In the Camargue, in one of the most isolated parts of France but close to many of the country’s major oil refineries, there are queues at the supermarket petrol stations and many of the pumps are dry. We are one day away from a key vote by France’s upper house to raise the retirement age in France from 60 to 62 years of age and the age for full state pensions from 65 to 67 years. It is half-term holidays in France and there are not as many people around as you would expect, so what is going on in the nation which boasts the world’s 5th largest GDP?
On the surface, the issue is about retirement age. France, which more than many countries depends on its state pension system, is facing a painful reform. The population is ageing and there will be massive deficits in the system by the time the world reaches projected peak population in 2050, at 9.1 billion versus 6.9 billion today. By 2050 1 in 3 people in developed countries will be 60+, with 2 older people for every child. France is no exception. The problem is the way that the state pension scheme has been financed, which can best be described as “pay-as-you-go,” means that people currently in employment are funding the retirement earnings of those who no longer in work. The problem comes when there are fewer people working, with more retirees who are living longer, i.e. less earnings to finance more retirement benefits. Billions of Euros of deficits will appear in the French pension system in the very near future unless changes are made. The problem is how to make the needed reforms happen.
Sarkozy’s government has made a courageous but unpopular choice by choosing to raise the retirement and full pension age, which can be seen as penalizing a section of the population that has “paid their dues.” Certainly that is what the unions in France would contend. The problem is that someone, somehow has to make up the deficit. If not the people approaching retirement now, then who – their children or grandchildren? By the way the good news is that we are as a race, globally, living longer and more healthily than ever. By 2050, the planet’s population will have a median age of 38 years, 10 years older than 2009 and 14 years older than in 1950. But that’s not a lot of good if we can’t afford to live…
An ageing population is not an issue which the Europeans alone are dealing with. China is worried about whether the nation will become wealthy before it comes old. Japan is already facing an old age “boom.” Both are making changes to recognize these realities, although both have much higher personal savings rates than the Europeans and US. So what is going on with the French?
As noted above there are a couple of other drivers behind this mass movement – firstly, reforms to make the French ports more competitive with those around the Mediterranean particularly in Spain and Italy, which are being resisted. Secondly, the need for rationalization in the North Atlantic region of oil refinery capacity which exceeds demand and will affect French oil refineries – particularly since Europe is a leader in recognizing and implementing the potential of renewable energies. Already some of the French refineries are facing substantial changes and/or closure. Taking a somewhat cynical lens, the ports and refineries workers have extended their primary grievances to embrace the retirement reforms. Unfortunately they are gatekeepers on a key resource to keep the economy working.
Having said that, what is interesting if not baffling, is that a majority of French people according to polls are behind action against the pension reforms. Ageing is happening, whether we like it or not. Low savings and private pension rates are a fact of life in Europe, whether we like it or not. Renewable energy is replacing oil, whether we like it or not (by the way, we do).
Some changes are unknown, other are inevitable. Why is France tilting at windmills? There are truckers slowing down motorways, secondary students protesting, oil refineries refusing oil – all starving the economy of fuel, freedom and the minds of the next generation that may help to solve the global challenges we face. Why? What does this mean for France’s place in the future global economy?
Taking this back home to you, me and we, how do we address the challenges of an increasing but ageing population? What does this mean for how we do business and live in future? Thoughts very welcome, and we will have plenty of time to respond as we figure out how make our way (slowly) north from the Camargue…