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why raising the retirement age will still have a cost

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Laura Laplaud
2:14 p.m., September 28, 2022modified to

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3:33 p.m., September 28, 2022

Is pushing back the legal retirement age from 62 to 64 a financial miscalculation? By delaying retirement, Emmanuel Macron hopes to make significant savings. According to the Pensions Orientation Council (COR), which recently published its report on “Developments and prospects for pensions in France”, this postponement would generate 10 billion in savings per year. A sum that will allow the government to secure the regime while preventing it from sinking further into the red. Savings which will also make it possible to finance other measures desired by the executive such as the reduction in production taxes, old age, school or even ecological transition.

Work more to earn more ?

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Main argument of the executive: the population is aging and the current pension system is structurally in deficit. “There are not 36 solutions, either we increase taxes, or we let the debt slip away, or we work more”, declared the Minister of Labor Olivier Dussopt, in mid-September on franceinfo. Do we then have to work two more years to bring in more money? Not necessarily. Pushing back the legal retirement age would save money, but would also entail additional expenses.

One in two French people who reach retirement are unemployed

Because one in two French people arriving at retirement age would be unemployed, unemployed, on RSA, on disability or on sick leave. Extending his career by two years would therefore automatically increase the number of seniors in difficulty and, at the same time, the sums intended to help them.

Costs detailed by the Department of Research, Studies, Evaluation and Statistics (DREES). In total, the bill would have reached nearly 3.6 billion euros, excluding pensions and unemployment insurance, if the legal age was 64 instead of 62 in 2019. Disability pensions would then have known 160,000 beneficiaries additional, amounting to 1.8 billion euros, and sick leave would have cost 970 million euros.

But unemployment insurance would also have been impacted. According to a note from the Directorate for the Animation of Research, Studies and Statistics (Dares), expenditure related to unemployment insurance would have been increased by around 1.3 billion euros in 2019. This time -here, the bill would have reached not 3.6 billion but nearly 5 billion euros, if the retirement age had risen to 64 years.

A reform that will be adopted at all costs

For the government, the COR report shows implacably that it is necessary to reform the pension system. One of the indicators mentioned in the report, the balance of the pension system, indicates that there should be a deficit to be filled during the next 25 years, after which the system could return to balance. And it is on this indicator that the executive relies. “Between 2021 and 2032, the balance of the pension system would deteriorate quite significantly: initially slightly in surplus, it would become in deficit by -0.4 points of GDP in 2027 and -0.8 points of GDP in 2032 for the scenario 1.0%,” the report said.

“Between 2027 and 2032, the balance would continue to deteriorate, in particular for the basic schemes of private sector employees, mainly due to the increase in the share of expenditure in GDP which would result from the marked slowdown in growth linked to the transition of the unemployment rate towards its long-term target.

Same report and different conclusions between the executive and the unions

And unlike the government, relying on the same report, the unions have reached very different conclusions since they are based on another indicator: the share of pension expenditure in relation to France’s GDP. According to the secretary general of the CFDT, Laurent Berger, there is no urgency to pass this reform: “The COR says that there is a deficit but that there is no fire in the lake. S ‘there was fire at the lake: quick measures. If there is no fire at the lake: time for discussion,’ he said at the microphone of France Inter and of franceinfo.

Day of strike and demonstration Thursday

This file has not finished being talked about. The unions, standing up against the pension reform, will demonstrate Thursday in several cities in France. For Laurent Berger, guest of Europe Matin Monday, “if the government passes in force, there will be an opposition which will be frontal, on the part of the trade union organizations and in particular of the CFDT”.

Source: Europe1

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