMEs the rest of their life, when most French people would rather work for CAC 40 companies (large conglomerates or enterprises).

Regarding the pensions system, the French are and will always be comfortable spending their entire life within a single company. Remember that the French highly distrust and dislike strangers, and that it takes 5-7 years of weird stares and angry looks before the French can show some signs of friendliness at the workplace.

Furthermore, a lot of French companies don't hire people over 30 and a lot of French companies don't hire people with previous experience of business ownership.

My advice? Keep the pensions system the way it was. Let's think together about solutions that would match the French cultural realities, rather than copying and pasting the American 401K model.


     
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