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It’s Official: France Raises Retirement Age

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France’s President Nikolas Sarkozy made it finally. Despite strong protests from millions of workers across the country, Sarkozy’s reform of the pension system became the law. The law was published in the government’s Journal Official, which means the law has come into effect.

SarkozyAccording to the law, employees will retire at the age of 62 instead of 60. Retirees will become eligible for full pension payment at the age of 67 instead of 65, for those who have not completed 41 years of contributions. France parliament passed the law on October 27; the constitutional court approved it on November 9; and Sarkozy signed it on November 10.

The pace at which the law became effective demonstrates how the conservative government of France was eager to satisfy the financial companies. To put it in Socialist leader Martine Aubry’s words, “we are seeing the pursuit of brutality.” The Socialist party vowed to overturn the law if it comes to power in 2012 elections.

The law was challenged by the opposition parties in court, but the legal bid failed. Sarkozy claims his unpopular law will save France’s pension system as a whole. His rating is reported to be plummeted to 35 percent, the lowest since he came to power in 2007.

Unions have declared they will organize protests on November 23 against the law. They have said they will conduct work stoppages, rallies or meetings on that day.

All of this needs to be put in a continental perspective. A sovereign debt crisis developed in Greece with the revelation of the new government that its budget deficit was understated by almost half the actual figure. As rating agencies began downgrading sovereign debts of the most indebted countries in the Eurozone, such as Greece, Portugal, Ireland and Spain, investors around the world panicked and debt rates skyrocketed. After several heated debates and deliberations the EU and IMF announced a combined safety net worth one trillion dollar.

Wall Street investment banks did not miss the chance to cash in on betting on debts of indebted Eurozone countries. European financial conglomerates were satisfied with one trillion dollar package. But, the workers and employees became the victims with the announcement of series of austerity measures imposed by the package. Since then, European countries from Germany to Greece have been embarking on several austerity measures such as spending cuts, tax increases, and pension reforms. Financial vultures are being aided with packages while creators of wealth and finance are punished with austerity.

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About Sekhar

  • Baronius

    Austerity? Getting free money for the last 20 years of life is austerity? With 12 paid holidays and 5 weeks vacation per year? And a 35-hour work week?

  • http://financialpolitics.net/ Sekhar

    Free money? Who creates money? Machines? computers? Or computer programs? These machines give only what they worth. Not a single penny more than their worth. You must know that.

    Only labor creates wealth or money more than its worth. That difference of value paid to labor and paid by the labor is amassed over centuries and thus capital formed. What we see now as capital is not created by capital, but again by labor. Austerity is nothing but shifting more money from workers’ pockets to capitalists’ coffers.

    If you can see that fact, you cannot say it’s free money, welfare and so on. You cannot get profits without labor that produces more than it is paid. You have to understand it.

    (You may ignore grammatical mistakes if any)

  • http://blogcritics.org/writers/dr-dreadful/ Dr Dreadful

    It’s not free money, Baronius. Just like an American worker with a 401(k), French citizens have been paying into a retirement fund throughout their working lives.

  • Baronius

    I’m pretty sure you’re wrong, Dread.

  • http://www.maskedmoviesnobs.com El Bicho

    Considering people live longer and do so on average in a healthy manner, I don’t see the issue in raising the age by two years.

    It does seem unfair to those who were close to retirement age and likely should have been put off for a few years to allow people to prepare but was it raised out of financial necessity as Sarkozy claims? I don’t see where the author has even stated otherwise.

  • http://financialpolitics.net/ Sekhar

    #5 What fed financial necessity El? It has born out of illegal and unfair practices of financial conglomerates. So, the costs should be paid by them, not workers who work to produce goods. Instead, they were bailed out with tax payers’ money and that bail out money has added more debt to already debt stricken economies. My point is workers did not cause the crisis. Why should they bear the brunt?

    It’s not that as simple as looking at numerical difference of 60 and 62. It is the matter of life of the people for two years. It is also the matter of losing jobs for fresh job claiming people. It has many implications on job prospects for upcoming graduates. Why the France government should pursue hard for pension reforms if there was no issue in raising the age by two years? Let it be dropped it is not an issue at all? The logic is simple. But, we should be ready to see it.

    It is not only my point, but it was acknowledged by almost all heads of governments of the west as well as emerging market economies, immediately after the crisis. We may refer G20 communiques released by G20 conferences held after the crisis broke out. We can see how they were critical of these financial institutions and how they promised to make stringent laws to regulate those institutions. Those promises and commitments have been forgotten by the governments and they are pretending as if they did not know any thing about what “too big to fail” companies did to cause financial crisis.

    And they are out to plunder workers salaries and their pensions accumulated over decades in the name of austerity measures. Let me make a point why austerity measures are only directed against workers but not financial companies? Because they fund the political parties, they control their political and economical policies. They control the state as a whole with their unpredictable magnitudes of the wealth. They are there to loot. Politicians are the minority shareholders of that loot.

    Just read the latest communique signed by the G20 heads in Seoul. You will find many clues about what I wrote in this comment. But on condition, we have to be patient enough to read such long statements as they are dry enough to get bored.

  • JoeR

    Let’s look at the costs and benefits of Social Security and Medicare. Let’s start by looking at the average of two workers, one who ended up with a salary of $25,000 year and the other one a salary of $65,000 year. Retirement benefits are paid based on one’s recent high salary. For the sake of argument we will assume that these two people made the same income throughout their 45 year working lives. But actually their initial salaries were probably less than 10% of their ending salaries. Of course there would have been interest compounded on their lower salaries throughout their working lives, but it would not be equal to the following estimates.
    Life expectancy at birth in 78. But each year that you live increases your chances of living longer. So while at birth we would expect a 66-year-old to live only 12 years, the average life expectancy at 66 is actually 17.5 years. (For white males it is 15.9, for black males is 14, and women generally have 18.7 more years to live after age 66.)
    A worker earning $25,000 a year would have contributions to Social Security lowerfrom himself and his employer of $3100 a year or a total of $140,000 from his 45 year working career. His $860 monthly pension, $10,320 a year, is 41% of his ending pay. His contributions would pay for 13.5 years assuming our inflated contribution estimates. So for white males the government would have to borrow to pay for his last four years– about $41,000. For black males the government will have to borrow about $5000 to pay for the last six months. For women the government will have to borrow over $60,000 to pay for her last six years.
    For the person who earned $65,000 a year or 45 years, he and his employer would have put in $363,000. His pension would be about $1609 which would last about 18 years. His pension would only be about 30% of his top wage, or $19,300 a year. The government would earn a little on men and lose a little on women. Of course since the above estimate on contributions is far in excess of what is really contributed, the government loses on this level also.
    What about Medicare? The employer and employee contributed about 2.90%. For the person earning $25,000 a year this would be a total of about $32,600. For the person who earned 65,000 a year for 45 years it would be about 85,000 in total contributions. According to the Kaiser Foundation the average retiree spends about $12,000 a year on medical expenses and about half of that comes from Medicare. So the person who earned $25,000 a year would have contributed enough to pay for five years of Medicare, so for men that government will have to borrow about $6000 for 11 years, or $66,000 to pay for their remaining Medicare expenses. For women it will have to borrow about $82,000.
    For the people earning $65,000 a year for 45 years they would have contributed $56,500 which would pay for about 9 1/2 years of Medicare. So the government will have to borrow about $39,000 for white males and about $55,000 for women.
    I guess the question is whether these are entitlements from China or whether they should be insurance benefits that we must pay for!

  • http://financialpolitics.net/ Sekhar

    JoeR, you are treating the government and the people as separate entities. That’s what is being done actually. But, are they really separate from one another when we consider the definition of democracy. No. Democracy is not considered in its true sense in even so-called democratic countries. There arises the question of the government losing something when it comes to welfare measures.

    Did these governments consider bailing out of financial giants that caused the crisis, as loss for the governments? Not at all. Instead, they considered it necessary to bailout those firms which placed enormous burden on the government and the people, one by causing the crisis and two by claiming bailouts. While the British government is aggressively cutting welfare measures, it is not hesitating to pay higher bonuses to the CEOs and other top officials of the banks and other financial giants.

    You have to consider who are the actual wealth generators? Those who offer their labor, generate wealth but none else. Every other person is just an appropriator of wealth but not a generator of wealth. These appropriators have occupied the decision making places and counting whether government is losing or gaining on welfare measures. If these appropriators stop appropriating wealth and hiding it in tax havens, there will be no question for the government losing anything on welfare system. Moreover, it can pay even more to its workers.

    One more fact. If the governments do not pay their workers, who will buy the products produced by capitalist firms? Without increasing purchasing power of the people, how the goods will get sold? By decreasing the welfare payments the governments are decreasing the purchasing power of the people thereby decreasing the number of buyers of goods. That again causes crisis of high production but less buyers. So welfare system is ultimately in the interests of capitalist production system but not against to them.