French word of the day: La Retraite (24/2/2023)

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With temperatures hovering around the 32°F (0°C) across the country, the French are cranky. We just lost the World CupChristmas is over, and who knows if there will be enough snow in the Alps during the upcoming ski holidays.

Enter stage right, the debate over le système de retraite (retirement system). You may have seen on TV last week that over 1 million French people marched last Thursday to protest the government’s planned change to raise the retirement age from 62 to 64 years old.

Rather than a “snow day”, my 6-yr-olds got a “grève day” because their teachers were striking. (The kids decided to use it to learn the lyrics and ponder the meaning of the French national anthem . Maman, what is “impur sang”?)

Anyway, to explain the current French retirement system (very briefly as I don’t want your eyes to glaze over), a significant number of people in France actually don’t retire at 62. They retire much earlier than that.

The French retirement system is broken down into separate buckets, based on the work they do. Many government employees like teachers, police, government workers, railway employees, nurses, etc. all have separate state-run retirement systems which lets them retire at earlier ages, as these jobs are considered pénible.

So certain professions like notary clerks can retire with a full pension as early as 55-60. Railway workers could retire as early as 50-55. There are 42 separate buckets (caisses de retraite) for all the different professions, leading to an accounting boondoggle if there ever was one.

And that doesn’t even include the calculations if you decide to change careers and move from one profession to another!

In addition, some of these age benchmarks were set decades ago before the invention of the computer. These days notaries are not poring over giant illegibly handwritten ledgers, and improvements in railway technology mean many train systems are now automated.

So upcoming government changes proposes to change all this. They want to group some of these separate buckets all together and raise the retirement age to 64 for everyone else.

Older workers would be grandfathered in under the old system, while younger generations will have the new rules apply. And there would still be 8 different age limits for those who are in “active” professions to leave earlier.

But you can easily see why some younger notaries or railway workers who previously could retire at 55, may now be pi$$ed at potentially having to work till 64.

And I say potentially because from here the explanation gets a bit fuzzy. Apparently, you can click through this online questionnaire to find out if you will be a winner or a loser.

In general, the government’s messaging is a bit all over the place as to how it impacts everybody. Who are the winners in this change besides “society” and “the budget”?

There is a govt-issued pdf but the only ones reading that are the unions, who get most of their support from the detrimentally impacted state-employees anyway.

So what better moment to launch a preemptive strike action than now in gloomy January when we’ve got nothing else going on?

Another big difference I should point out is that as a North American, I grew up with the message that “you better save up for your retirement because there is likely to be none when it is your turn”. (Is it just me? I studied finance in uni and definitely grew up with this message.)

This is not the same message that is predominant in France. Less than 20% of the population invests in any form of the stock market. The majority prefer low-yielding monetary deposits that keep capital secure, along with a big side passion for investing in illiquid real estate.

Former-banker-turned-President Macron’s government has moved towards creating new retirement investment vehicles in 2019, as well as increasing taxes on real estate while reducing taxes on stocks. But for all his attempts to push the risk-averse French towards the CAC40 and S&P500, this is still a work-in-progress.

Old habits don’t change that quickly, so most French people are still completely dependent on that dubitatif government pension to fund their retirement.

To sum up, are we in for more strike days? My guess would be yes, unless some miraculous agreement is reached. If you live in France, apparently you should fill up your car tanks because fuel shortage part deux is on its way.

But at least the kids should have plenty of time to learn those extended verses of the national anthem!

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